Boehner Targets Ullico
Just days after a key union ally of President Bush’s cut his ties to the organization, House Education and the Workforce Chairman John Boehner (R-Ohio) has asked a union-owned insurance company to turn over documents that could shed light on an alleged insider stock trading scandal touching a number of powerful labor leaders.
Investigators from the Securities and Exchange Commission, Justice and Labor departments, as well as Maryland insurance regulators and reportedly a federal grand jury, are already looking into the actions of top Ullico, Inc. officials and its board of directors. There are allegations that a half-dozen board members, many of whom are current or past union presidents, reaped at least $6.5 million in profits during the period between 1999 and 2001 by buying and selling Ullico stock at prices that they, as board members, set.
At that time, Ullico, a privately-held company controlled by more than 30 large labor unions, was flying high on its investment in the now-bankrupt telecommunications firm Global Crossing Ltd. That investment led to a $335 million profit in 1999 and 2000 for Ullico on an initial investment of only $7.5 million.
Even after the price of Global Crossing collapsed in 2000, however, some Ullico board members continued to make money by selling the Ullico shares at guaranteed prices that were not available to union pension funds that reportedly had also purchased Ullico stock. Investigators are trying to determine if these actions violated insider trading and civil labor laws.
GOP Congressional leaders have held back on conducting their own probe into Ullico until now. Republican insiders said party leaders didn’t want to embarrass Bush or United Brotherhood of Carpenters and Joiners President Douglas McCarron, one of Bush’s best friends in organized labor. McCarron was on Ullico’s board until this week, and any Congressional probe of Ullico would naturally drag in McCarron. McCarron sold 3,000 shares of Ullico stock by the end of 2000, netting $276,000. McCarron has since pledged to return that money to union members.
There were also concerns that Congressional hearings could interfere with the various federal and state investigations of the privately-held company, which was created in 1925 to provide low-cost life and health insurance to union members.
But McCarron’s departure from the Ullico board apparently cleared the way for Congressional action, although Boehner strongly denied any connection between the two events.
“Absolutely not. It never crossed my mind,” said Boehner. “The committee has a responsibility to protect union members.”
Some unions lost money in their investments in Ullico stock after Global Crossing failed, and the company may be found to have lost tens of millions of dollars when it finally closes its books on last year. Ullico has also been forced to shell out millions of dollars in legal fees to defend itself during the various federal and state probes.
Boehner declined to be drawn into a discussion of whether Education and Workforce would subpoena Ullico officials if they did not respond to his request for information.
“We have other options available to us,” said Boehner. “Obviously, we would prefer if they cooperate and we’ll see what we’ve got and make a determination then.”
Boehner also did not commit to any public hearings on Ullico and added that he had no news on the status of other investigations of the company, which controls roughly $6 billion in union pension funds.
In his letter to Ullico Chairman, President and CEO Robert Georgine, Boehner asserted his committee’s authority to look into “alleged misconduct of individuals associated with Ullico’s Board of Directors, including but not limited to the methodology employed for the valuation of the corporation’s stock; the purchase and sale of this stock by officers, directors and other shareholders of the corporation; the effect these transactions had on the corporation’s union and multi-employer plans; and related matters.”
Boehner asked Ullico to turn over its records going back to Jan. 1, 1997, and gave the company until April 17 to comply with his request.
One of the most sensitive documents sought by Boehner is an internal Ullico report prepared by former Illinois Gov. James Thompson (R). Ullico has refused to release the Thompson report to anyone other than board members, a decision that caused AFL-CIO President John Sweeney and several other labor leaders to resign from the board. Both the Labor Department and United Auto Workers have both sued Ullico to force the release of the report.
Neither Ullico nor Carpenters’ union officials could be reached for comment at press time.