AFL-CIO President John J. Sweeney and two other labor leaders yesterday disclosed that they have resigned from the board of a union-owned insurance company to protest the company chairman's refusal to release results of an investigation into alleged insider stock trading.
The stock deals at the privately held company, Ullico Inc., produced profits of $200,000 to $1 million for some directors who took advantage of the arrangement and as much as $7 million or more for Robert A. Georgine -- chairman of Ullico and former head of the AFL-CIO's Building and Construction Trades Department -- according to sources.
Frank Hanley, president of the International Union of Operating Engineers, and Linda Chavez-Thompson, executive vice president of the AFL-CIO, joined Sweeney in resigning from the company that originally was called the Union Labor Life Insurance Company. None of them participated in the stock arrangements.
Hanley was the most outspoken, accusing the board of adopting a "seemingly adversarial approach" to the lawyers hired to investigate the stock deals. In a letter to Georgine, he wrote, "a continuing stonewalling approach plays into the hands of the enemies of labor who are all too ready to make comparisons between the Ullico situation and corporate misconduct at Enron, WorldCom and the like."
Sweeney wrote: "Despite my repeated requests, we as a board have not addressed whether the report will ultimately be made available to our shareholders," which are mostly the AFL's member unions. "I cannot adequately fulfill both my obligation in Ullico and to the labor movement under these circumstances."
After a closed meeting in the law offices of Sidley Austin Brown & Wood, Ullico lawyer Thomas C. Green issued a statement saying, "The board created a special committee composed of disinterested directors to consider the report's recommendations." He declined to say whether the report later would be released to shareholders or the public.
Asked about the resignations, Green said, "I'm personally disappointed that they decided not to participate in the consideration" of the internal investigation.
After disclosures of the insider stock deals, the board hired former Illinois governor James R. Thompson (R) and his law firm, Winston & Strawn, to investigate. According to several sources, the report, more than 100 pages long, calls for the return of all stock profits by directors, and raises questions about compensation to Georgine, including the creation of special tax deferral funds on large payments from Ullico.
Hanley and Sweeney voiced anger over Ullico officers' creation of a special "joint defense agreement" that excluded Sweeney and Hanley. "I cannot continue to serve as a director of a company whose counsel is withholding information from me and my counsel," Sweeney wrote.
Green declined to comment on their complaint.