[House Prints 108-108]
[From the U.S. Government Publishing Office]


                                    
 
                           [COMMITTEE PRINT]



                                     

                                 REPORT

                                   ON

                      INVESTIGATION OF ULLICO INC.

                        PREPARED FOR USE BY THE

                              COMMITTEE ON
                      EDUCATION AND THE WORKFORCE
                     U.S. HOUSE OF REPRESENTATIVES

                      TOGETHER WITH MINORITY VIEWS

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                                     
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                                     

                              OCTOBER 2003

                               ----------                              

                            Serial No. 108-A

                               ----------                              

  Printed for the use of the Committee on Education and the Workforce
                       JOHN A. BOEHNER, Chairman

  This report has not been officially approved by the Committee and, 
therefore, may not necessarily reflect the views of all of its members.
                     



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                            C O N T E N T S

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    Report of the Committee on Education and the Workforce.......     1
    Minority Views: ULLICO Investigation.........................   305

                               Appendices

    Appendix A: GRequests for Production by ULLICO Inc. from the 
      Committee on Education and the Workforce (March 18, 2003)..    14
    Appendix B: GLetter from Hon. John A. Boehner, Chairman, 
      Committee on Education and the Workforce, to Robert A. 
      Georgine, Chairman of the Board, ULLICO Inc. (March 31, 
      2003)......................................................    19
    Appendix C: GSubpoena Testicandum to Robert A. Georgine (May 
      8, 2003)...................................................    20
    Appendix D: GSubpoena Testicandum to Robert A. Georgine (May 
      21, 2003)..................................................    22
    Appendix E: GHearing on ``The ULLICO Scandal and Its 
      Implications for U.S. Workers'' before the Committee on 
      Education and the Workforce, U.S. House of Representatives, 
      108th Congress, First Session, Serial No. 108-19...........    25


 REPORT OF THE COMMITTEE ON EDUCATION AND THE WORKFORCE CONCERNING ITS 
                      INVESTIGATION OF ULLICO INC.

                              ----------                              


                            OCTOBER 14, 2003

                              ----------                              


                                SUMMARY

    In early 2003, pursuant to the constitutional authority of 
the U.S. House of Representatives and the oversight authority 
conferred upon it by the Rules of the House of Representatives, 
the Committee on Education and the Workforce (the 
``Committee'') commenced an investigation into certain stock 
dealings and transactions by individuals associated with the 
Board of Directors of ULLICO Inc. (``ULLICO'' or the 
``Company'').
    The purpose of the Committee's investigation was to examine 
matters within its legislative and oversight jurisdiction 
regarding alleged misconduct of officers of the Company and/or 
members of its Board of Directors, including but not limited to 
the methodology employed for the valuation of the Company's 
stock, the purchase and sale of this stock by officers, 
directors, and other shareholders of the Company, the effect 
these transactions had on the Company's union and multi-
employer benefit plan shareholders, and related matters within 
the Committee's jurisdiction.
    In the course of its investigation, the Committee requested 
and received more than 95,000 pages of documentary evidence. In 
June 2003, the Committee convened an investigatory hearing 
examining questionable stock transactions at ULLICO, at which 
it received oral and documentary testimony from both fact and 
expert legal witnesses.
    Based on its investigation, the Committee remains deeply 
concerned that the transactions undertaken by certain officers 
and members of ULLICO's Board of Directors in connection with 
the Company's stock repurchase program may have violated 
federal labor law under the Labor-Management Reporting and 
Disclosure Act of 1959 and/or federal pension law under the 
Employee Retirement Income Security Act of 1974. The Committee 
strongly recommends that those regulatory and investigative 
authorities currently investigating ULLICO and these 
transactions give the closest scrutiny to their lawfulness 
under the aforementioned federal labor and pension laws. Should 
these agencies determine that federal labor or pension laws are 
insufficient to adequately safeguard the rights of those whom 
the laws were enacted to protect, the Committee welcomes an 
analysis of any such deficiencies and recommended legislative 
or administrative solutions. The Committee in turn will 
continue the vigorous exercise of its oversight authority to 
ensure that these laws are effective in protecting the rights 
of American workers, and if they are not, in considering 
legislative solutions.

