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Special Report

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At the same time, ULLICO was sustaining heavy operating losses. But its directors and management, having camouflaged this "perfect storm" from its ERISA-covered investors, exited via golden parachutes, realizing $305 million in post-tax capital gains on the original $7.6 million investment.

Then-ULLICO Chairman and CEO Robert Georgine alone collected an estimated $20 million in stock profits, bonuses and benefits during 1998-2001. Other senior executives and board members also cashed in handsomely. Rank-and-file union members who'd put their money in ULLICO weren't so lucky.

The House Committee on Financial Services, chaired by John Boehner, put together an investigation. Its final report, released in October 2003, stated that the "union leaders who set up these sweetheart stock transactions may well have violated federal labor and pension laws."

Senator Susan Collins, who chaired the Senate Governmental Affairs Committee, called the scandal "an extraordinary case of insider trading, corruption and abuse of power."

ULLICO BRASS WERE defiant. Boehner's committee had subpoenaed Robert Georgine, who took the Fifth Amendment, and then resigned from the board. When the Maryland Insurance Administration sued ULLICO to enforce a subpoena to demand information on stock transactions, the company promptly filed a motion to block the subpoena.

The company did subject itself to an internal investigation overseen by former Illinois Republican Governor Jim Thompson. But a special advisory committee to the board, acting at Georgine's behest, rejected the advice of the Thompson report that board members give back $6 million in profits from the sale of Global Crossing stock.

All the while, the Department of Labor was doing its own digging. The DOL filed suit in March 2002, charging ULLICO had violated ERISA requirements in its Las Vegas land deal. Two years later, the department won a $2.4 million consent judgment against its basic subsidiary, Union Labor Life Insurance Co., and an investment consultant, Trust Fund Advisors, forcing them to repay restitution to a pair of funds run by the Laborers International Union of North America.

This preliminary action set the stage for the DOL settlement announced this past November. Though the new agreement has all the hallmarks of a slap on the wrist, the department appears satisfied that it's more than that.

"Self-dealing by pension fiduciaries at the expense of workers' requirement plans cannot be tolerated," said Labor Secretary Elaine Chao. "This $20 million settlement is a loud and clear message to all plan fiduciaries that they will be held accountable when their actions are detrimental to workers' benefit plans."

ULLICO's current CEO, Mark Singleton, disagreed about what the settlement says, calling it instead a "good-faith disagreement over whether legitimate, reasonable and customary fees were sufficiently disclosed." Of course, most good-faith disagreements do not result in $20 million settlements.

Singleton did, however, emphasize that his company has changed. "Since 2003," he said, "we have taken the necessary steps to ensure a strong financial foundation for ULLICO investors, including conducting conservative investment and reserving practices, establishing strong liquidity, and building very high capital levels."

It may be true that ULLICO has righted itself. If the settlement can help remove the legal cloud from this major insurance and financial-services provider, with some $5.3 billion in total assets under its control, that's a good thing.

But the fact remains that some people really did make off like bandits -- and self-righteous bandits at that. When ULLICO's troubles became known, the AFL-CIO's Sweeney pushed for only an internal investigation. At the same time, he and other labor officials were demanding full-scale public probes into Enron, WorldCom, and other scandal-ridden corporations not dependent upon union largesse.

Hopefully, the settlement can help to remind the company's current management that its central simple mission remains the same as when life insurance was its sole niche. They should serve the best interests of union members and steer clear of sweetheart deals for union bosses.

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