WASHINGTON – A House committee will issue a subpoena Thursday to force the outgoing chairman of a union-owned insurance company to testify at a June 10 hearing into sweetheart stock deals that made millions in profits for labor officials.
The House Education and Workforce Committee, which has jurisdiction over labor and union issues, is investigating the insider deals at Ullico Inc. (search) orchestrated by outgoing Chairman Robert Georgine.
"Rank-and-file union members deserve to know whether Ullico leaders who participated in these stock deals violated the trust they owe to their unions and union members," said Rep. John Boehner, R-Ohio, committee chairman.
Ullico lawyers have provided the committee with 23 boxes of documents at Boehner's request. The subpoena is being issued to make sure that Georgine will show up to testify, congressional aides said.
Georgine will relinquish the chairmanship of Ullico late Thursday afternoon after the board meets to install 13 new members. Georgine claimed in a statement that he would stay on as president and chief executive. But he has little support from the new board, which is being installed to clean up the scandal.
Georgine's departure was part of a deal brokered by presidents of several building and construction trade unions and other frustrated labor officials. Georgine's stock deals and compensation packages have totaled more than $12.6 million since 1998.
He is expected to be replaced by Terry O'Sullivan, president of the Laborers International Union of North America (search), a current board member who didn't participate in the stock deals.
The various stock deals made $12.7 million in profits for some labor leaders. Union pension funds are heavily invested in the company, which now is facing financial difficulty.
O'Sullivan was one of just two board members out of eight on a special investigative committee who voted to require officials to return the profits.
Only three have done so: Doug McCarron, president of the carpenters' union; Morton Bahr, president of the Communications Workers of America; and Martin Maddaloni, president of the plumbers' union.
The ordeal has been an embarrassment for organized labor, which mounted a campaign last year calling for tougher laws to counter corporate greed in a wave of accounting scandals.
"Last year, the committee subpoenaed Enron executives to testify about the Enron collapse and its implications for the retirement security of American workers," Boehner said. "Congress should insist on the same type of accountability from union leaders. Union members have a right to know that the union leaders who manage labor pension funds are following the law and acting in the interests of the workers they represent."
Also investigating are the Justice and Labor departments, the Securities and Exchange Commission (search) and the Maryland Insurance Administration. A federal grand jury has subpoenaed board members and company officials to testify in its probe. Last week, the Senate Governmental Affairs Committee announced a hearing for June 19.
Georgine in 1999 invited Ullico directors to buy company stock at $54 a share just before they planned to upgrade the cost. The stock shot up to $146 per share, then started falling.
The board voted in 2000 to buy back shares at the high price, knowing it would be re-valued at $71. The deals weren't offered to all shareholders.