                            COMMITTEE ACTION

    In the spring of 2003, the Committee commenced its 
investigation into ULLICO and a series of questionable stock 
transactions brought to light at the Company. The purpose of 
the Committee's investigation was to examine matters within its 
legislative and oversight jurisdiction regarding alleged 
misconduct of officers of the Company and/or members of its 
Board of Directors, including but not limited to the 
methodology employed for the valuation of the Company's stock, 
the purchase and sale of this stock by officers, directors, and 
other shareholders of the Company, the effect these 
transactions had on the Company's union and multi-employer 
benefit plan shareholders, and related matters within the 
Committee's jurisdiction.
    By way of Requests for Production dated March 18, 2003 (the 
``Requests''), the Committee requested from ULLICO the 
production of responsive documents, records, and materials 
concerning these matters. A copy of the Committee's Requests is 
included with this report as Appendix A. The Committee called 
for the production of these documents no later than the close 
of business on April 17, 2003.
    Among the materials requested in the Committee's Requests 
were all documents concerning a certain report to the officers 
and Board of Directors of ULLICO prepared by the Honorable 
James R. Thompson, Jr., formerly the Governor of the State of 
Illinois, and at the time of the Requests, a partner in the law 
firm of Winston and Strawn of Chicago, Illinois. In April 2002, 
Governor Thompson had been engaged by ULLICO as Special Counsel 
to investigate the stock transactions at issue and report to 
ULLICO's Board. It is the Committee's understanding that 
Governor Thompson's Report, entitled ``Report of the Special 
Counsel: ULLICO Stock Purchase Offer and Repurchase Programs 
and Global Crossing Investment'' (the ``Thompson Report''), was 
delivered to ULLICO's Board on or around November 26, 2002.
    From the time of its delivery to the Board until late March 
2003, ULLICO maintained that the Thompson Report was 
confidential to the Board; that it was protected from 
disclosure to shareholders, investigators, or the public by the 
attorney-client privilege; and that ULLICO would not release 
the Thompson Report to those federal and state investigative 
authorities examining the lawfulness of these stock 
transactions.1
---------------------------------------------------------------------------
    \1\ The Committee understands that as of March 2003, ULLICO and the 
stock transactions at issue were being investigated by the federal 
Departments of Labor and Justice, the Securities Exchange Commission, 
the Commissioner of Insurance of the State of Maryland, and a federal 
grand jury in the District of Columbia.
---------------------------------------------------------------------------
    The Committee's Requests called for production of the 
Thompson Report (and all other responsive documents) by April 
17, 2003. On March 28, 2003, the Board of ULLICO apparently 
reversed its prior position and announced that it would release 
copies of the Thompson Report to its shareholders. In light of 
ULLICO's decision to release the Thompson Report, by letter 
dated March 31, 2003, the Committee requested ULLICO's 
immediate production of the Thompson Report by the close of 
business on April 1, 2003. See Appendix B.
    On April 2, 2003, ULLICO produced to the Committee a copy 
of the Thompson Report and its three-volume Appendix (the 
Thompson Report is appended to the Committee's June 17, 2003 
hearing report, see Appendix E, infra, at Appendix E; the 
Appendix to the Thompson Report was included in the record of 
the Committee's hearing and is available through the offices of 
the Committee).
    In addition to these materials, ULLICO at that time 
produced a document prepared by Sidley Austin Brown & Wood LLP 
of Washington, DC, then counsel to ULLICO, entitled ``Summary 
Analysis of the ``Report of the Special Counsel: ULLICO Stock 
Purchase Offer and Repurchase Programs and Global Crossing 
Investment '' dated April 2, 2003, and an additional document 
entitled ``ULLICO Report of the Special Committee to the Board 
of Directors,'' dated March 25, 2003.
    In further response to the Committee's Requests, ULLICO on 
April 17, 2003 produced documents Bates Numbered U-MIA-00001 to 
U-MIA-52460. On May 9, 2003, ULLICO produced additional 
documents Bates Numbered ULLICO-000000001 to ULLICO-000041543. 
A final production of documents Bates Numbered BS-00001 to BS-
01965 was made on May 15, 2003.
    Based on preliminary review of the documents it had 
received in response to its Requests to date, the Committee on 
April 24, 2003 announced that it would convene hearings to 
further investigate the ULLICO matter. On May 8, 2003, the 
Committee announced that it had issued a subpoena to the then-
Chairman of ULLICO, Robert A. Georgine, to testify before the 
Committee on June 10, 2003. On May 20, 2003, the Committee 
rescinded its May 8 subpoena and reissued a subpoena commanding 
Mr. Georgine to appear before the Committee at 10:30 a.m. on 
June 17, 2003. Copies of these subpoenae are attached to this 
Report at Appendices C and D.
    On June 17, 2003, the Committee convened a hearing on the 
ULLICO matter entitled ``The ULLICO Scandal and Its 
Implications for U.S. Workers.2 Invited to testify 
before the Committee were Mr. Georgine, the former President, 
Chairman and CEO of ULLICO (pursuant to the Committee's May 20, 
2003 subpoena); Warren E. Nowlin, Esq., a partner of the law 
firm of Williams Mullen; and Damon Silvers, Esq., Special 
Counsel to the current Chairman of ULLICO.
---------------------------------------------------------------------------
    \2\ See Hearing on ``The ULLICO Scandal and Its Implication for 
U.S. Workers'' before the Committee on Education and the Workforce, 
U.S. House of Representatives, 108th Congress, First Session, Serial 
No. 108-19 (hereinafter, ``Hearing on ULLICO Scandal''). The transcript 
of that hearing is attached to this report at Appendix E.
---------------------------------------------------------------------------
    At hearing, Mr. Georgine invoked his rights under the Fifth 
Amendment to the U.S. Constitution, and declined to answer any 
of the Committee's questions.3 Mr. Nowlin testified 
as to the divergence of disclosure laws applicable to pension 
funds and their fiduciaries from the evolving laws governing 
disclosure and interested party transactions in the public 
company arena, and whether actions taken by members of ULLICO's 
board were potentially violative of federal labor and pension 
laws.4 Mr. Silvers, counsel to the current Chairman 
of the Board of Directors of ULLICO, testified as to actions 
the new Board of ULLICO had taken since Mr. Georgine's 
resignation from the Company, and the factual predicates 
leading to that resignation.5
---------------------------------------------------------------------------
    \3\ See id. at 10.
    \4\ See id. at 5-7.
    \5\ See id. at 7-9.
---------------------------------------------------------------------------
    This report outlines the Committee's findings and 
conclusions relating to its investigation of ULLICO based upon 
the documents and information received and reviewed by the 
Committee, the testimonial evidence of witnesses at hearing, 
and independent research and review conducted by Committee 
staff.

                           COMMITTEE FINDINGS

    The Committee's factual and legal findings are set forth 
below.

