ENGINEERING NEWS-RECORD (3/24/03)
Worries Over Shrinking Assets As Ullico Director Resigns
By Sherie Winston, with Richard Korman
...One investment that needs to be watched is ULLICO's new
383,000-sq-ft headquarters building now under construction in
downtown Washington, D.C. There is also "a considerable amount
of limited partnerships on their balance sheet," says [financial
analyst Carl] Austin. If those partnerships continue to perform
poorly and additional write-downs are needed, "then [ULLICO]
will really be in need of capital," he says. "If there is any
future deterioration in their invested capital it will be very
That is not the only problem ULLICO faces. It is under federal and
state investigation over questionable stock transactions that put hefty
profits into the pockets of several of its board members, many of whom
are current or former building trades union presidents.
Carpenters' union President Douglas J. McCarron resigned from the
ULLICO board on March 13, protesting the board's lack of action in
carrying out management changes recommended in an independent report.
Last year the board hired former Illinois Gov. James Thompson to
conduct an independent query. The board, citing attorney-client
privilege, has declined to make the report public. According to
industry sources, it calls on board members who profited from the stock
transaction to return their profits. Sources say it also calls for
management changes but not the ouster of ULLICO President and CEO
Robert A. Georgine, the former president of the AFL-CIO Building and
Construction Trades Dept. Labor sources say that Georgine has been
under pressure but board members recently gave him a vote of
confidence. A key staff member, John K. Grelle, ULLICO's chief
financial officer, resigned recently. The reason was not clear and
Grelle could not be reached.
In his resignation letter to Georgine, McCarron says he is
"disappointed that by now the recommendations Governor Thompson made in
his report have not been implemented. I am disappointed that the other
directors have not followed my lead in returning the profits from the
stock transactions. I am disappointed that the company has not turned
its core business around financially." McCarron returned his profits in
Georgine says in response that he is disappointed with McCarron's
decision, praising the carpenters' president as "a good friend" whose
"counsel was always sensible, always wise." Industry observers note
that McCarron has historically been a strong supporter of Georgine and
previously described him one of his mentors. They believe McCarron's
resignation signifies the depth of ULLICO's troubles. AFL-CIO President
John J. Sweeney and operating engineers' union President Frank Hanley
resigned from ULLICO's board earlier this year.
Georgine has been mostly silent through the controversy, but he
recently told ULLICO employees in a letter the company was taking
"decisive steps" to answer criticisms and strengthen itself. He called
his staff to cut expenses and conserve cash where possible because
"cash is the lifeblood of the company."
In the March 17 letter, Georgine says that company management and the
ULLICO board "are working nonstop to complete a business plan within
the next 30 days that will start us back on the road to rebuilding."
Suggestions to sell the new headquarters building are "premature," says
a ULLICO spokesman.
ULLICO Inc. has approximately $290 million in shareholder equity and
more than $100 million in statutory surplus in its insurance
subsidiaries, according to the company. The group life and health
division has more than $16 billion in life insurance in force. And
ULLICO's J for Jobs program handles more than $2 billion in assets on
behalf of unions and trust funds. Pension assets held in J for Jobs and
other separate accounts of Union Labor Life are protected from all
liabilities of the company by contract and law, Georgine notes.
Some unions are pulling their investments out. One building trades
union reports that its pension fund has withdrawn approximately $100
million from the J for Jobs program.