Union Leaders Accused of Profiting From Insider Trading

National Right to Work Legal Defense Foundation (NRTW) alleges that Union Labor Life Insurance Co. Inc. (ULLICO) allowed top union leaders to profit from insider information through a "scheme" NRTW compared to the questionable accounting practices recently exposed at a number of U.S. corporations.

NRTW alleges that among those who personally profited from the stock transactions were Morton Bahr, president of Communications Workers of America; Douglas McCarron, president of United Brotherhood of Carpenters; and Martin Maddaloni, president of United Association of Plumbers and Pipefitters.

"These guys got rich, basically, off the workers they're supposed to be protecting," said Dan Cronin, spokesman for NRTW. "This is exactly what Enron did."

Calls to United Brotherhood of Carpenters and United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry were not answered. ULLICO and Communications Workers of America refused to comment on NRTW's allegations.

The NRTW complaint alleges that the union leaders and other members of ULLICO's board of directors were advised to buy 4,000 shares of the company's stock in 1999 for $53.94 a share, at the urging of ULLICO President Robert Georgine.

In May 2000, according to the complaint, the board voted to inflate the value of ULLICO's stock to $146 a share. The vote was taken, NRTW alleges, despite the questions about the true value of the stock.

Because ULLICO is not a publicly traded company, it has the option of determining the value of its stock, Cronin explained.

ULLICO's stock value was predicated in part on the company's investment in Global Crossing, a company whose stock had already started to fall due to rumors of questionable business practices.

In November 2000, the ULLICO board members allegedly authorized the repurchase of the stock they had bought in 1999, at a nearly 100 percent profit, NRTW complained. Other shareholders, however, were allowed to sell only a small part of their holdings.

ULLICO shares had dropped to $74 in the spring of 2001, when NRTW alleges the company allowed the holders of union pension funds invested in ULLICO, to sell their shares.

"By allowing themselves to liquidate their personal holdings at an inflated price, ULLICO's board of directors made significant profits to the direct detriment of others who had invested in ULLICO," NRTW said in a statement.

Cronin said the charges are especially stinging because of oft-heard claims by union officials that they are the only ones who can protect workers' rights.

"Saying these guys are the guardians against corporate greed is like having Bobby Knight run an anger management class," said Cronin, referring to the former Indiana University basketball coach fired for his volatile temper.

Well, it may be a gimmick to funnel money to someone but,

In November 2000, the ULLICO board members allegedly authorized the repurchase of the stock they had bought in 1999, at a nearly 100 percent profit, NRTW complained. Other shareholders, however, were allowed to sell only a small part of their holdings.

that is the way it goes with a privately held company. They usually have the “right of first refusal.” If they refuse to buy the shares you are generally out of luck. They can agree to buy some shares and refuse to buy others. They can refuse to buy back more than a certain percentage of your shares, and they can refuse to buy back any shares if they want. All perfectly legal from what I’ve seen.

You can sell them to your brother-in-law if you want but he won’t be able to unload them, etc. It’s just part of buying into a non-publicly traded company, IMO.

ULLICO shares had dropped to $74 in the spring of 2001, when NRTW alleges the company allowed the holders of union pension funds invested in ULLICO, to sell their shares.

Which is interesting and may be nefarious in some way but they have it within their power to do. At least I’ve seen it done and it continues today and NRTW has never demonstrated any successful suits in this area from what I can remember.

"These guys got rich, basically, off the workers they're supposed to be protecting,"

And IBT pensioners financed Las Vegas, often receiving a small percentage – if anything - of the amount contributed on their behalf to the fund… we know, we know. That’s where the Organized Crime aspect comes into play.

"Saying these guys are the guardians against corporate greed is like having Bobby Knight run an anger management class,"

Well, there is that. It is interesting that if you are the victim of union violence you will most likely (like in excess of 90% of the time) be a fellow union “brother.” I read that somewhere last year. It follows that there may be other issues... IMO, of course.

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