April 17, 2002
Top Union Leaders Profited at ULLICO As Insiders in Enron-Style Stock Deal
By Harry Kelber
At least a dozen current and former national union presidents enriched themselves by more than $6.5 million through special stock deals as board directors of ULLICO, a private life insurance company largely owned by unions and their members. With their insiders’ knowledge, they were able to buy and sell their shares of company stock for a lucrative profit during a 21-month period, from January 2000 to September 2001.
ULLICO’s CEO and board chairman is Robert A. Georgine, who for 26 years was president of the AFL-CIO’s Building and Construction Trades Department, an umbrella group of 15 craft unions, until his recent retirement.
On Dec. 17, 1999, Georgine offered to sell 4,000 shares of the company stock at $54 a share (based on its 1998 book value) to each of the 32 board directors, even though the company’s stock was now worth $146 a share, as the result of windfall profits from an early investment of $7.6 million in Global Crossing Ltd.
Georgine increased his own holdings from 8,868 shares in 1988 to 52,868 in 1999, according to company records.
That was not the end of it.
In 2000, ULLICO’s board of directors were given another opportunity for self-enrichment. They were invited to sell their stock back to the company at $146 a share, even though they knew that, because of a declining market, the book value of the stock would be fixed at $75 a share at the end of the year.
Thus far, only a few of the union presidents on the 32-member board have gone public to explain why they did or did not take advantage of the quick and easy profit that Georgine offered them.
Even those who say they traded no shares, like AFL-CIO President John J. Sweeney, bear responsibility for approving the self-serving transactions, including a five-month extension to allow directors to sell more shares.
Serving as a director paid off handsomely for Martin Maddaloni, the president of the United Association of Plumbers and Pipefitters. He made a profit of $184,000 by selling his 2,000 shares of stock back to the company in 2000.
He told a Wall Street Journal reporter: “I didn’t think there was anything wrong with it, I just took advantage of the process.” He said the company’s lawyers had okayed the transaction.
A WSJ front-page article on April 5 revealed the names of several other union presidents who had sold their shares back to the company at the top $146 price: William Bernard, former president of the Asbestos Workers, 8,664 shares; Jake West, former president of the Iron Workers, 5,250 shares, and Douglas McCarron, president of the United Brotherhood of Carpenters, 3,000 shares. Morton Bahr, president of the Communications Workers and a ULLICO director, sold all of his 300 shares for a profit of more than $27,000.
A grand jury in Washington is investigating whether ULLICO acted illegally in providing special stock deals to its directors, while denying them to pension fund shareholders.
The U.S. Labor Department is also checking whether the union presidents on the company’s board were guilty of a conflict of interest in adopting procedures that benefited them, almost exclusively.
Coming on the heels of the Enron debacle, the misdeeds at ULLICO represent probably the worst labor scandal in decades.
Virtually all of the union presidents on the company’s board hold seats on the 54-member AFL-CIO Executive Council, the group that makes decisions affecting 13 million union members and their families. Their greedy, insensitive behavior is not that far removed from Enron executives, whom unions have been denouncing with righteous wrath.
We can be sure that anti-labor Republicans and Democrats and their right-wing allies will be exploiting the ULLICO mess in the 2002 elections, and so will employers when confronted with a union organizing campaign.
We are waiting to see what actions the AFL-CIO leadership will take against the union presidents at ULLICO, whose unethical behavior can cause incalculable harm to the labor movement.
What is abundantly clear: the ULLICO scandal will not go quietly away.
A new “LaborTalk”column appears every Wednesday at www.laboreducator.org.