Bureau of National Affairs

 

Volume 02

Number 74

Wednesday, April 17, 2002

ISSN 1523-5718

 

 

Pensions

 

Georgine Predicts ULLICO's Directors Will Be Vindicated in Probe of Investments

 

By Michelle Amber and Brian Lockett

 

 

ULLICO Inc., a union-owned insurance company that is being investigated regarding its investments in Global Crossing Ltd. and alleged insider trading by board members in ULLICO's own stock, and its board of directors will be vindicated when the probe is complete, ULLICO's Chairman Robert A. Georgine predicted April 15.

 

Georgine, who also is ULLICO 's president and chief executive officer, told BNA that he is in the process of putting together a committee of the board to investigate the matter but that the approach he is taking is "somewhat different" from the steps recommended last month by AFL-CIO President John J. Sweeney.

 

In a March 20 letter to Georgine, Sweeney urged that the ULLICO board set up an internal review of the situation and said the board "must act quickly to determine what happened surrounding ULLICO's investment in Global Crossing and any trading in ULLICO stock in recent years."

 

In the letter, a copy of which was obtained by BNA, Sweeney added that when the labor movement is "fighting as never before to protect workers' retirement savings, ULLICO must live up to the standards we ask others to meet."

 

Press reports began surfacing last month raising allegations that some members of ULLICO's board of directors--which includes a number of prominent union officials--personally profited from the sale of ULLICO stock as a result of insider trading. At the same time, the value of ULLICO 's investment of pension funds, which was heavily invested in Global Crossing, dropped when the price of Global Crossing's stock plummeted. In his letter to Georgine, Sweeney stated that after the AFL-CIO received inquiries from reporters, he asked federation attorneys to look into the situation and subsequently wrote the letter.

 

'Effective Independent Process' Sought

 

Sweeney, who has been a member of the ULLICO board since 1985, told BNA April 15 that in private conversations Georgine has said he is working on setting up a committee to investigate the matter. When asked about whether he was concerned that nearly a month had gone by since he made the request without any action, the AFL-CIO president replied that if Georgine works out an "effective independent process" it will accomplish "what I recommended."

 

In Sweeney's March 20 letter, he told Georgine that the internal committee that Georgine planned to appoint must be made up of board members who did not trade in ULLICO stock from January 1997 until the present, with a majority of the members consisting of directors who joined the board after the events under investigation occurred. These members should not have received a payment from ULLICO "other than as a director or a policyholder in the last five years," he wrote.

 

Sweeney also suggested that the chair be "a respected individual from outside the labor movement with expertise and appropriate credentials in this area."

 

The AFL-CIO president also asked Georgine to charge the ULLICO committee with looking into the "full history of ULLICO 's investment in Global Crossing, our executive and director compensation during this period, and all matters related to the trading of our stock during this period, as well as with suggesting reforms if necessary."

 

Charges Surfaced During Grand Jury Probe

 

The allegations of insider trading at ULLICO surfaced during a grand jury investigation of Jake West, former president of the Bridge, Structural, Ornamental, and Reinforcing Iron Workers. West, who was elected to ULLICO's board in 1990, was indicted in the U.S. District Court for the District of Columbia Aug. 29, 2001, for allegedly embezzling union funds and filing false reports with the Labor Department. West, 73, pleaded not guilty Aug. 29 and was released on personal recognizance.

 

Georgine confirmed that a federal grand jury is hearing testimony on the ULLICO-Global Crossing matter, and it is the same grand jury that was convened to hear testimony in the investigation of West.

 

ULLICO , formerly known as Union Labor Life Insurance Company, is a union-owned insurance company that also invests and manages approximately $6 billion of largely building trade union pension fund assets. The company also is under investigation by the Labor Department regarding its management of those funds.

 

ULLICO 's annual meeting will be held May 7 in Washington, D.C., a company official said. The annual meeting typically is held in conjunction with a meeting of the company's board of directors. A meeting of the audit committee will take place about a week before the annual meeting.


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