Georgine, ULLICO’s Boss, Hand-Picked
A Batch of Union Presidents as Directors
By Harry Kelber
Robert A. Georgine, ULLICO’s chief executive officer, president and chairman, picked 22 current and retired union presidents to serve on the life insurance company’s board of directors. He later gave them a private invitation to buy and sell ULLICO stock at such favorable terms that it netted them more than $6.5 million in windfall profits during a 21-month period ending September 2001.
A federal grand jury in Washington is investigating charges that the company’s officers and board members used their insiders’ control of stock price changes to promote their self-enrichment scheme, allegedly disregarding the interests of union pension funds and insured retirees, the company’s major shareholders. As the ULLICO story unfolds, it is fast becoming the worst labor scandal in the AFL-CIO’s history.
Georgine, ULLICO’s mastermind, has had an amazing, power-filled career within the labor movement. He became president of the AFL-CIO’s Building and Construction Trades Department, an umbrella group of 15 craft organizations, in 1974 and held that position for 26 years until his retirement in January 2000.
But he also had a “moonlight”career at the Union Labor Life
Insurance Company (later to become ULLICO) that began in 1981, when he was named a director. By 1990, he had become the company’s chief executive officer and board chairman, subsequently also assuming the title of company president.
Thus, for the entire decade of the 1990s, Georgine worked in a dual role: as the most influential union leader in the construction industry and as CEO in a union-based insurance company with billions of dollars in assets. He adroitly interlocked his union and business responsibilities, giving him extraordinary power, while he maintained a discreet, low-key public image.
Some of Georgine’s questionable activities came to light in articles in The Wall Street Journal (April 5) and Business Week (April 8). It appeared that Georgine had sent a private invitation to board members on Dec. 17, 1990 in which he offered to sell each of them as many as 4,000 shares of company stock at $54 a share "’based on its 1998 book value’" even though the company’s stock was now actually worth $146 a share, as the result of windfall profits from an early investment of$7.6 million in Global Crossing Ltd.
In 2000, company directors were given a fresh opportunity to participate in a profit binge by selling their shares back to the company at the top $146 price per share, even though they had insiders’ information that, with the sharp decline in the stock price of its Global Crossing investments, the book value of ULLICO stock would be fixed at $75 a share at the end of the year.
Company officers and directors sold back 73,000 of their 120,000 shares at a profit of $71 a share, while union pension funds were, for the most part, excluded from participating in the lucrative stock transactions.
Thus far, most union presidents on the board have refused to answer phone calls or make public statements as to whether they bought or sold company stock for profit. While John Sweeney owns some stock in ULLICO, he did not trade any of it back to the company in the past two years, nor does he receive any compensation as a board director, according to Denise Mitchell, the federation’s public affairs director. Sweeney was elected to the board in 1987, while president of the Service Employees International Union.
The WSJ revealed the names of several union presidents and the shares they had allegedly traded to the company at the top $146 price:
William Bernard, former president of the Asbestos Workers, 8,664 shares; Jake West, former president of the Iron Workers, 5,250 shares; Douglas McCarron, president of the United Brotherhood of Carpenters, 3,000 shares, and Martin Maddaloni, president of the United Assn. of Plumbers and Pipefitters, 2,000 shares, which netted him a personal profit of $184,000. Morton Bahr. President of the Communications Workers, traded all of his 300 ULLICO shares in early 2001 for a gain of more than $27,000. Lenore Miller, former president of the Retail, Wholesale and Department Store Union, the only woman on the board, owns 42 shares and did not participate in the profit-taking spree on moral grounds.
At press time for this column, Frank Hanley, president of the Operating Engineers, phoned us to state: “I did not participate in the Global Crossing IPO at any time, and I did not participate in the buying and selling of ULLICO shares during that questionable period of time.”
While there may be other directors who resisted the temptation to cash in on their insider’s knowledge, the fact remains that all 32 board members voted for the profit-taking scheme and rubber-stamped each transaction, including their approval of a five-month extension to give the directors more time to sell back additional shares to the company.
Even if the grand jury exonerates the officers and board members of criminal liability, they can be subjected to civil suits. But beyond that, shouldn’t union presidents at ULLICO be held to a higher ethical standard than the typical corporate executive? Should they be allowed to use their position as board members to enrich themselves at the expense of union pension funds and retirees?
Several weeks have gone by and there is as yet no plan for cleaning up the ULLICO mess. It’s hard to believe that Georgine, who is himself a principal target of the grand jury investigation, has decided to set up his own internal committee to investigate ULLICO’s problems. The AFL-CIO is also toying with the idea of a “pure” internal investigating committee of board members who refrained from the profit grabfest.
The problem is that all board members “those who profited and those who abetted them“ are implicated in the ULLICO scandal. What is needed is an independent counsel with a large enough staff to conduct a full scale investigation of the company’s operations under Georgine in the past dozen years.
At ULLICO’s annual stockholders meeting on May 7 in Washington, union pension fund trustees and individual shareholders must demand a detailed accounting of why Georgine and board members acted the way they did and what steps must be taken to restore the company’s integrity and credibility.
The union presidents on the ULLICO board, ten of whom are also members of the AFL-CIO Executive Council, are:
Morton Bahr, president of the Communications Workers of America
Frank Hanley, president of the International Union of Operating Engineers
Frank D. Hurt, president of Bakery, Confectionery and Tobacco Workers
Earl J. Kruse, president of Roofers, Waterproofers and Allied Workers
James La Sala, president of the Amalgamated Transit Union
Martin Maddaloni, president of the United Association of Plumbers and Pipefitters
Douglas McCarron, president of the United Brotherhood of Carpenters
Terence O’Sullivan, president of the Laborers’ International Union
Vinccent Sombrotto, president of the National Association of Letter Carriers
John Sweeney, president of the AFL-CIO
Eugene Upshaw, president of the Federation of Professional Athletes
John Wilhelm, president of the Hotel Employees and Restaurant Employees
Former union presidents on the ULLICO board, all of whom had held seats on the AFL-CIO Executive Council, are:
John Barry, President Emeritus, International Brotherhood of Electrical Workers
William Bernard, retired president of the Asbestos Workers International Union
Moe Biller, retired president of the American Postal Workers Union
Marvin Boede, retired president of the United Association of Plumbers and Pipefitters
Kenneth Brown, retired president of the Graphic Communications International Union
Arthur Coia, President Emeritus, Laborers’ International Union
John T. Joyce, retired president of the Bricklayers and Allied Craftworkers
Lenore Miller, retired president of the Retail, Wholesale and Department Store Union
Jacob West, President Emeritus, International Association of Iron Workers
William H. Wynn (deceased), President Emeritus, United Food and Commercial Workers
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