New York Times
Union-Owned Insurer Will Release
By STEVEN GREENHOUSE (NYT)
March 29, 2003, Saturday
The board of Ullico, a union-owned insurer whose directors face accusations of insider trading, voted yesterday to release a special counsel's report that, union officials said, found widespread breaches of fiduciary duty involving stock trades by some board members.
Ullico's decision came three days after a special advisory committee to the board concluded that the directors who made large profits selling the company's stock had violated no laws and should not be required to surrender their profits.
In announcing plans to release the special counsel's report, Robert A. Georgine, Ullico's chairman and chief executive, said in a statement, ''I am pleased the special committee has concluded that there was no wrongdoing by any corporate officer or member of the board.''
Several union officials said that the advisory committee's conclusions clashed with those of the special counsel's report, which was prepared by James R. Thompson, the former Illinois governor.
The Thompson report, these officials said, found compelling evidence that several Ullico board members had violated their fiduciary duties to Ullico's union shareholders when they made more than $6 million in profits trading the company's stock.
These officials familiar with the report said Mr. Thompson found it likely that the directors who engaged in stock trades had broken state law because breaches of fiduciary duty are violations of state civil law. The report, these officials said, found no criminal law violations.
The Thompson report found that Mr. Georgine made more than $2 million in selling Ullico's stock shortly before the insurer's board, which periodically reset the stock price, established a much lower price. Several other directors, many of them current or former presidents of building trades unions, made profits of more than $150,000 each.
Several officials said the Thompson report found real issues about whether the stock trades also violated federal securities law. But the report stopped short of saying there were federal violations, they said.
Having blocked the Thompson report's release since it was completed on Nov. 26, Ullico's board now plans to release the report next week. The Labor Department has subpoenaed the report and, along with the Securities and Exchange Commission and the Justice Department, is investigating the Ullico trades.
In his statement, Mr. Georgine said, ''With the steps we are taking today, we can put these allegations of wrongdoing behind us and move forward to continue to provide our customers with the highest quality products and services.''
In December 1999, Mr. Georgine invited Ullico directors to buy up to 4,000 company shares each at $53.94 a share. It then seemed inevitable that the stock would rise because Ullico owned many shares of Global Crossing, a telecommunications company whose stock was soaring.
In May 2000, Ullico's board raised the share price to $146, though Global Crossing shares had fallen nearly 50 percent. In November 2000, Ullico's board approved a stock repurchase at $146 a share, enabling directors to sell all or almost all their shares, while letting the shareholding unions sell only a small fraction.
Mr. Georgine and several other Ullico directors sold at $146, for a profit of $92 a share. Six months later Ullico's board lowered the share price to $74.
Copyright 2003 The New York Times Company