                            Factual Findings

    ULLICO is a privately-held corporation, and provides 
insurance, pension, and financial services to unions, union 
members, and union pension funds.6 ULLICO was 
originally founded in 1925 as the Union Labor Life Insurance 
Company.7 In 1987, ULLICO, a broader financial 
services holding company, was formed. The Union Labor Life 
Insurance Company remains a wholly-owned subsidiary of ULLICO. 
ULLICO is incorporated under the corporate laws of the State of 
Maryland.8
---------------------------------------------------------------------------
    \6\ The Honorable James R. Thompson, Report of the Special Counsel: 
ULLICO Stock Purchase Offer and Repurchase Programs and Global Crossing 
Investment (November 26, 2002) (hereinafter, ``Thompson Report'') at 
15.
    \7\ See id.
    \8\ See id. at 55.
---------------------------------------------------------------------------
    Pursuant to ULLICO's bylaws, a majority of the Company's 
Board must be comprised of union-affiliated officers and 
officials.9 The Board of Directors of ULLICO has 
historically consisted primarily of present or former officers 
of major unions and pension funds that are substantial ULLICO 
shareholders (during the time period in question, ULLICO's 
board included John Sweeney, President of the AFL-CIO, Douglas 
J. McCarron, President of the United Brotherhood of Carpenters 
and Joiners of America, and Martin Maddaloni, General President 
of the United Association for Journeymen and Apprentices of the 
Plumbing and Pipe Fitting Industry, among others).10
---------------------------------------------------------------------------
    \9\ See id. App. I, Ex. 2 (bylaws of ULLICO Inc., Art. IV Sec. 1).
    \10\ See Thompson Report. at Ex. 1.
---------------------------------------------------------------------------
    Throughout most of the Company's history, ULLICO's stock 
was fixed at a price of $25 per share. Historically, the 
Company returned value to its shareholders through the payment 
of cash and stock dividends on these shares.11
---------------------------------------------------------------------------
    \11\ See id. at 15.
---------------------------------------------------------------------------
    Beginning in or around 1992, the Company embarked on a more 
aggressive investment strategy, including capital and private 
equity investments. In February 1997, on the advice of then 
Chairman and CEO Robert Georgine, the Company approved a $7.6 
million investment in a company called Nautilus LLC, which 
would later be known as Global Crossing, a telecommunications 
company associated with prominent members of the Democratic 
National Committee, including Democratic National Committee 
Chair Terry McAuliffe.12
---------------------------------------------------------------------------
    \12\ See id. at 16-17. It appears that at the same time ULLICO was 
authorizing this investment in Global Crossing, Mr. McAuliffe was 
himself investing $100,000 of his own money in what would become that 
failed venture. ULLICO's Senior Vice President of Investments, Michael 
Steed, who had been hired to assist the Company in embarking on its 
aggressive investment strategy, had previously been the Executive 
Director of the Democratic National Committee.
---------------------------------------------------------------------------
    At approximately the same time, the Company changed the 
manner in which it distributed profits to shareholders: It 
reduced and later eliminated dividends, and adopted a formal 
stock repurchase program.13 As initially envisioned 
and designed by the Company, the stock repurchase program was 
intended to allow the Company to repurchase $180 million in 
stock over eleven years, with $30 million of stock repurchased 
in 1997, and a fixed sum of $15 million in stock to be 
repurchased in each of the following ten years.14 
The formal repurchase program had to be considered and approved 
by the Board of Directors or its Executive Committee each year 
it was offered.15
---------------------------------------------------------------------------
    \13\ See id. at 18-19.
    \14\ See id. at 19.
    \15\ See id.
---------------------------------------------------------------------------
    The stock repurchase program, in the words of Chairman 
Georgine, was intended to be a ``means for [ULLICO] to provide 
liquidity to [its] larger shareholders.16 The 
program was overseen principally by Chairman Georgine, as was a 
separate ``discretionary'' repurchase program. This 
``discretionary'' repurchase program had apparently been in 
effect for a number of years, but was not formally authorized 
by the Board until November 2000.17
---------------------------------------------------------------------------
    \16\ See id.
    \17\ See id.
---------------------------------------------------------------------------
Valuation of Stock and Purchase of Stock by Officers and Directors of 
        ULLICO
    In connection with the implementation of its new stock 
repurchase program, the Company in 1997 changed the way in 
which the price of the Company's stock was calculated. Whereas 
historically shares of the Company's stock had been valued at a 
fixed price of $25 per share, under this new system the price 
for stock was set based on the prior year-end book value per 
share. Book value per share was calculated by dividing the 
Company's total stockholders'' equity by the number of all 
outstanding shares (e.g., in May 2001 the Company would reset 
the share price based on the results of the Company on December 
31, 2000).18
---------------------------------------------------------------------------
    \18\ See id. at 18.
---------------------------------------------------------------------------
    In May 1997, ULLICO's stock was valued at $27.06/
share.19 When Global Crossing completed its initial 
public offering in August 1998, the value of Global Crossing 
stock skyrocketed; as ULLICO was heavily invested in Global 
Crossing, the book value of ULLICO's own stock followed 
upward.20
---------------------------------------------------------------------------
    \19\ See id.
    \20\ See id. at 22.
---------------------------------------------------------------------------
    In July and October 1998, ULLICO Board members were offered 
the opportunity to purchase up to 4000 shares of stock at a 
price of $28.70/share.21 In December 1999, this 
offer was extended so that officers and directors could 
purchase an additional 4000 shares of ULLICO stock at $53.94/
share.22 Throughout this time, ULLICO's large 
institutional shareholders were not afforded the same 
opportunity.23
---------------------------------------------------------------------------
    \21\ See id. at 25-26; 28-29.
    \22\ See id. at 31.
    \23\ See id. at 25-26, 31-32.
---------------------------------------------------------------------------
    Significantly, these offers to buy shares were made weeks 
or even days before the Company's books for those years would 
close, and the shares would be revalued. With the ongoing 
success of Global Crossing, this meant, for example, that in 
late 1999, ULLICO Board members were afforded the opportunity 
to purchase shares at $53.94/share, at a time when they likely 
knew that the share price would increase significantly when the 
Company's books closed days later.24
---------------------------------------------------------------------------
    \24\ See id. at 33, 35.
---------------------------------------------------------------------------
    Indeed, the questionable nature of these transactions is 
evidenced by the fact that PriceWaterhouseCoopers, ULLICO's 
auditor, was subsequently forced to restate the Company's 
audited financial statements because participants in the 
officer/director stock purchase program were not subject to any 
real ``investment risk.''25
---------------------------------------------------------------------------
    \25\ See id. at 33.
---------------------------------------------------------------------------
Repurchase of Stock from Officers and Directors of ULLICO
    While the Company had authorized a share repurchase program 
in 1997, it was rarely used until 2000. In late 2000, by which 
time the value of Global Crossing's shares had plummeted, the 
Company began to aggressively repurchase shares from its 
stockholders. As detailed below, the repurchase of these 
shares, which had been offered for purchase only to officers 
and directors of the Company, disproportionately inured to the 
benefit of the Company's Board members, at the expense of 
ULLICO's principal shareholders, unions, and union pension 
funds.
    In November 2000, the ULLICO board approved a repurchase 
program to buy back shares at $146.04/share, with the near-
certain knowledge that the Company's share value would plummet 
when its books closed on December 31, 2000.26 The 
repurchase program was designed so that smaller shareholders 
(such as board members and officers) could sell back all of 
their shares, while larger shareholders (unions, union pension 
funds) were limited in their ability to sell shares. This was 
accomplished by way of a 10,000 share proration threshold. This 
threshold allowed those shareholders who held 10,000 or fewer 
shares to redeem all of their shares, while shareholders with 
more than 10,000 shares were required to tender all of them, 
but allowed to redeem only a small portion of the tendered 
shares.27
---------------------------------------------------------------------------
    \26\ See id. at 40.
    \27\ See id. at 41-42, 44.
---------------------------------------------------------------------------
    Tender offer documents issued in connection with this 
repurchase program indicated that the Company did not believe 
that any of its officers and directors intended to offer their 
shares for repurchase, and that the Company believed ULLICO 
stock to be an ``excellent investment opportunity for investors 
seeking long term growth of capital.28 Nor did the 
tender documents make clear the impact of the 10,000 share 
proration threshold, its effect on larger shareholders, and the 
benefit it would provide to directors and 
officers.29
---------------------------------------------------------------------------
    \28\ See id. at 45, 69 & App. Ex. 82.
    \29\ See id. at 36, 44.
---------------------------------------------------------------------------
    Notwithstanding the Company's statement that it did not 
anticipate its officers and directors offering their shares of 
stock for repurchase, in the 2000 repurchase offer, 31% of the 
funds used to buy back stock went to officers and directors of 
the Company, who were permitted under the program to redeem 
100% of their stock; in contrast, large stockholders were 
limited to a buy-back of 2.2% of their shares.30 
Numerous board members sold back their stock at this $146/share 
offer, which was extended through early 2001.31 Not 
surprisingly in light of the financial devastation that Global 
Crossing had suffered, the value of ULLICO's shares was reset 
at $74.87/share shortly thereafter.32
---------------------------------------------------------------------------
    \30\ See id. at 45.
    \31\ See id. at 47 & Ex. 1.
    \32\ See id. at 49.
---------------------------------------------------------------------------
    In 2001, the Company again approved a repurchase program. 
This program again included a 10,000 share proration threshold, 
thereby again allowing officers and directors the opportunity 
to sell back all of their stock, while larger shareholders were 
limited to a buy-back of only 2.66% of their 
shares.33
---------------------------------------------------------------------------
    \33\ See id.
---------------------------------------------------------------------------
    In short, while board members, officers, and directors of 
the Company were permitted to buy and sell all of their shares, 
large shareholders (e.g., union pension funds) were limited in 
their buying and selling rights. These transactions are 
believed to have netted approximately $6 million in profits for 
ULLICO Board members at the expense of union pension funds and 
other large shareholders of the Company, insofar as absent the 
program's skewed proration threshold, these monies would have 
been used to repurchase shares from ULLICO's larger 
shareholders.
    It appears that this issue--specifically, that the stock 
repurchase program would inure to the benefit of officers and 
directors, but not to large shareholders--was not discussed at 
the Board level. Indeed, several Board members subsequently 
reported to Governor Thompson during his investigation that had 
they known of this issue, they might not have approved the 
program.34 Another director reported that had he 
known of the impact this would have on larger shareholders, he 
would have ``considered whether this raised fiduciary duty 
issues. 35
---------------------------------------------------------------------------
    \34\ See id. at 47.
    \35\ See id.
---------------------------------------------------------------------------
    While the Company repurchased stock through the formal 
repurchase program described above, throughout this time period 
ULLICO also employed a ``discretionary'' stock repurchase 
program, administered solely by Mr. Georgine.36 
While the Company's Compensation Committee later tried to 
formally ``authorize'' this program, it is unclear whether it 
had the legal authority to do so under the Company's 
bylaws.37 Mr. Georgine himself was the beneficiary 
of this laxity, as over the years he was allowed to issue stock 
to himself, and later sell it back to the Company.38
---------------------------------------------------------------------------
    \36\ See id. at 38-39.
    \37\ See id. at 41.
    \38\ See id. at 38.
---------------------------------------------------------------------------
The Thompson Report
    In April 2002, in response to increasing public attention 
and criticism, ULLICO engaged former Illinois Governor James 
Thompson as Special Counsel to review the transactions at issue 
and report back to the board. The Committee understands that 
Special Counsel Thompson delivered his report to ULLICO in or 
around the end of November 2002.
    Throughout the spring of 2003, ULLICO refused to disclose 
the contents of the report. In a reversal of its position, in 
late March 2003, ULLICO decided that it would release the 
Thompson Report to its shareholders. As noted above, in light 
of this reversal, the Committee requested that ULLICO produce a 
copy of the Thompson Report immediately (i.e., prior to the 
deadline of April 17, 2003 set for the production of all 
responsive material). ULLICO produced a copy of the Thompson 
Report to the Committee on April 2, 2003.
    The Thompson Report concluded that owing to the high 
standard of proof required in federal securities cases, it does 
not appear that these transactions violated federal securities 
law.39 The Thompson Report did conclude, however, 
that it is highly likely that these transactions violated 
Maryland's (and potentially other states'') state securities 
law.40 More broadly, the Thompson report concluded 
that ``Certain ULLICO officers and Board members arguably acted 
inappropriately and to the detriment of the rights of ULLICO 
institutional shareholders. 41 The Thompson Report 
recommended that all board members who profited from these 
transactions be required to return their profits.
---------------------------------------------------------------------------
    \39\ See id. at 75.
    \40\ See id. at 92.
    \41\ Id. at ii.
---------------------------------------------------------------------------
    Notably, pursuant to ULLICO's express direction, the 
Thompson Report did not examine whether any of these 
transactions ran afoul of federal pension or labor law, as 
Thompson was instructed by the Company that such questions were 
outside of his mandate as Special Counsel.42
---------------------------------------------------------------------------
    \42\ See id. at 65.
---------------------------------------------------------------------------
    On May 8, 2003, in the face of this scandal, Mr. Georgine 
announced that he would resign, not seek reelection to ULLICO's 
board, and would sever all ties with the Company (he had 
previously indicated that he would not seek reelection to the 
board; until May 8, however, Mr. Georgine maintained that he 
would continue in some role at the company). That same day, 
Terence O Sullivan, president of the Laborers'' International 
Union, assumed leadership of ULLICO. Shortly thereafter, the 
newly-elected board voted to require all directors to return 
any profits from the stock transactions.
    The Committee understands that ULLICO is presently under 
investigation by the federal Departments of Labor and Justice, 
as well as the Securities and Exchange Commission and a federal 
grand jury in the District of Columbia. In addition, the 
Maryland state insurance commissioner's office is conducting an 
investigation of the matter. These investigations are believed 
to be continuing as of this date.

