- The Washington Times - Sunday, September 1, 2002

As Global Crossing was hurtling toward bankruptcy in late 2000 and 2001, several of the most powerful labor bosses in the nation were making a killing by selling the Global Crossing-dependent stock of ULLICO Inc., formerly known as Union Labor Life Insurance Co. It is an appalling tale of self-dealing and conflict of interest.
The details are straightforward. A once-sleepy, union-owned firm established 77 years ago to provide cheap health and life insurance to blue-collar union workers, ULLICO became a swashbuckling player in the go-go years of the 1990s after former DNC official Michael Steed became a senior executive. For decades, ULLICO had followed a conservative investment strategy, while maintaining a stable share price of $25. In 1997, however, ULLICO took the telecom plunge; ULLICO invested $7.6 million in upstart telecom Global Crossing. Thereafter, ULLICO's stock price was adjusted once each year in May. For the next five years ULLICO's stock price would draw much of its value from the Global Crossing shares in its portfolio.
When Global Crossing's shares soared above $50 after having split 2-for-1 following ULLICO's investment, the value of ULLICO's stock dramatically increased as well. In May 1999, based on Global Crossing's year-end, split-adjusted price of about $22.50, ULLICO's annual audit raised the price of its stock to $53.94, a price that would remain in effect until 2000.
By Dec. 16, 1999, Global Crossing's price had reached $52.56, signaling a major upward revision the following May for ULLICO's stock price. On Dec. 17, ULLICO Chairman Robert Georgine, a former AFL-CIO official, wrote a confidential memo to ULLICO's officers and directors, the vast majority of whom were Big Labor bosses, and offered each the chance to purchase as many as 4,000 Ullico shares at $53.94. Mr. Georgine told his colleagues that he himself intended to take advantage of this sure-fire insider bonanza.
As expected, in May 2000 ULLICO's board, based on Global Crossing's 1999 year-end closing price, ratified a ULLICO share price of $146, nearly three times the price that board members and other insiders paid for additional shares several months earlier.
However, Global Crossing's price began plunging in May 2000, and by December had fallen below $15 a share. As Global Crossing's share price began to plummet, it was well-known within ULLICO that ULLICO's closely held shares were clearly overvalued. It was only a matter of time before the next annual re-evaluation in May 2001 reflected Global Crossing's downward impact on ULLICO's own stock price. With ULLICO's true value now known to be close to $75 per share, ULLICO nonetheless bought back more than 200,000 shares from its directors and officers in December 2000 and January 2001 at the price of $146 per share.
Several ULLICO insiders including the presidents of the plumbers union and the carpenters union, and the former presidents of the asbestos-workers union and the ironworkers union sold thousands of temporarily overinflated ULLICO shares for personal gain, precipitating a scandal of personal greed that is now being investigated by a federal grand jury and the Department of Labor. Even AFL-CIO President John Sweeney, who audaciously decried the "corporate crime wave" in a recent op-ed article published by The Washington Post, has initiated an investigation. The good news is that the man conducting the Sweeney-instigated review is not the AFL-CIO's No. 2 official, Secretary-Treasurer Richard Trumka, who spent the better part of the Clinton-Gore administration's second term exercising his Fifth Amendment privilege against self-incrimination.
The level of self-dealing and conflict of interest at ULLICO was so astounding that even the self-righteous, stone-throwing Mr. Sweeney should be appalled.


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