Directors of the Union Labor Life Insurance Company (ULLICO) are attempting to keep a report on their insider stock deals under cover of “attorney/client privilege,” and away from the U.S. Attny in Washington, D.C.
ULLICO pres. and ex-chief of the AFL-CIO’s Bldg. & Construction Trades Dept., Robert Georgine, allowed the union boss directors to buy and sell ULLICO stock before its value was reset at the beginning of each year. Thus, with ULLICO’s stock highly leveraged on the telecom firm Global Crossing, directors could buy ULLICO stock “low,” before its value rose along with Global Crossing’s in 1999. As the telecom bubble deflated in 2000 and 2001, they were allowed to sell back their stock “high,” before its price was readjusted downward as Global Crossing spiraled toward the 4th largest bankruptcy in history. But ULLICO’s rules only allowed individuals, with a relatively small number of shares, to participate. As a result, the huge union pension funds, which largely own ULLICO, were stuck with its falling stock.
With a fed. grand jury investigating the scheme, ULLICO directors appointed ex-Ill. Gov. James Thompson on April 29 to conduct an internal review of the sales. Georgine and the other directors appear to have disliked Thompson’s result. On Sept. 11, the Board voted to limit access to the report, with the directors allowed to hear Thompson speak about it, but not allowed to read it themselves. Thompson objected, and ULLICO decided to make it available for directors to read at Thompson’s law ofc. a week before Thompson was to formally deliver the report at a Nov. 20 board meeting.
But just days before, Georgine cancelled the ULLICO board meeting, and Thompson wrote a letter to all ULLICO board members, offering to present the report to them individually. But even Thompson agreed with ULLICO lawyers that the report is protected by attorney/client privilege, thus keeping it out of the hands of the U.S. Attny. for Wash., D.C. Thompson told the Wall Street Journal that the 70-plus page report recommends changes in “corporate governance procedures.”
Experts on corporate responsibility say that directors have a legal obligation to discuss such reports of potential wrongdoing among themselves. Another defense that ULLICO board members are now hiding behind is that the ULLICO purchase of Global Crossing stock was made by paid investment advisers, thus relieving the union officials of responsibility. But acc. to Aaron Bernstein of Business Week, those advisers were never informed of Georgine’s letter to the board offering the ULLICO stock to them before its price was readjusted to reflect the company’s investment in the then-booming Global Crossing.
Ominously, Thompson agreed to delay until Nov. 26 his presentation of the report, so that Thomas Green, a criminal lawyer just retained by ULLICO, could “provide Mr. Thompson with information about the situation,” acc. to Wall Street Journal reporter Tom Hamburger.