Senate Cmte. Issues ULLICO Report

Senator Susan Collins (R-Maine) blamed the union chiefs making up the bd. of the union-pension-owned ULLICO company for a insider stock-trading scandal, due to their infrequent meetings and poor attendance.  According to a June 2nd staff report by the U.S. Senate Cmte. on Governmental Affairs, the bd. members’ lack of oversight allowed ex-CEO Robert Georgine to orchestrate a series of deals involving the private company’s stock that enriched him and other employees and bd. members at the expense of the union pension funds supporting the company.  The 98-page majority staff report can be accessed on NLPC’s website at


Key findings of the report include the following:


Although ULLICO (Union Labor Life Insurance Company) was a corporation directed by leaders of organized labor, Georgine and other mgrs. structured stock transactions largely for the benefit of insiders rather than the union members whose unions and pension funds were the company’s primary shareholders.  In the late 90s, ULLICO invested $7.6 million in Global Crossing and realized an after-tax gain of about $305 million. These gains temporarily masked operating losses in ULLICO’s core businesses and created the false impression that management was running the company successfully. Senior executives used this illusion of success to justify unwarranted increases in their compensation and benefits.


ULLICO insiders exploited the temporary windfall from the Global Crossing investment to enrich themselves by orchestrating manipulative transactions in ULLICO stock. ULLICO insiders received from company funds a net profit of $10.6 million in stock transactions, which deprived other shareholders of those gains.  ULLICO’s annually-fixed stock price combined with the extraordinary growth of its investment in Global Crossing to create a situation where merely observing Global Crossing’s market price in December provided a reliable indication of what ULLICO’s price would be the following May. Thus, ULLICO insiders were able to virtually guarantee profits from transactions in ULLICO stock by manipulating the timing of their own opportunities to buy and sell.  When Global Crossing stock began to fall in 2000 and 2001, directors were allowed to sell their ULLICO stock back to the company before its value was readjusted.


Most of the officers and directors held fewer than 10,000 shares, and each year, ULLICO adopted a rule ensuring that those with fewer than 10,000 shares could sell all of their stock back to the company while other shareholders, such as labor unions and pension plans, could sell only a small portion of their shares back to the company.


The lack of oversight by the board of directors, including AFL-CIO pres. John Sweeney and vice-pres. Richard Trumka, enabled Georgine to spend company funds irresponsibly or for the benefit of himself and his relatives. Examples include $380,000 in unsecured loans for his nephew, Patrick Mertz, relatives on the payroll, and a $3.7 million lease for a corporate jet.


As he departed from ULLICO, Georgine attempted to give money to six sitting directors. Committee staff attempted to interview all six board members about this incident. However, four of them invoked their 5th Amendment right against self-incrimination rather than answer questions from the Committee staff about the attempted gift or any other ULLICO-related subject. Each director who took the Fifth Amendment also refused ULLICO’s request to return his profits.


ULLICO spent nearly $14 million on legal, consulting, and lobbying fees to deal with the multiple investigations spawned by the stock transactions.  “It shouldn’t have taken the spotlight of a Senate hearing or grand jury investigation for ULLICO to clean up its act,” said Senator Collins.  According to the report, that grand jury is likely investigating a possible mail fraud violation, involving a scheme to financially defraud a person or organization through the mail.


“It is difficult to believe that it was only by accident that Robert Georgine and other senior ULLICO officers created the conditions by which they made millions of dollars at the expense of ULLICO’s shareholders,” acc. to the report.  “Rather, the facts in the ULLICO case suggest a series of intentional acts by Georgine and other senior ULLICO officers calculated to enrich them and other company insiders… [while] conceal[ing] from other shareholders the extent to which they were loading up on ULLICO stock.” [U.S. Sen. Cmte. Governmental Affairs, 6/2/04]