November 28, 2002

An investigation into highly profitable stock trades by labor leaders on the board of Ullico, a union-owned insurance company, severely criticizes the insurer's chairman and calls on union leaders to return their trading profits, a Ullico board member said yesterday.

The investigation, by James R. Thompson, the former governor of Illinois, criticized stock trades in which several union presidents on Ullico's board made profits of more than $200,000 when they sold Ullico stock shortly before it plunged in value, said the board member, who spoke on condition of anonymity. Ullico's proxy statement indicates that its board members made more than $6 million from the trades.

Mr. Thompson submitted the report to the Ullico board on Tuesday and asked its 26 members to sign statements promising to keep its contents confidential. The board hired Mr. Thompson last April to investigate the stock sales, which are also being investigated by a federal grand jury in Washington, the Labor Department and the Securities and Exchange Commission.

The board member said the Thompson report was scathing toward Robert A. Georgine, the Ullico chairman, but concluded that no laws had been violated.

Mr. Georgine, who invited board members to engage in stock deals, could not be reached for comment. His spokesman has repeatedly declined to comment, citing the grand jury investigation.

The grand jury is investigating whether Ullico's board members improperly enriched themselves at the expenses of the labor unions that are Ullico's main shareholders. Specifically, the grand jury is looking into the company's sale of stock to its board members at $54 a share in December 1999, then its repurchase of those shares at $146 each in November 2000, shortly before they plunged in value to $74.

Traditionally, Ullico's board sets the company's stock price once a year on the recommendations of its auditors. Ullico's stock price soared and then plunged because of its heavy holdings in the stock of Global Crossing, a telecommunications company whose shares rose and then nose-dived.

John J. Sweeney, president of the A.F.L.-C.I.O. and a Ullico board member, has clashed with Mr. Georgine in recent weeks, and has urged Ullico to make the Thompson report public as quickly as possible. But Mr. Georgine wants the report distributed to only a few people, union leaders said.

Among those who profited from the sale of Ullico stock were Mr. Georgine, the former presidents of the iron workers and plumbers unions, and the president of the carpenters' union. A month ago, Douglas J. McCarron, the carpenters' president, announced that he would return more than $200,000 in profits he made from selling Ullico stock.

Mr. Thompson called on Ullico's officers to do a better job of providing information to the board and called on the board to provide more information to shareholders, the board member said. That board member added that Mr. Thompson had called for board members who did not make money trading Ullico stock to form a committee that would recommend rules to prevent a recurrence of questionable trading.