New York Times
Union Chief to Return $200,000 From Stock Deal Under Inquiry
By STEVEN GREENHOUSE
The president of the carpenters' union, Douglas J. McCarron, President Bush's closest friend in organized labor, has agreed to return more than $200,000 in profits he made in a stock deal that is under federal investigation.
On Tuesday, Mr. McCarron informed the Union Labor Life Insurance Company, a labor-owned carrier known as Ullico, that he would pay back the money, which he earned when he sold Ullico shares in what is being investigated for the possibility of insider trading.
The Labor Department and a federal grand jury in Washington are investigating whether the deal, in which Ullico repurchased shares from Mr. McCarron and several other union presidents on its board, enabled them to enrich themselves improperly at the expense of the unions that own the insurer. Those unions include Mr. McCarron's, the United Brotherhood of Carpenters.
Subsequent Ullico proxy statements indicated that the board members profited by more than $6 million all told, with Mr. McCarron earning $276,000. In his letter this week to Ullico's chairman, Robert A. Georgine, he said he would return his profits, minus taxes owed. His decision was first reported on Wednesday by the Bureau of National Affairs, a publisher of legal and regulatory news.
“Issues surrounding our implementation of the stock repurchase program have created such a diversion and have been used by those who oppose labor's goals to damage the interests or reputations of our unions and the trade union movement in general,” Mr. McCarron's letter said. “This cannot be allowed to continue.”
The issue dates from December 1999, when Mr. Georgine invited board members to buy up to 4,000 Ullico shares each at a price of $53.94. The stock price is periodically reset by the Ullico board, and at the time it seemed inevitable that the shares would rise in value because Ullico had heavy holdings in Global Crossing, a telecommunications company whose stock had been soaring at a time when Ullico had not reset its own price for some time.
In May 2000, Ullico's board set a share price of $146, even though by then Global Crossing shares had fallen nearly 50 percent from their 1999 peak. In November 2000, Ullico's board approved a $30 million stock repurchase at $146 a share, enabling individual board members, but not the shareholding unions, to sell almost all their shares.
Mr. McCarron and several other union presidents sold at $146, for a profit of $92 a share.
Six months later Ullico's board set the new share price at $74, largely because of the plunge in Global Crossing stock.
After news reports early this year about the repurchases, Ullico's board named James R. Thompson, former governor of Illinois, to investigate. He is due to report back within the next few weeks.
Copyright 2003 The New York Times Company