THE WASHINGTON TIMES
Union fund chiefs probed in stock deal
By James G. Lakely
October 29, 2003
The House Education and the Workforce Committee has determined that executives of Ullico, a union-owned insurance company and pension fund, "may well have violated federal labor and pension laws" when they set up "sweetheart" stock deals for themselves.
The committee yesterday sent its final report on what Republicans call "Big Labor's Enron" to the Department of Labor, which is conducting its own investigation into the illegal stock-selling scheme in which Ullico executives — all current or former heads of unions — used inside information to reap millions of dollars in profits.
"At the very same time that union leaders were joining the chorus of well-deserved criticism of Enron and others for corporate misconduct, Ullico set up a system of insider stock deals that made millions for the board at the expense of rank-and-file union members," said Rep. John A. Boehner, Ohio Republican and chairman of the Education and the Workforce Committee. "Our committee's investigation has concluded that the union leaders who set up these sweetheart stock transactions may well have violated federal labor and pension laws."
Labor Department spokesman Ed Frank acknowledged receipt of the congressional report on Robert A. Georgine, former chairman and chief executive officer, and other Ullico board members, but said he couldn't comment on the pending investigation.
"This administration is completely committed to protecting the economic security of all workers, and we will vigorously enforce the nation's laws," Mr. Frank said.
Democrats on the committee criticized the report for not recognizing the fact that Ullico and labor leaders had moved to punish those who took part in the stock deal.
"The majority's biased and distorted report ignores these responsible actions by the leaders of the labor movement that occurred not in response to congressional inquiries, but a year before the committee even scheduled a hearing on the Ullico matter," said Rep. George Miller of California, ranking Democrat on the panel.
"We are still awaiting comparable scrutiny of far larger abuses by the executives of Enron, Global Crossing and other corporations," he said.
Under Mr. Georgine's guidance, board members bought thousands of shares of Ullico stock in 1999 at $54 a share, which the board members were able to sell later at $146 a share. The Ullico stock was tied to the soaring communications company Global Crossing.
In August 2001, Global Crossing was rocked by accusations of accounting fraud, sending the stock price into a free fall. Mr. Georgine, according to both an independent Ullico investigation and the House committee, told executives to sell their Ullico shares before the stock bottomed out.
Rank-and-file union members who owned stock weren't permitted to sell before the shares were nearly worthless.
"Everyone who has looked at this has shown that it is wrong, or perhaps criminal," said Ken Boehm, chairman of the National Legal and Policy Center, a Virginia-based watchdog group. "They all made money at the expense of their own members and pension holders. Every penny they made belonged to the union members, not to them."
Several board members have returned their portions of the $6.7 million in profits from the early sale of the stock. Those who did not, including Mr. Georgine, were "pushed out" of their positions at Ullico in May, said Ullico attorney Damon Silvers.
Ullico, founded in 1925 as the Union Labor Life Insurance Co., shifted in the late 1990s from being mainly a life-insurance provider for union workers into a financial-services company that invests the pension funds of unions across the country.