New York Times





Union Head Cites Secret Report in Quitting Insurer



December 3, 2002


The A.F.L.-C.I.O.'s president, John J. Sweeney, resigned yesterday from the board of Ullico, an embattled union-owned insurer, because of concerns that an outside counsel's report into accusations of insider trading at the insurer might never be made public.


Mr. Sweeney resigned on the day that Ullico's board met in Washington to consider an investigative report by James R. Thompson, a former governor of Illinois, into highly profitable stock trades by members of Ullico's board, which is made up primarily of former and current union presidents. Mr. Thompson asked the board's two dozen members to sign statements promising to keep his findings confidential.


But one board member said Mr. Thompson's investigation into the stock trades severely criticized Ullico's chairman, Robert A. Georgine, and called on union leaders to return their trading profits. Ullico's proxy statements indicate that union leaders made more than $6 million from the trades.


In recent weeks, Mr. Sweeney and Mr. Georgine have clashed, with Mr. Sweeney demanding that the Thompson report be made public and Mr. Georgine seeking to limit its disclosure. Mr. Sweeney, who did not participate in the stock trades, has criticized them and was one of the first to urge that an outside counsel be named.


A federal grand jury in Washington, the Labor Department and the Securities and Exchange Commission are investigating the stock trades in which several board members made more than $200,000 in profits. Specifically, the grand jury is looking into the company's sale of stock to its board members at $54 a share in December 1999, then its repurchase of those shares at $146 each in November 2000, shortly before they plunged in value to $74.


In his letter of resignation, Mr. Sweeney voiced concerns that Ullico's board had not addressed whether the Thompson report would be made available to the unions that own Ullico's stock. He said he feared that he, as a board member, might be forced to withhold important information from the insurer's union shareholders and thus violate his obligations to the labor movement.


Saying Ullico had a “unique mission and history of serving working families,” Mr. Sweeney wrote, “I hope that Ullico responds to Governor Thompson's report in a manner that assures the labor movement that Ullico remains true to its mission.” He asked that the Thompson report be released to all of the insurer's shareholders. The A.F.L.-C.I.O.'s executive vice president, Linda Chavez-Thompson, also resigned from Ullico's board yesterday.


Thomas C. Green, a lawyer for Ullico, said Ullico's board met yesterday to begin considering the Thompson report. He added that the board created a special committee of directors who did not participate in the stock trades to consider the report's recommendations.


As for Mr. Sweeney's resignation, Mr. Green said, “I'm personally disappointed that he elected not to participate in the deliberative process of considering the governor's report.”

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