Hearing on
“The ULLICO Scandal and Its Implications for U.S. Workers”

June 17, 2003

Good morning.

We are here this morning in exercise of our oversight authority - the responsibility we are charged with as members of Congress and of this Committee.

In March of this year, the Committee began an investigation into ULLICO, Inc. - a union-owned insurance company that was started in 1925 by the American Federation of Labor to ensure that rank and file union members in high-risk jobs could purchase affordable life insurance. In the seventy-some years since its founding, ULLICO has grown to become a multi-million dollar enterprise providing financial, lending, investment, and pension services to unions, union members, and union pension funds.

The Committee began this investigation based on facts which, as they became public, suggested that while at the same time organized labor was decrying corporate wrongdoing and corporate greed, many of the leaders of these same unions were in fact themselves profiting at the expense of rank and file union members and their families.

Specifically, the facts suggest that ULLICO, under the leadership of its then Chairman Robert Georgine, engaged in a series of transactions involving the sale of company stock to directors and officers at a price which the company knew or should have known was artificially low, and the repurchase of this stock only a year or two later from these same officers and directors, at a highly-inflated price. Notably, at the time these repurchases were made, officers and directors of the company were permitted to “cash in” all of their stock holdings - while the unions and union pension funds who held the vast majority of shares were not given this same opportunity.

In the course of its investigation, Committee staff has reviewed thousands of pages of documents, including a highly-critical independent legal analysis conducted by the former governor of Illinois, James Thompson, which concluded that officers and directors of ULLICO very likely broke securities laws. Governor Thompson was expressly directed not to examine whether ULLICO broke federal pension and labor laws, including the Employee Retirement Income Security Act (ERISA) and the Labor-Management Reporting and Disclosure Act (LMRDA). As a result, the question of whether ULLICO’s actions violated those laws remains unclear, and is a key issue for this committee today.

What seems clear is that these officers and members of ULLICO’s Board - which was overwhelmingly comprised of the top officials of some of this country’s largest unions - acted inappropriately, and reaped personal benefit at the expense of the very union members and pensioners they have a moral and legal duty to represent.

Last year, the financial collapses at Enron and WorldCom prompted this Congress to take strong and decisive action to address corporate wrongdoing. In the wake of these scandals, Congress approved, and President Bush signed into law - the Sarbanes-Oxley corporate accountability act - one of the farthest-reaching protections of American workers in modern history. In the same spirit, this year the House again passed the Pension Security Act, to give rank-and-file workers the same access to professional investment advice that wealthy executives have.

Just as Congress acted quickly to hold corporate leaders accountable, it is my belief that Congress should insist on the same type of financial accountability from union leaders. Union members have a right to know that the union leaders who manage billions of dollars in union dues and labor pension funds are following the law and acting solely in the interest of the workers they represent. Rank-and-file union members deserve to know whether the leaders of ULLICO who participated in these stock deals violated the trust they owe to their unions and union members.

While investigations by the Departments of Justice and Labor, the Securities and Exchange Commission, the federal grand jury, and state regulators will reveal whether the millions of rank-and-file union members were the victims of illegal actions, we on this Committee have a responsibility to ensure that the interests of those union members are protected under our federal labor and pension laws. The credibility of ULLICO and its obligation to the unions, union pension funds, and union members who invested in the company is at stake.

With that, I thank our witnesses for appearing here today. We look forward to your testimony.