                             Legal Findings

    While the Committee's inquiry examined the broad range of 
legal issues presented by the activities of ULLICO's Board, its 
investigation in particular focused on potential violations of 
two federal laws within the Committee's plenary jurisdiction: 
the Labor-Management Reporting and Disclosure Act of 1959, 29 
U.S.C. Sec. 401 et seq. (the ``LMRDA''), and the Employee 
Retirement Income Security Act, 29 U.S.C. Sec. 1001 et seq. 
(``ERISA'').
    At the outset, it bears note that in commissioning a 
Special Counsel to investigate and report on the legality of 
the stock repurchase transactions, ULLICO specifically directed 
that Special Counsel not examine whether these transactions 
were in any way violative of federal labor or pension laws, 
despite their potential and recognized applicability. As the 
Thompson Report explained:
        Fiduciary duties similar to those imposed by [state] 
        law which may be applicable to self-interested 
        transactions involving officers and directors may also 
        arise under the Federal Labor-Management Disclosure and 
        Reporting Procedure [sic] Act (``LMRDA'') (29 U.S.C. 
        Sec. 501 et seq.) and the Employment [sic] Retirement 
        Income Security Act (``ERISA'') (29 U.S.C. Sec. 1100 et 
        seq.). These statutes impose fiduciary duties upon 
        individual directors who may be officers of unions or 
        trustees of union pension funds who are ULLICO 
        shareholders. These duties are similar to the statutory 
        and fiduciary duties discussed above. However, outside 
        Company counsel have advised the Special Counsel that 
        the Special Counsel's mandate does not extend to the 
        consideration of the applicability of these statutes to 
        the conduct by individual directors because of the 
        union or pension fund positions they hold. Therefore, 
        we have not analyzed these issues.43
---------------------------------------------------------------------------
    \43\ See id. at 65 (emphasis added).
---------------------------------------------------------------------------
    The Committee's findings with respect to both of these 
federal laws are set forth below. Particularly in light of the 
fact that ULLICO's own investigative counsel was advised by 
ULLICO not to examine the lawfulness of the stock repurchase 
transactions at issue under federal pension and labor laws, the 
Committee strongly urges those investigative authorities 
presently investigating these transactions to closely examine 
their legality under these federal statutes. Should these 
agencies determine that federal labor or pension laws are 
insufficient to adequately safeguard the rights of those whom 
the laws were enacted to protect, the Committee welcomes an 
analysis of any such deficiencies and recommended legislative 
or administrative solutions.

