The Associated Press
By LEIGH STROPE AP LABOR WRITER
Tuesday, June 17, 2003
WASHINGTON -- The ousted chairman of Ullico Inc. invoked his Fifth Amendment right against self-incrimination Tuesday and refused to tell Congress about a stock purchase program that earned millions for some union officials and jeopardized the insurance company's financial health.
Robert Georgine, who resigned under pressure last month from the union-owned company, appeared under subpoena before the House Education and Workforce Committee, which has jurisdiction over labor issues.
After pledging an oath of truth, Georgine refused to answer a question about whether he was the architect of the stock deals, citing the constitutional protection.
Georgine, his hands clasped on the table and his lawyer sitting beside him, said: "Mr. Chairman, while I am confident that I have done nothing wrong, on the advice of my attorney, I respectfully decline, based upon my rights under the Fifth Amendment of the Constitution of the United States."
Georgine also refused to answer whether Ullico's officers directed former Illinois Gov. James Thompson, the investigator they hired to examine the stock trades, to ignore federal pension laws in his assessment of potential wrongdoing.
Thompson's report found that the stock deals from 1998 to 2001 probably violated securities laws in Maryland, where Ullico is incorporated.
Board members and executives were allowed to buy stock in the private company at artificially low values and sell at inflated prices before the shares were revalued. The arrangement netted almost $6 million for the participating officials. Unions and their pension funds, which hold 98 percent of the company's stock, weren't offered the favorable terms.
"What seems clear is that these officers and members of Ullico's board ... acted inappropriately and reaped personal benefit at the expense of the very union members and pensioners they have a moral and legal duty to represent," said the committee's chairman, Rep. John Boehner, R-Ohio.
The stock deals were approved by Ullico's board of current and retired union officials. Those labor leaders didn't object until news accounts last year raised questions about the transactions.
Tuesday's hearing had big political overtones. Organized labor is the money and mobilizing force of the Democratic Party, and several Democrats complained that the Republican-controlled Congress failed to show such an interest in other corporate scandals.
Ullico has been an embarrassment for organized labor, which mounted a campaign after Enron and WorldCom to obtain tougher laws to counter corporate greed.
Labor is cleaning up the mess, said Damon Silvers, the AFL-CIO's associate general counsel and adviser to Ullico's new chairman, Terry O'Sullivan, president of the Laborers International Union of North America.
Georgine was forced out last month with most of the board. New members have been installed, and an acting president also is in place. Some union leaders have returned their profits. Others have been given 30 days to return theirs.
Ultimately, the scandal caused little financial harm to unions and their pension funds, unlike the problems at Enron and WorldCom, where workers lost their jobs, homes and retirement savings, Silvers said.
"There has not and will not be the horrifying spectacle of dedicated, honest people being turned out in the street with no severance or health care while executives wire themselves severance bonuses, as has occurred at powerful companies many times Ullico's size," he said.
But Rep. Charlie Norwood, R-Ga., said labor laws are too weak, giving only "a slap on the wrist" to corrupt unions.
"There's no doubt in my mind that Ullico board members knew that what they were doing smelled like week-old fish," he said.