Bureau of National Affairs
Labor Relations Week
Volume: 17 Number: 20
May 22, 2003
ULLICO Board Members Have 30 Days To Return Profits From Stock Buyback
The newly constituted board of directors of ULLICO Inc. May 13 voted to approve implementation of all recommendations made by former Illinois Gov. James Thompson (R) following his investigation last year of insider trading at the union-owned insurance company.
"We are proud of this board's decisive action to begin restoring accountability and public and investor confidence in the company," said Terence M. O'Sullivan, president of the Laborers' International Union who was elected ULLICO chairman and chief executive officer by shareholders at the company's May 8 annual meeting (17 LRW 589, 5/15/03).
A resolution adopted by the board states that ULLICO will ask board members who profited from stock transactions in 1998 and 1999 to return the profits to the company within 30 calendar days. If board members who participated in the stock deal are not able to make "satisfactory arrangements" with the company to return the proceeds in that time period, the resolution states that steps will be taken to remove those members from the board and all other positions in the company as well as taking further steps to recover the proceeds. This action by the board endorsed the first of six remedial recommendations in the Thompson report.
The board also agreed to the remaining five remedial recommendations in the Thompson report, including review of other officer and director stock buybacks and a re-examination of procedures for setting the value of ULLICO stock.
In other business, board members agreed to take steps necessary to determine the liability of providers of professional services to the company and recover monies where appropriate.
Approval of the resolution by the board was relatively close, according to sources familiar with the matter.
To date, three of ULLICO's board members have said they were returning their after-tax profits on the stock transactions to the company.
Board Turnaround on Thompson Recommendations.
Thompson and a legal team from his Chicago-based law firm of Winston & Strawn were retained by ULLICO's board in April 2002 to investigate allegations of insider trading. Thompson submitted his report on the investigation to the board on Nov. 30, 2002. A copy of the report was released April 2 by the company (17 LRW 440, 4/10/03).
The board appointed a special panel of board members who had not participated in the stock deal to study Thompson's report and make recommendations to the board on how to proceed (16 LRW 1447, 12/5/02).
A majority of the special panel recommended that, because Thompson found no technical violations of federal security laws, there was no basis for requiring a return of profits. O'Sullivan was one of two special panel members who voted for a return of the profits. Accepting the special panel's recommendation, the board voted not to accept Thompson's recommendation (17 LRW 429, 4/3/03).