Readers of Labour News will remember that, in our last issue, we reported on the scandal at the union-owned insurance company Ullico. The company, which was set up to provide insurance coverage for union members, invested heavily in Global Crossing, a giant telecommunications firm riding the dotcom wave of the late 1990s. Some directors of Ullico, all of whom were union leaders, were able to buy Ullico shares at a price set by the board. When the company's investment in Global Crossing soared in value, the value of these shares also increased.
When the dotcom bubble burst, however, Global Crossing went into the tank, and it was clear that the value of Ullico shares was also about to fall. At that point, the same directors sold their shares back to Ullico, netting handsome profits for themselves and passing the losses on to the union pension funds that owned the company.
This was exactly the kind of corporate shenanigans that unions consistently criticize, and the scandal caused serious damage to the union movement. Our Labour News editorial argued that unions had to insist on higher standards of behaviour from labour leaders.
Fortunately, that's exactly what happened. AFL-CIO President John Sweeney, backed up by Laborers Union President Terence M. O'Sullivan, won the support of the union pension plans, and used that support to force the resignation of CEO Robert Georgine. They also put the directors who profited from the share trades on notice that they will be expected to return those profits.
The union movement owes a debt of thanks to Sweeney, and to the trade unionists who supported him in this fight. Business Week called their decisive action "an example Corporate America should heed." Labour News doubts very much that Corporate America will do so, but we're pleased to report that Labour is keeping its own house in order.
There is a lesson for the future in all this: we can't always rely on the personal integrity of individual union leaders like Sweeney to solve these problems. Union-run pension and benefit funds must always be subject to rigorous oversight, and the directors of these funds held to a very high standard of conduct.
The Ullico story has a happy ending, and the labour movement can be proud of the outcome - we just can't be smug about it.
Tom Fuller, AFL Executive Staff