    A. The Labor-Management Reporting and Disclosure Act of 
1959: The LMRDA is widely held to be the cornerstone of 
democratic rights of union members. Enacted in 1959, the LMRDA 
was intended to ensure that rank-and-file union members have a 
full, equal, and democratic voice in union affairs. The LMRDA, 
among other things, requires that union financial matters be 
publicly disclosed, and prohibits union officers and officials 
from engaging in self-interested transactions.
    Congress intended the LMRDA to ensure that union democracy 
would be the first line of defense against union corruption, 
and that armed with knowledge, union members would elect 
leaders who work in their members'' best interests, and rid 
themselves of union officials who serve their own interests. In 
furtherance of that goal, section 105 of the LMRDA imposes a 
fiduciary duty on the officers and leaders of unions to act 
solely in the best interest of their members. Specifically, 
section 105 of the LMRDA provides that:
        The officers, agents, shop stewards, and other 
        representatives of a labor organization occupy 
        positions of trust in relation to such organization and 
        its members as a group. It is, therefore, the duty of 
        each such person, taking into account the special 
        problems and functions of a labor organization, to hold 
        its money and property solely for the benefit of the 
        organization and its members and to manage, invest, and 
        expend the same in accordance with its constitution and 
        bylaws and any resolutions of the governing bodies 
        adopted thereunder, to refrain from dealing with such 
        organization as an adverse party or in behalf of an 
        adverse party in any matter connected with his duties 
        and from holding or acquiring any pecuniary or personal 
        interest which conflicts with the interests of such 
        organization, and to account to the organization for 
        any profit received by him in whatever capacity in 
        connection with transactions conducted by him or under 
        his direction on behalf of the 
        organization....44
---------------------------------------------------------------------------
    \44\ 29 U.S.C. Sec. 501 (emphasis added).
---------------------------------------------------------------------------
    In light of the unambiguous prohibition on self-dealing 
transactions contained in section 105, the Committee's 
investigation focused on whether the transactions engaged in by 
ULLICO Board members violated that section of the LMRDA.
    At hearing, the Committee heard expert testimony that the 
stock transactions in question may have represented a violation 
of section 105 of the LMRDA.45 The Committee remains 
concerned that insofar as many of the members of ULLICO's Board 
served simultaneously as officers of the country's largest 
unions,46 the activities in which these Board 
members engaged--which diverted proceeds available under the 
Company's stock repurchase program from ULLICO's larger 
stockholders (e.g., unions and union pension funds) to 
individual members of ULLICO's Board--disproportionately 
benefited these Board members at the expense of these unions 
and union funds, and their members and beneficiaries. This 
conduct may well have violated section 105 of the LMRDA, and 
may represent a breach of the fiduciary duty imposed on these 
union officers by this section of federal labor law.
---------------------------------------------------------------------------
    \45\ See Testimony of Warren Nowlin, Hearing on ULLICO Scandal, at 
16. See also Thompson Report at 65 (noting potential applicability of 
LMRDA to stock repurchase transactions).
    \46\ Indeed, as noted above, ULLICO's bylaws in fact require that 
the majority of the membership of the Board of Directors be comprised 
of current union officers. See supra at 4 & 4 n. 9.
---------------------------------------------------------------------------
    In light of the testimony and other evidence presented to 
the Committee, the Committee strongly urges those regulatory 
agencies presently charged with investigation of the ULLICO 
matter to focus closely on the question of whether the actions 
of ULLICO and its Board may have violated section 105 of the 
LMRDA. Should those authorities investigating this matter 
determine that current law--which has not been substantively 
modified since its enactment in the 1950s--fails to adequately 
address those matters raised by the facts presented, the 
Committee is prepared to consider legislative change to ensure 
that the prohibitions contained in the LMRDA protect against 
the recurrence of incidents of this sort, and welcomes an 
analysis of this point and recommended legislative or 
administrative solutions from those authorities examining these 
transactions.

    B. The Employee Retirement Income Security Act: To ensure 
that the assets of pension benefit plans would be adequately 
protected, Congress in 1974 enacted ERISA. ERISA provides that 
pension and welfare benefit plans shall be administered and 
overseen by plan fiduciaries, and further provides that a plan 
fiduciary shall discharge his or her duties with respect to an 
ERISA-covered plan ``solely in the interest of participants and 
beneficiaries'' with the care, skill, prudence and diligence 
that a prudent person acting in a like capacity and familiarity 
with such matters would use.47
---------------------------------------------------------------------------
    \47\ See 29 U.S.C. Sec. 1104.
---------------------------------------------------------------------------
    In addition to these fiduciary standards, ERISA sets forth 
a series of ``prohibited transactions,'' which provide that a 
fiduciary shall not engage in transactions dealing with the 
assets of the plan in furtherance of his or her own interest, 
and shall not receive any personal benefit from any party in 
connection with transactions involving plan 
assets.48
---------------------------------------------------------------------------
    \48\ See 29 U.S.C. Sec. 1106.
---------------------------------------------------------------------------
    At hearing, the Committee heard extensive testimony as to 
the restrictions and regulations that ERISA imposes on pension 
plan trustees by way of the fiduciary duty of loyalty and care. 
Attorney Warren Nowlin testified that under ERISA, a fiduciary 
must execute his duties solely in the interest of plan 
participants and beneficiaries, holding the plan assets in 
trust and ensuring that such assets do not inure to the benefit 
of the employer.49 This duty of loyalty requirement 
imposes an obligation upon fiduciaries to act with complete and 
undivided loyalty with an eye solely toward the interests of 
the participants and beneficiaries.50 Penalties for 
violation include a requirement to disgorge profits made in any 
related-party transaction that violates the so-called 
prohibited transaction rules of ERISA.51
---------------------------------------------------------------------------
    \49\ See Nowlin Testimony, Hearing on ULLICO Scandal, at App. B, 
45-46.
    \50\ See id.
    \51\ See id.
---------------------------------------------------------------------------
    Attorney Nowlin further testified that the scope of the 
fiduciary responsibility to plan participants is much wider 
than generally recognized because of the broad definition of 
fiduciary contained in ERISA, and that under ERISA, one may be 
considered a fiduciary if one has an element of authority or 
control over the plan, including plan management, 
administration or disposition of assets.52 The 
Committee was informed that to the extent that plan sponsors 
influence or maintain discretionary authority over plan 
management or plan investments, they are also considered to be 
fiduciaries.53 Accordingly, corporate officers, 
directors and in some cases, shareholders, that exert 
sufficient control over such a plan may be deemed fiduciaries 
and could be held liable for a breach.54
---------------------------------------------------------------------------
    \52\ See id at 51.
    \53\ See id.
    \54\ See id.
---------------------------------------------------------------------------
    The Committee remains concerned that the facts alleged with 
respect to the ULLICO stock transactions at issue suggest 
potential violations of the fiduciary duty requirements and 
prohibited transaction proscriptions contained in ERISA. 
Specifically, owing to the design of the Company's fixed-sum 
stock repurchase plan, and its disparate treatment of large and 
small shareholders, monies that would otherwise have gone to 
institutional shareholders under the repurchase program in fact 
went instead to members of ULLICO's Board of Directors. The 
windfall reaped by these Board members came at the expense of 
ULLICO's larger shareholders--notably union pension funds--the 
trustees and fiduciaries of which were these same Board 
members.
    Put more simply, it appears that in numerous instances 
individuals were both trustees and fiduciaries of union pension 
plans (which plans themselves were ULLICO's largest 
shareholders) and members of ULLICO's Board. These individuals 
appear to have engaged in transactions that benefited them in 
their personal capacity as Board members, at the expense of the 
pension funds to which they owed a fiduciary duty, and, 
accordingly, the union member participants and beneficiaries of 
these funds. The facts presented, if true, raise the more than 
colorable--and yet unanswered--question of whether the 
transactions undertaken by ULLICO's Board members were lawful 
under ERISA.55
---------------------------------------------------------------------------
    \55\ Cf. Thompson Report at 65 (noting potential applicability of 
fiduciary standards contained in ERISA to Board members'' conduct and 
ULLICO's direction that Special Counsel not investigate or opine on 
potential ERISA violations).
---------------------------------------------------------------------------
    The Committee urges those investigating the ULLICO matter 
to scrutinize these transactions closely in light of the 
unambiguous provisions of ERISA prohibiting self-dealing 
transactions and imposing fiduciary duties of loyalty on plan 
trustees, to ascertain whether these provisions of federal law 
were violated. Consistent with its position as regards 
potential amendment of the LMRDA, the Committee stands ready to 
consider legislative solutions or amendment to ensure that the 
protections included in ERISA are sufficient to guard against 
similar incidents and that the statute effectively protects 
plan participants in accordance with Congressional intent. In 
that light, the Committee welcomes an analysis of the 
sufficiency of ERISA's fiduciary duty standards and self-
dealing transaction prohibitions, and any recommended amendment 
thereof, from those authorities examining these transactions.

