- The Washington Times - Sunday, November 17, 2002

Even as he decried a "corporate crime wave" in an August op-ed essay in The Washington Post, AFL-CIO President John Sweeney was besieged by what may well prove to be a major crime wave involving some of the most powerful officials in the labor movement. The ULLICO scandal, now known as Big Labor's Enron, has been the subject of an ongoing federal grand jury probe, as well as investigations by the Department of Labor, the National Labor Relations Board and the Securities and Exchange Commission.
ULLICO is the parent of Union Labor Life Insurance Co., a union-owned firm established 77 years ago to provide cheap health and life insurance to blue-collar union workers. As it happens, the scandal directly involves ULLICO's ownership of millions of shares of now-bankrupt Global Crossing, the very kind of company Mr. Sweeney had in mind when he decried the "corporate crime wave." As the value of Global Crossing shares soared during the telecom stock bubble of the late 1990s, so did the price of ULLICO stock, which, by custom, was readjusted once a year.
Worse, the scandal also involves stiffing the union pension funds, and, indirectly, all the workers whose futures depend upon those investments. Union pension funds, which comprise the bulk of ULLICO's shareholders, were shut out of a sure-fire, get-rich-quick scheme, which was secretly made available only to the two dozen union leaders who serve as officers and directors of ULLICO.
Devised by ULLICO CEO Robert Georgine, who previously headed the AFL-CIO's building- and construction-trades department, the scheme, which was outlined in a confidential Dec. 17, 1999, letter from Mr. Georgine, encouraged the union-boss directors and officers to purchase 4,000 shares of ULLICO at a fixed price of $53.94 per share. That price was based on a Global Crossing split-adjusted December 1998 share price of $22.50. On Dec. 16, 1999, the day before Mr. Georgine wrote his confidential letter, Global Crossing was selling for $52.56, nearly two-and-a-half times the price that had been used to fix ULLICO's share price at $53.94. Two weeks later, as ULLICO knew at the time of Mr. Georgine's letter, ULLICO's share price was reassessed to $146. At the time, Mr. Georgine owned about 53,000 shares of ULLICO.
After the telecom stock bubble burst in March 2000, Global Crossing shares plummeted, falling below $15 in December 2000 and signaling a major downward revision of ULLICO's stock price. Not to worry if you were a ULLICO director or officer. During December 2000 and January, ULLICO repurchased more than 200,000 shares from its union-boss directors and officers at $146 per share. That highly questionable insider action effectively solidified a nearly $100-per-share profit, even though ULLICO's pension-fund shareholders were about to take a bath.
In addition to Mr. Georgine, other union bosses who made last-minute killings were Douglas McCarron, president of the carpenters union; Martin Maddaloni, president of the plumbers union; Morton Bahr, president of the Communications Workers of America; and Jake West, the former iron workers boss who pleaded guilty Oct. 25 to embezzling from an employee pension fund and making a material false statement in an unrelated corruption case. Four days later, Mr. McCarron announced he would return nearly $300,000 in ULLICO insider profits.
Meanwhile, according to a recent report in Business Week, Mr. Georgine is frantically attempting to suppress a 70-page report written by former Illinois Gov. James Thompson, who was hired to investigate ULLICO's insider shenanigans. Mr. Georgine's goal, according to lawyers who talked to Business Week, is to maintain attorney-client privilege and keep the report from the U.S. attorney for the District of Columbia. ULLICO officials are scheduled to receive the report on Wednesday. That he and many of ULLICO's directors intend to stiff union pension funds in the process doesn't seem to bother the labor bosses in the least.


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