Its stock windfall from the bankrupt Global Crossing now gone, the union pension-owned Ullico company lost money in 2002 for the first time in 11 years, its CEO, Robert Georgine, admitted on Feb. 21. In a meeting with the Board of Directors, Georgine, former head of the AFL-CIO’s Bldg. & Construction Trades Dept., blamed chief financial officer John Grelle for the losses. Days later, Grelle resigned in protest, blasting Georgine for not selling the company jet, which costs $3 million a year.
There was no indication if Grelle also called on Georgine and other union boss directors of Ullico to return the more than $6 million they made in inside deals of Ullico stock in 2000 and 2001. In the late 90s, Ullico was able to buy Global Crossing stock at its initial public offering (IPO) price. By 1999, a $7.6 million investment had mushroomed to $335 million. After pricing its own stock at a set $25 per share, Ullico directors changed the rules, setting a new price at the beginning of each year.
In the Fall of 1999, Ullico sold $127 million of that windfall. With Ullico’s stock set to increase from $54 to $146 a share, many of the union boss directors, including Georgine, bought their own company stock at the lower price. As the telecom bubble deflated over the next two years, Global Crossing spiraled toward bankruptcy, and Ullico’s stock took a tumble, the Ullico directors who had bought their stock at $54 a share were given two opportunities to sell it back, the first time for $146 a share, the second time for $75. As Georgine and the other Ullico officials made $6.7 million in profits, the union pension funds that own Ullico could not take advantage of the same deal.
By the time the books are closed on 2002, Ullico is expected to have lost between $20 and $30 million. On March 3, the insurance rating service, A.M. Best, downgraded Ullico to “vulnerable.” Georgine claims that hiring a management-consulting firm will help. But the board reportedly also discussed slashing Ullico staff salaries by 25 percent. [Business Week 3/17/03]
“Special” Cmte. Votes for Release of Thompson Report, but Waffles on Returning Profits
An advisory committee of Ullico board members who didn’t participate in the stock deals recommended the public release of an internal report on the scandal that Ullico CEO Robert Georgine has quashed. But the committee also voted against requiring board members to return their insider profits.
Georgine picked his friend, former Illinois governor James Thompson, to conduct an internal investigation last April. Georgine apparently did not like Thompson’s conclusions last November, because he invoked attorney-client privilege to keep the report from the public, and federal investigators.
The special committee voted to recommend the report’s release on March 25, three days before a scheduled meeting of the full Ullico board. But the committee voted against requiring those union officials sitting on the board to return the money they made buying and selling their own Ullico stock before the price of that stock was scheduled to be lowered in 2000 and 2001. [New York Times 3/28/03]