                               CONCLUSION

    Based on its investigation detailed above, and the 
documentary and oral evidence received and reviewed in the 
course of that investigation, the Committee remains deeply 
concerned that the transactions undertaken by certain members 
of ULLICO's Board of Directors in connection with the Company's 
stock repurchase program may have violated the Labor-Management 
Reporting and Disclosure Act of 1959 and/or the Employee 
Retirement Income Security Act of 1974. The Committee strongly 
recommends that those regulatory and investigative authorities 
currently investigating ULLICO and these transactions give the 
closest scrutiny to their lawfulness under the aforementioned 
federal labor and pension laws. Should these agencies determine 
that federal labor or pension laws are insufficient to 
adequately safeguard the rights of those whom the laws were 
enacted to protect, the Committee welcomes an analysis of any 
such deficiencies and recommended legislative or administrative 
solutions. The Committee in turn will continue the vigorous 
exercise of its oversight authority to ensure that these laws 
are effective in protecting the rights of American workers, and 
if they are not, in considering legislative solutions.
                                ------                                


                               APPENDICES

    Appendix A: LRequests for Production by ULLICO Inc. from 
the Committee on Education and the Workforce (March 18, 2003)

    Appendix B: LLetter from the Honorable John A. Boehner, 
Chairman, Committee on Education and the Workforce, to Robert 
A. Georgine, Chairman of the Board, ULLICO Inc. (March 31, 
2003)

    Appendix C: LSubpoena Testicandum to Robert A. Georgine 
(May 8, 2003)

    Appendix D: LSubpoena Testicandum to Robert A. Georgine 
(May 21, 2003)

    Appendix E: LHearing on ``The ULLICO Scandal and Its 
Implications for U.S. Workers'' before the Committee on 
Education and the Workforce, U.S. House of Representatives, 
108th Congress, First Session, Serial No. 108-19

                           APPENDIX A

                committee on education and the workforce


                     u.s. house of representatives



                                           March 18, 2003

Via Facsimile and First Class Mail

Robert A. Georgine
Chairman, President & CEO
ULLICO Inc.
111 Massachusetts Ave. NW
Washington DC 20001

Dear Mr. Georgine:

    Pursuant to the constitutional authority of the House of 
Representatives and the authority provided by Rules X and XI of 
the House of Representatives, the Committee on Education and 
the Workforce (herein the ``Committee'') is investigating 
matters within its legislative and oversight jurisdiction 
regarding alleged misconduct of individuals associated with 
ULLICO, Inc.'s Board of Directors, including but not limited to 
the methodology employed for the valuation of the corporation's 
stock; the purchase and sale of this stock by officers, 
directors and other shareholders of the corporation; the effect 
these transactions had on the corporation's union and multi-
employer benefit plan shareholders; and related matters.
    By this letter, the Committee hereby requests the 
production of documents, records, or other materials responsive 
to the Requests for Production set forth below, in conformance 
with the General Instructions and Definitions set forth herein.
    Unless otherwise specified, the time period encompassed by 
the request is January 1, 1997 to the present date. In 
addition, please note the continuing nature of these Requests 
pursuant to General Instruction 11 and your duty of timely 
supplementation thereunder.
    The Committee requests your response no later than 5:00 
p.m. on Thursday, April 17, 2003.

