ULLICO Inc., the insurer owned by union pension funds, has reached a $13-million settlement with its former CEO, Robert A. Georgine, longtime president of the AFL-CIO Building and Construction Trades Dept.
The insurer forced out Georgine in 2003 after a scandal erupted over an insider stock-trading scheme involving Georgine and other directors.
During the scandal, Georgines rich compensation package and alleged self-dealing by the directors, including several building trades presidents, also was extensively examined by an independent investigator. Since the investigator completed his report, ULLICO says, new loans by ULLICO to a company controlled by a Georgine relative came to light.
The loan repayment and other settlement terms were described by ULLICO Chairman Terence M. OSullivan in a Nov. 10 letter to stockholders. In 2002 and 2003, ULLICO (http://www.ullico.com/b/index.cfm) posted significant operating losses. The leaders of the same unions Georgine championed for 26 years forced him out of his ULLICO position in late 2003.
According to the settlement, Georgine must reimburse ULLICO $500,000 to pay for "certain outstanding loans of $380,000 that ULLICO made to a Company controlled by a relative of Mr. Georgine during Mr. Georgines tenure.
The broader settlement deal involves millions of dollars. In 2003, the independent investigator found a compelling case that Georgine had breached his fiduciary duties to ULLICO by self-dealing in ULLICO stock and recommended the company try to get the profits back.
Under the settlement, Georgine will repay $2.6 million in ULLICO stock. Georgine also forfeits the right to purchase or retain 72,000 ULLICO shares.
Other union leaders who served as ULLICO directors benefited from the scheme and were forced to pay back their profits. Under the scheme, ULLICO directors were allowed to sell back ULLICO shares to the company at an inflated price, prior to an adjustment of ULLICO stock value that would have taken into account losses related to ULLICOs investment in the stock of Global Crossing, a once-hot communications company.
Under the settlement, Georgine forfeits over $10 million in compensation in bank trusts. These funds consisted of profits from transactions in his benefit plans pegged to ULLICOs stock price, OSullivan reports.
By untangling itself from Georgine, ULLICO will receive total cash and tax benefits in excess of $13 million, together with cancellation of nearly $4 million in obligations to compensate Georgine which have now been undone under the settlement, OSullivan wrote.
The settlement is so rich it will result in a gain to the company of $10.2 million and a book value gain of about 92 cents a share, says OSullivan.
The terms are very much in the interest of the Company and its stockholders, says OSullivan, ULLICO chairman since 2003 and the head of the laborers international union.
Georgine and his attorney could not be reached for comment.
But Georgine didnt lose everything. He keeps his ULLICO pension, which is protected by federal law from litigation, as well as an insurance policy that will pay beneficiaries $7 million following the deaths of Georgine and his wife. Georgine also gets to keep $8.1 million in deferred compensation paid to his retirement plan.
ULLICO has reached settlements with all but four former directors who, like Georgine, realized profits from the stock transactions and ULLICO continues to pursue claims against other former officers and service providers related to the stock transactions and other executive compensation issues.