GOP Hearings Target Ullico, McAuliffe

Posted June 13, 2003 at 6:35pm

Congressional Republicans will take aim at their adversaries in organized labor this week in twin hearings highlighting alleged malfeasance at Ullico, the union-run insurance company. The hearings will give GOP lawmakers their first crack at ousted Ullico chief Robert Georgine, and will feature testimony from former Illinois Gov. Jim Thompson (R), who was called in by Ullico to conduct an independent investigation.

But the most intriguing figure in the hearings may be someone who won’t be present to testify: Democratic National Committee Chairman Terry McAuliffe.

Republican lawmakers say they want to know whether McAuliffe played a role in bringing Ullico in as an early investor in Global Crossing — an investment that ultimately figured at the center of the Ullico scandal, after Global Crossing’s bankruptcy created huge losses for the union life insurance company.

“We’ve got to know how [Ullico] got interested [in Global Crossing], and who put the deal together,” said Rep. John Boehner (R-Ohio), the chairman of the Education and the Workforce Committee, which will hold its first Ullico hearing on Tuesday.

Asked whether he believes it was McAuliffe who brokered the deal, Boehner said, “I don’t know, but I intend to ask.”

Rep. James Greenwood (R-Pa.), who chairs the Energy and Commerce subcommittee on oversight and investigations, said Ullico has come under scrutiny as part of his own panel’s ongoing investigation of Global Crossing. He said he has become interested in McAuliffe because “he was sort of tied in to both entities,” though he stressed that he knows of no wrongdoing by the DNC chairman.

“I think I want to understand it,” said Greenwood, who is a member of Boehner’s committee. “I don’t think we’ve plumbed the depths of this.”

GOP lawmakers’ interest in McAuliffe amounts to the first public attempt by Republicans to link the DNC chairman to Ullico’s implosion.

To this point, there have been no specific allegations made regarding McAuliffe’s links to Ullico, and insinuations about his role in the chain of events that led to the upheaval on Ullico’s board would seem to rest on circumstantial associations.

McAuliffe was among a select few parties, including Ullico, that were given the opportunity to invest in Global Crossing at the ground level.

At the time, Ullico’s investment strategy was being guided by Michael Steed, a former DNC official-turned-financier who had joined the labor-led company as a senior executive.

McAuliffe eventually turned an $18 million profit on his original $100,000 investment in Global Crossing, while the value of Ullico’s stake reached as high as $2.1 billion at one point (from an original investment of $7.6 million), before plummeting as the fiber-optics company collapsed — taking a good amount of Ullico’s overall value down with it.

DNC spokeswoman Debra DeShong declined to comment directly on what role, if any, McAuliffe played in Ullico’s stock purchase. She called the line of inquiry being pursued by senior GOP lawmakers a “typical partisan attack, trying to spread rumor and innuendo.”

“Or maybe they are trying to draw attention away from the fact that Republican leaders are getting caught selling their services to Big Tobacco and Big Energy,” DeShong added, alluding to two scandals of recent vintage on Capitol Hill.

Even without McAuliffe, the Ullico scandal has enough ingredients to prove potentially embarrassing to Democrats, by implicating many close party allies in the kind of scheme more commonly associated with the boardrooms of corporate America than the labor movement.

The events began in November 1999, when many of the insurer’s directors — all senior labor officials — bought Ullico stock at a price set by the board, knowing the board would likely soon boost the price of its shares.

A year later, 17 of those board members sold their shares back to Ullico at nearly three times the purchase price, knowing the board was likely to soon reset the share price lower. The trades are believed to have netted the group of directors about $6 million total.

The ensuing scandal eventually led the board to replace Georgine, a former head of the building-trades division at the AFL-CIO, with Laborers’ Union president Terence O’Sullivan.

Republicans hope Georgine’s appearance before Education and the Workforce will shed new light on the nexus of interests that brought about major losses for Ullico’s shareholders — primarily unions and their pension funds — while a prominent group of insiders profited.

The committee also wants Georgine to flesh out the terms of Thompson’s investigation. At its outset, one committee source said, Ullico’s lawyers indicated to Thompson that his mandate did not extend to finding out whether labor or pension laws had been violated.

Thompson, who will appear Thursday before the Senate Governmental Affairs Committee, was brought in to examine Ullico under strong pressure from AFL-CIO President John Sweeney. The ensuing report found that board members had enriched themselves at the expense of Ullico’s other shareholders, who had not been given the same trading opportunities.

Thompson’s report unleashed a firestorm of controversy, and the former Illinois governor has since accused Ullico and its lawyers, who disputed his findings, of seeking to undercut him and the report. Thursday’s Senate hearing will provide the first forum for Thompson to publicly air his findings and grievances.

Governmental Affairs Chairwoman Susan Collins (R-Maine) likened the scandal at Ullico to other recent examples of alleged corporate wrongdoing, such as Enron and WorldCom.

“This is an example of another company … where the board did not represent the shareholders and enriched themselves at the expense of others,” Collins said.

Some Democrats, however, suspect political motives in the GOP’s efforts to shine a spotlight on Ullico. Rep. Robert Andrews (D-N.J.), a senior member of Education and the Workforce, called the House Ullico hearing a “transparent” attempt to “discredit organized labor.”

“I don’t think we should limit the scope of public inquiry to the political opponents of the Republican Party,” Andrews said, citing various corporate scandals that he believes have been neglected by the GOP.

But Rep. Pete Hoekstra (R-Mich.), himself a senior member of Education and the Workforce, likened the complaints from Democrats to those he heard throughout his investigation of the Teamsters, which ultimately led to charges of corruption against the union’s then-chief, Ron Carey.

“I’m amazed they’re at it again,” Hoekstra said, describing the critics as “apologists” for corrupt labor leaders, “because six years ago they were burned.”