                          GENERAL INSTRUCTIONS

     1. LIn complying with these Requests, you are requested to 
produce all responsive documents that are in your possession, 
custody, or control, whether held by you or your past or 
present agents, employees, and/or representatives acting on 
your behalf. You are also requested to produce documents that 
you have a legal right to obtain, documents that you have a 
right to copy or have access to, and documents that you have 
placed in the temporary possession, custody, or control of any 
third party. No records, documents, data or information called 
for by any Request(s) shall be destroyed, modified, removed or 
otherwise made inaccessible to the Committee.
     2. LIn the event that any entity, organization or 
individual denoted in any Request(s) has been, or is also known 
by any other name than that herein denoted, the Request(s) 
shall be read to also include them under that alternative 
identification.
     3. LEach document produced shall be produced in a form 
that renders the document susceptible of copying.
     4. LDocuments produced in response to these Requests shall 
be produced together with copies of file labels, dividers or 
identifying markers with which they were associated when the 
Request(s) was made, and shall be identified as to which 
Request(s) such documents are responsive.
     5. LIt shall not be a basis for refusal to produce 
documents that any other person or entity also possesses non-
identical or identical copies of the same document.
     6. LIf any of the requested information is available in 
machine-readable form (such as punch cards, paper or magnetic 
tapes, drums, disks, core storage, CD-rom, or otherwise), state 
the form in which it is available and provide sufficient detail 
to allow the information to be copied to a readable format. If 
the information requested is stored in a computer, indicate 
whether you have an existing program that will print the 
records in a readable form.
     7. LIf any Request(s) cannot be complied with in full, it 
shall be complied with to the extent possible, which shall 
include an explanation of why full compliance is not possible.
     8. LIn the event that a document is withheld on the basis 
of privilege, provide the following information concerning any 
such document: (a) the privilege asserted; (b) the type of 
document; (c) the general subject matter; (d) the date, author 
and addressee; and (e) the relationship of the author and 
addressee to each other.
     9. LIf any document responsive to any Request(s) was, but 
no longer is, in your possession, custody, or control, identify 
the document (stating its date, author, subject and recipients) 
and explain the circumstances by which the document ceased to 
be in your possession, custody, or control.
    10. LIf a date set forth in any Request(s) referring to a 
communication, meeting, or other event is inaccurate, but the 
actual date is known to you or is otherwise apparent from the 
context of the Request(s), produce all documents which would be 
responsive if the date were correct.
    11. LThese Requests are continuing in nature. Any record, 
document, compilation of data or information not produced 
because it has not been located or discovered by the return 
date shall be produced immediately upon location or discovery 
subsequent thereto.
    12. LAll documents shall be Bates stamped sequentially and 
produced sequentially, and a log shall be provided indicating 
each document, a description of the document, and its Bates 
number(s), author, and source.
    13. LTwo sets of documents shall be delivered, one set for 
the Majority Staff and one set for the Minority Staff.

                              DEFINITIONS

     1. LThe words ``document'' and/or ``record'' are used in 
the broadest sense and means, without limitation, any writing 
or recording of any type or description, whether printed or 
recorded (mechanically or electronically), or reproduced by 
hand, and whether provided by plaintiff or defendant or not, 
including, without limitation, any letters, e-mails, 
correspondence, telegrams, memoranda, notes, records, reports, 
financial statements, statistical and financial records, 
minutes, memoranda, notices or notes of meetings, telephone or 
personal conversations, telephone records or conferences or 
other communications, envelopes, interoffice, intra-office or 
intra-company communications, microfilm, microfiche, tape 
records, videotapes, photographs, bulletins, studies, plans, 
analyses, notices, computer and/or e-mail records, runs, 
programs or software and any codes necessary to comprehend such 
records, runs, programs or software, books, pamphlets, 
illustrations, lists, forecasts, brochures, periodicals, 
charts, graphs, indices, bills, pamphlets, illustrations, 
lists, forecasts, statements, files, agreements, contracts, 
sub-contracts, completed forms, schedules, work sheets, data 
compilations, policies, amendments to policies or contracts, 
training manuals, operator's manuals, user's manuals, 
calendars, diaries, test results, reports and notebooks, 
opinions or reports of consultants, and any other written, 
printed, typed, recorded, or graphic matter, of any nature, 
however produced or reproduced, including copies and drafts of 
such documents, and any and all handwritten notes or notations 
in whatever form. The term ``document'' also includes all data 
or documentation that is stored in a computer or other storage 
device and can be printed on paper or tape, such as drafts of 
documents and/or e-mails that are stored in a computer or word 
processor and information that has been input into a computer 
or other storage device, as well as disks or other materials in 
which the data or documentation is found.
     2. LThe term ``communication'' includes, without 
limitation, every manner or means of statement, utterance, 
notation, disclaimer, transfer or exchange of information of 
any nature whatsoever, by or to whomever, whether oral or 
written or whether face-to-face, by telephone, mail, personal 
delivery or otherwise, including but not limited to, 
correspondence, conversations, dialogue, discussions, meetings, 
interviews, consultations, agreements and other understandings.
     3. LThe terms ``Corporation'' and/or ``ULLICO'' refer to 
ULLICO, Inc.; its subsidiary the Union Labor Life Insurance 
Company; each of the foregoing entities'' attorneys, 
investigators, agents, affiliates, representatives, 
shareholders, officers, trustees, directors; and all persons 
acting on either or both of the foregoing entities'' behalf or 
in either or both of the foregoing entities'' service.
     4. LThe term ``Board'' refers to the Board of Directors of 
ULLICO and its members, attorneys, investigators, agents, 
managers, employees, affiliates, representatives, shareholders, 
officers, trustees, directors, and all persons acting on its 
behalf or in its service.
     5. LThe words ``person'' and/or ``individual'' means all 
natural persons, corporations, business entities, partnerships, 
associations, firms, any governmental agency, department, 
administration, bureau or political subdivision thereof, and 
any other type of organization or entity.
     6. LThe words ``concerning'' and/or ``regarding'' shall be 
construed to mean referring to, relating to, supporting, 
constituting, embodying, discussing, describing, depicting, 
illustrating, recording, summarizing, evidencing, 
demonstrating, reflecting, containing, studying, analyzing, 
considering, explaining, mentioning, showing, commenting upon 
and resulting from.
     7. LThe words ``and'' and ``or'' shall each be considered 
both conjunctively and disjunctively to mean ``and/or.
     8. LThe term ``identify,'' when used in reference to a 
natural person, means to supply the following information: (a) 
the person's name; (b) the person's present and/or last known 
residential address and telephone number; (c) the name and 
address of the person's present and/or last known place of 
employment; and (d) the person's present or last known business 
title or position.

                        REQUESTS FOR PRODUCTION

     1. LPlease produce copies of ULLICO's Articles of 
Incorporation, By-Laws, and any other documents concerning the 
rules of procedure for the conduct of Board meetings of the 
Corporation.
     2. LPlease produce copies of all documents concerning any 
codes or standards of ethical or professional behavior 
applicable to any member of the Board by virtue of his or her 
membership on the Board or his or her membership in any ``labor 
organization,'' as that term is defined at 29 U.S.C. 
Sec. 152(5).
     3. LPlease identify all of the Corporation's stockholders, 
officers, and Board members.
     4. LPlease produce complete copies of all minutes, 
memoranda or other written record of the Corporation's Board 
meetings, and any other minutes, memoranda or other written 
record of any other group or subcommittee of ULLICO, its 
officers, employees or directors concerning the valuation, 
sale, re-purchase or options of Corporation stock for the same 
period.
     5. LPlease produce any and all documents, including emails 
or other electronic communication, regarding the retention of 
Credit Suisse First Boston Corporation to perform services to 
the Corporation related to the valuation of the Corporation's 
stock.
     6. LPlease produce any and all documents, including 
internal reports, contractor/consultants reports, regarding the 
methodology and the valuation of the Corporation's stock.
     7. LPlease produce a complete accounting of the amount of 
shares in the Corporation held by each of its stockholders.
     8. LPlease produce all documents relating to any stock 
option programs, stock purchase or re-purchase programs of the 
Corporation, including but not limited to letters, 
correspondence, emails or other electronic communication, and/
or notices to any and all shareholders, officers, or directors 
of the Corporation informing them of any such programs.
     9. LPlease produce a list of all shareholders, officers, 
or directors of the Corporation who exercised any stock 
option(s) for shares of Corporation stock for the period of 
1997 through the present.
    10. LPlease produce all documents, including any letters, 
correspondence, emails or other electronic communication, and 
any responses to such communications, by any officer, director, 
employee, or other agent of the Corporation or from any 
shareholder, director or officer of the Corporation regarding 
the valuation of the Corporation's stock, or any sale or re-
purchase of that stock by any shareholder, director or officer 
of the Corporation, including but not limited to all 
correspondence from the Chairman of the Corporation to any 
individual(s) regarding same.
    11. LPlease produce all documents concerning any report to 
the officers, Board, or shareholders of the Corporation 
prepared by the Honorable James R. Thompson, Jr. and a copy of 
said report.
    12. LPlease produce all documents, to the extent not 
encompassed in any of the above Requests, provided to the 
Department of Labor, Department of Justice, Securities and 
Exchange Commission, and/or any other government agency from 
January 1, 1997 to the present in response to any investigation 
of the Corporation and/or any member(s) of its Board, or in 
response to any request for production of documents and/or 
request for information concerning the Corporation and/or any 
member(s) of its Board by any of the foregoing agencies.

