Big Labor's continuing scandal

The corruption of Big Labor bosses has become so squalid that it now even exceeds the bounds of acceptability for the union leaders of the hotel workers and the laborers, whose unions were found in 1986 by the President’s Commission on Organized Crime to be extensively controlled by the Mafia. The disgust of these two union leaders occurred at a recent meeting of an eight-member “special committee” appointed by the board of directors of ULLICO. ULLICO is a labor-owned insurance company, many of whose officers and directors have been implicated in a massive, secretive, self-dealing stock scheme organized by Robert Georgine, the firm’s chairman and CEO.
According to a self-serving memo to ULLICO shareholders from Mr. Georgine, three members of the special committee “recommended returning the profits for the good of the company.” Two of those members reportedly were Terence O’Sullivan, president of the corruption-laden laborers union, and John Wilhelm, president of the hotel and restaurant employees. Mr. Wilhelm even resigned from ULLICO’s board in disgust with the special committee’s majority vote to permit the insiders to keep the profits.
The profits, of course, are the booty that the labor bosses reaped from a surefire scheme designed by Mr. Georgine. The scheme allowed officers and directors in 1998 and 1999 to purchase thousands of shares of ULLICO stock, whose price was tied to the skyrocketing share price of the then-high-flying Global Crossing telecom, in which ULLICO had made a substantial early investment. In 1999, for example, Mr. Georgine and his pals paid less than $54 per share for the ULLICO stock, which was soon to be revalued at $146 per share. After the stock price of now-bankrupt Global Crossing subsequently collapsed but before ULLICO’s share price was re-adjusted downward as a result, Mr. Georgine and his labor buddies permitted themselves to cash out at $146 per share, reaping a $92 per-share profit.
The ULLICO insider-trading scandal is often described as “Big Labor’s Enron,” and there is much truth to that comparison. However, in reality, ULLICO is much worse than Enron.
Enron became a renegade corporation that cooked its books while insiders reaped millions of dollars in profits from Enron’s soaring stock price before the house of cards collapsed. Notwithstanding the media’s efforts to portray the Enron experience as far more prevalent among the nation’s largest corporations, in the end Enron essentially proved to be a huge exception. Enron’s own corporate executives comprised the vast majority of the beneficiaries of the firm’s perfidy.
Outside of Enron executives, none of the pillars of America’s big-business community were implicated in the Enron scandal. This is where the ULLICO scandal differs from Enron. Those who reaped their millions in loot from questionable ULLICO stock deals were the pillars of the labor community. Indeed, the vast majority of ULLICO profiteers are current or former leaders of many of the AFL-CIO’s most powerful unions and departments.
Mr. Georgine, who served for more than a quarter-century as the head of the AFL-CIO’s Building and Construction Trades Department, reportedly made $837,760 in pretax profits from the buyback scheme and reaped another $6 million in other questionable ULLICO stock deals. Other ULLICO profiteers included Jake West, former president of the iron workers, who also collected nearly $850,000 in pretax profits; Bill Casstevens of the auto workers, who pocketed more than $600,000; Martin Maddaloni, president of the plumbers, who netted more than $400,000; and Douglas McCarron, president of the carpenters, who has promised to return the hundreds of thousands of dollars he reaped from the scheme.
Collectively, Mr. Georgine and 19 other ULLICO officers and directors pocketed more than $13.7 million in surefire, highly questionable profits from the ULLICO stock schemes. A long-suppressed report prepared by former Illinois Gov. James Thompson concluded that there was “a compelling argument” that the “self-interested” transactions of Mr. Georgine and other ULLICO officers and directors may have violated civil laws. “The November 2000 stock repurchase program failed to treat all shareholders equally,” the report declared. In fact, the repurchase program “greatly favored the very people, ULLICO’s directors and officers, who had formulated, approved and implemented the program,” Mr. Thompson’s report concluded. Although the insiders owned less than 2 percent of ULLICO’s stock, they netted nearly 33 percent of stock-repurchase profits.
The involvement of labor officials in the ULLICO scandal is so pervasive that the Enron debacle, to be fully comparable with ULLICO’s, would have to have involved a score of current and former chairmen and CEOs of the 100 largest firms in America, a condition that the Enron scandal most emphatically did not satisfy. ULLICO perfectly underscores how corrupt so many labor bosses have become.