Rightists Exploit Labor Insurance Scandal
By Charles Walker
It was bound to happen. Right-wing, virulent anti-union elements moving in to exploit organized labors emerging major scandala scandal involving high union officials admittedly profiting from insider information and helping themselves to millions of dollars. The Falls Church, Virginia-based National Legal and Policy Center (NLPC), an anti-worker outfit of the first rank, has opened up a campaign in the press and in Congress to further harm organized labors already contradictory reputation. In its own words, the anti-union outfit makes the case for the end of the use of compulsory union dues for political purposes by exposing abuses by Organized Labor .
The NLPCs boss, Ken Boehm, on May Day of all days, testified before a congressional committee investigating the circumstances under which the Board of Directors of ULLICO, the parent company of the Union Labor Life Insurance Co., all former or present major union officials, reaped as much as $6.5 million from their stockholdings in the private insurance company that is owned by unions and some union officials. If that were not bad enough, theres evidence that suggests that some ULLICO directors benefited from investing pension fund money entrusted to the union insurance firm in Global Crossing LTD., a communications corporation that was once a hot Wall Street favorite, but recently filed for bankruptcy.
Boehms testimony was mostly a recitation of earlier press accounts by Business Week and the Wall Street Journal, credited with first breaking the story. So his presence at the congressional hearing suggests that he was there as part of calculated efforts to build up Boehm and NLPC for other anti-labor moves. In any event, two weeks later Boehm bought a full-page open letter advertisement in Roll Call, self-billed as the newspaper of Capitol Hill.
His open letter was addressed to Morton Bahr, president of the Communication Workers, Douglas McCarron, Carpenters presidentboth members of the ULLICO Board of Directorsand Robert Georgine, ULLICOs chief executive officer and until January 2000, president of the labor federations Building Trades Department.
Boehm charged that, Arthur Coia, a former laborers union president and convicted felon, Jake West, former head of the ironworkers and recently indicted on federal embezzlement charges, and Marty Maddaloni, head of the plumbers union and under investigation for pension irregularitieswere all part of the ULLico (sic) board who approved the stock scheme. Boehm called on the ULLICO directors to resign. Curiously, he didnt mention AFL-CIO president John J. Sweeney and Linda Chavez, AFL-CIO Executive Vice President, also ULLICO directors.
Its hard to imagine that the ULLICO affair is going to go away before there are public investigations, much media attention, and perhaps some early retirements by ULLICO directors. In addition to the congressional hearing mentioned, the Labor Department has opened an investigation, as has a federal grand jury. Companies seemingly ripe for union organizing are sure to use the ULLICO investigations as a weapon to keep unions out. Other antiunion elements are likely to argue that unions need to be reigned in and to attempt to smear all unionists.
Recently, the ULLICO directors announced that they had hired one-time Illinois Governor James R. Thompson to independently assess the medias revelations and allegations. But veteran labor-friendly commentator Harry Kelber recently wrote, The Thompson investigation is seen as a thinly-veiled effort at damage control by ULLICOs directors. Thompson, a former United States attorney in Chicago, told the New York Times: Ill do the investigation theyve asked me to do Ill ask the questions they want me to get answered. Then Ill give them a report, and its up to them.
Kelber adds, There never was a time when so many powerful national union leaders were implicated in a self-serving scheme in a company dedicated to the welfare of union members . What penalties, if any, will they be required to pay for conduct unbecoming a union officer? Or will a cover-up be followed by a whitewash?
Boiled down, theres no doubt that at least some of ULLICOs directors made money utilizing their insider positions, and some of those made a lot of money. Their first opportunity arose in 1997 when ULLICO and its directors were offered stock in Global Crossing LTD. for literally pennies a share. ULLICO bought 33 million shares, investing $7.6 million. Its not clear how many Global Crossing shares some ULLICO directors separately bought. However, the stock price soared after being put up for sale to the public, peaking in 1999 at $62 a share. At that point, ULLICO had accumulated over a billon dollars in paper profits. Of course the directors who bought the Global Crossing stock early on were sitting pretty, as well.
No doubt investigators will want to know if the ULLICO directors were induced to buy the stock, knowing that they as individuals would get the same deal. But using their insider information to personally benefit may not be illegal. Business Week (Mar. 14) wrote that what the directors did for themselves is not unusual. Thats no different from the way many investors made windfall profits benefiting from their close ties to newly formed companies. In this case, those windfall profits made by some directors, including Robert Georgine, the chief executive officer who headed up the Building Trades Department, AFL-CIO, for 26 years, are likely to total millions of dollars, according to union sources Business Week didnt identify.
The directors got a second bite at the apple when they bought and sold their shares in ULLICO itself. Since ULLICO stock is not sold on the public market, the directors themselves set the yearly value of the ULLICO stock, based on expert opinion. But by knowing in advance that the ULLICO stock was going to be re-valued up or down, they could, and some did, use their inside knowledge to buy shares from ULLICO or sell their private holdings back to ULLICO. Which directors bought and sold the stock and how much they reaped is yet to be made public. However it is reported by Business Week that in 2000 and 2001 two-dozen of the directors cashed out at least some of their ULLICO stock. Georgine, for example, sold part of his holdings of 52,800 shares at $146 a share; that was far, far more than he paid ULLICO for its stock. Not all directors took the opportunity, including AFL-CIO President John Sweeney, who owned only a few hundred ULLICO shares.
Sweeney knew what the other directors were up to
However, what Sweeney knew about what the other directors were up to, and when he knew it, is sure to come up, as Sweeney had a vote on the conditions under which the directors could buy and sell their shares.
But for now, the chief investigative spotlight is on Robert Georgine, ULLICOs CEO, even during his last ten years as chief of the Building Trades Dept. Georgine himself has been the subject of controversy, too. Often viewed by critics as a big spender who loved the jobs perks. The Building Trades used a jet for many years during his tenure, and ULLICO has another one for his use, insiders say. (Business Week) Further, it was Georgines connection with the backer of a controversial Los Angeles construction enterprise, who later founded the now bankrupt Global Crossing LTD., that led to ULLICO putting money, some of it pension fund money, in Global Crossing stock.
Although the directors use of their insider knowledge to time their very profitable buying and selling of both Global Crossing and ULLICO stock has been called scandalous by some unionists, it remains to be seen, if their actions are eventually deemed illegal by civil authorities. Perhaps, even if its demonstrated, as has been suggested, that the directors profit taking diluted the earnings of union and workers pension fund investments in ULLICO, workers should not be surprised if the authorities judge the directors actions as normal business transactions under the circumstances, or at least technically within legal bounds.
If so, will John J. Sweeney, who has called on Georgine to investigate the controversial stock transactions, accept the authorities findings and judgments as conclusive and consider the matter settled, if the authorities take no action, exact no penalties? Will Sweeney, whose own role on the board isnt clear, then fail to take up the question of whether the directors actions were intolerably self-serving and deserving of the most severe sanctions merited by moral corruption? More critically: Who will benefit more from the ULLICO revelations and their aftermathU.S. workers or the bosses?