- The Washington Times - Friday, April 25, 2003

The House of Representatives will hold hearings in the coming weeks to investigate a stock-selling scheme Republicans are calling Big Labor's Enron scandal.
Rep. John A. Boehner, Ohio Republican and chairman of the House Education and the Workforce Committee, will lead the hearings on accusations that members of ULLICO, a labor-owned insurance company and pension fund, took part in an illegal scheme in which shares in ULLICO were bought and sold based on inside information gleaned by the board's chief executive officer, Robert A. Georgine.
"It is clear that the interests of rank-and-file union members have been little more than an afterthought to the ULLICO directors who profited from these stock deals," Mr. Boehner said. "The credibility of ULLICO is at stake. Our committee will closely examine the ULLICO scandal to ensure that union leaders who violate the trust of their members are held accountable."
The scheme allowed officers and directors in 1998 and 1999 to purchase thousands of shares of ULLICO stock, whose price was tied to the then-skyrocketing price of telecommunications firm Global Crossing.
Under Mr. Georgine's guidance, according to an independent investigation commissioned by ULLICO, board members paid $54 a share for additional ULLICO stock and cashed out when it hit $146 a share. Global Crossing soon thereafter was rocked by accusations of accounting fraud, causing the stock to plummet. When Global Crossing filed for bankruptcy in January 2002, shares in the company were valued at 30 cents each.
The 20 directors who collectively owned 2 percent of ULLICO stock made $13.7 million. But when they cashed out, their earnings came at the expense of the other 98 percent of ULLICO stockholders who were allowed to take only $28 million in profits after the stock price plummeted.
"Within the labor movement, the most common refrain is, 'How can the labor leaders criticize Enron and all the other business scandals when they are doing the very same thing themselves,'" said Ken Boehm, chairman of the National Legal and Policy Center, a Virginia-based watchdog group.
"This is a text-book example of what you can't do," Mr. Boehm said. "You can't enrich yourself at the expense of the people paying into the pension fund."
The stock sales have prompted investigations by a federal grand jury, the Department of Labor, the Securities and Exchange Commission and insurance regulators in Maryland, where ULLICO is headquartered.
Thomas C. Green, a lawyer for both ULLICO and Mr. Georgine, has pointed out that the initial report concluded that no member of the board "acted with criminal intent" and has predicted the grand jury will not hand up any indictments.
Several members of ULLICO's board resigned in protest, and a few have returned the profits gained by following Mr. Georgine's advice.
ULLICO was founded in 1925 as the Union Labor Life Insurance Company.
A Republican staffer for the House Education and the Workforce Committee said he expects the hearings to begin "in the coming weeks," but couldn't predict a date because staffers are poring over "50,000 pages of documents" submitted by ULLICO.
The staffer said this situation seems very similar to the insider-trading scam by Enron executives in 2001, who dumped the failing stock for a huge profit while ordinary stockholders were left with worthless shares.
"Last year Congress spent a lot of time holding Enron executives accountable for their actions basically defrauding investors," the staffer said. "If we spent so much time insisting on accountability from Enron executives, we should expect the same accountability of union leaders."

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