This is the conclusion of a US House of Representatives Education and Workforce Committee report that said the committee was “deeply concerned” about the stock deals at Ullico that pushed the company into financial turmoil. After finding evidence of possible inappropriateness within the company stock transactions, the report then urged regulatory investigators and law enforcement to scrutinize the transactions, according to an Associated Press report.
“Millions of workers deserve to know whether Ullico directors violated the law and made millions at the expense of rank-and-file union members they represent,” said committee chairman Representative John Boehner, (R-Ohio).
The congressional report comes after an earlier report of an investigative team appointed by Ullico’s board of directors found that union presidents who reaped $5.6 million form a stock-repurchase program should be forced to give back their profits. At the time, the report also cleared those involved of criminal violations, but did say the officials’ actions may have violated state security laws (See Report: Ullico Officials “Acted Inappropriately” in Stock Repurchase ).
In the board of director’s report, a pattern of questionable decisions were laid that allowed then President and Chief Executive Robert Georgine and 19 other Ullico directors and officers, who collectively owned less than 2% of the company’s stock, to earn more than $13.7 million under stock buyback programs while pension funds that owned more than 90% of the stock earned only $28 million. Georgine’s pretax profits were $837,760. The report noted that Georgine and others acquired stock under a program that allowed each director and senior officer – and no other investors – to buy stock at $28.70 a share in 1998 and $53.94 in 1999. They were later able to sell the shares at $146.40.
Ullico’s stock price was based on its book value, which soared because of a large run-up in the price of the stock of telecommunications concern Global Crossing Ltd., in which it had a large investment. The company’s 2000 stock repurchase program allowed smaller shareholders, including officers and directors, to sell back all of their shares while the largest shareholders, such as pension funds, were limited in how much stock they could sell. Shortly thereafter, the value of Ullico shares declined sharply along with the value of Global Crossing, which eventually filed for bankruptcy protection.
Despite the report’s suggestions that profits from the questionable transactions be returned, to date only five of the directors who profited from the deal after returned any funds.