                               * * * * *

    Thank you in advance for your assistance and cooperation. 
Please contact David Connolly or Jo-Marie St. Martin of the 
Committee staff at (202) 225-7101 or (202) 225-4527 if you have 
any questions or require additional information.


                                           Sincerely yours,

                                           John Boehner
                                           CHAIRMAN
                                ------                                


                           APPENDIX B

                COMMITTEE ON EDUCATION AND THE WORKFORCE

                     U.S. HOUSE OF REPRESENTATIVES

                                           March 31, 2003

Via Facsimile and First Class Mail

Robert A. Georgine
Chairman President & CEO
ULLICO, Inc.
111 Massachusetts Ave. NW
Washington DC 20001

Dear Mr. Georgine:

    We write with reference to the House of Representatives 
Committee on Education and the Workforce (the ``Committee'')'s 
Requests for Production (the ``Requests'') to ULLICO, Inc. 
(``ULLICO'') dated March 18, 2003 and received by ULLICO on 
even date.
    The Committee notes with interest media reports indicating 
that ULLICO's Board of Directors (the ``Board'') announced on 
March 28, 2003 that it would release publicly a certain report 
to the Board prepared by the Honorable James R. Thompson, Jr. 
(the ``Thompson Report''), the production of which was called 
for, inter alia, in Request No. 11 of the Committee's Requests.
    It is the Committee's position that ULLICO's immediate 
production of the Thompson Report is essential to the 
Committee's investigation of those matters within its 
legislative and oversight jurisdiction as set forth in detail 
in the Requests. In light of this fact, the Committee requests 
that a copy of the Thompson Report be provided to the Committee 
no later than the close of business on Tuesday, April 1, 2003.
    Please note that the production of the above-requested 
information is subject to the Definitions and General 
Instructions contained in the Requests. Note further that such 
delivery does not serve to relieve or in any way diminish 
ULLICO's obligations with respect to the remainder of the 
Requests (including but not limited to the production of those 
documents concerning the Thompson Report set forth in Request 
No. 11), which responsive production is to be made no later 
than the close of business on April 17, 2003.
    You or your designee may contact Jim Paretti of the 
Committee's staff at 202-225-7101 to arrange for the immediate 
delivery of the Thompson Report as set forth herein.
    The Committee appreciates your anticipated cooperation in 
this matter.

                                           Sincerely yours,

                                           John Boehner
                                           CHAIRMAN

                           APPENDIX C
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                  Minority Views: ULLICO Investigation

                            I. Introduction

    During the past two years, hard-working Americans 
throughout our country have lost hundreds of millions in 
irreplaceable life savings because of the unconscionable--and 
often illegal--behavior of those charged with managing their 
retirement savings and other investments. Numerous individuals 
have already admitted criminal liability, and many others are 
under investigation by the Securities Exchange Commission, 
Department of Labor, and other agencies.
    The events at ULLICO and the large scale corporate 
criminality represent profoundly contrasting case studies on 
how labor officials on one hand, and high ranking corporate 
officials on the other, responded in the face of serious 
allegations of misconduct and illegality at their institutions.
    The corporate scandals, well documented in the press, 
represent a breathtaking series of corporate obstruction, 
secrecy, destruction of documents, misrepresentations, and 
fraud perpetrated by companies like Enron, Global Crossing, and 
WorldCom and others. In the face of public scrutiny by the 
press and law enforcement, corporate officials--often aided and 
abetted by their accountants, law firms, and investment 
bankers--together continued their cover-up and denied 
responsibility until law enforcement officials were literally 
knocking down the door with fists of subpoenas and search 
warrants. Taken together, the unlawful looting of companies by 
top officials, and failure to take responsibility for their 
actions--resulted in billions of dollars in lost nest-eggs of 
employees, and losses by investors.
    By contrast, when union officials at ULLICO became aware of 
questionable transactions, they moved quickly to investigate 
allegations of self-dealing by its board; insisted on 
publishing the results; demanded the return of excess profits; 
insisted on the removal of (and has filed suit against) 
directors who did not cooperate; and implemented new, strict 
reforms for members to follow in the future. Unlike the 
considerable losses in the corporate scandals, no employee lost 
one cent of their pension, or 401(k) nest-eggs. In fact, the 
ULLICO investments on which this investigation turns made a net 
profit of over $300 million for the company and shareholders on 
an investment $7.6 million. The activities of these directors--
who wrongly took a disproportionate share of the profits for 
themselves--cannot in any way be condoned; but the response of 
union officials to act in the interest of their shareholders 
was swift and responsible.
    Assuring the retirement security of Americans is one of the 
most important responsibilities of the Committee on Education 
and the Workforce. And yet, despite repeated requests from the 
Democrat Minority for a thorough investigation of these 
scandals, the Committee has held only one public hearing 
limited to the Enron debacle. There has been no serious effort 
at investigating the weaknesses in current law and regulatory 
oversight that allowed these tragic abuses to continue. Nor has 
the Majority proposed any legislation to address the hundreds 
of millions of dollars in 401(k) investments lost by employees 
and other investors at WorldCom, Lucent Technologies, Global 
Crossing, Dynegy, and other companies due to corporate fraud 
and abuse.
    It is therefore curious that while ignoring urgent calls to 
investigate serious misconduct at these companies, the Majority 
has focused so much time, attention and staff energy on alleged 
labor union misconduct. Despite the unsubstantiated speculation 
of the Majority staff, after all this effort we still do not 
know if there was criminal conduct by some at ULLICO. That is a 
matter for the courts to determine. However, we do know that 
unlike the various corporate scandals that have been largely 
ignored by the Committee and about which no reports have been 
issued, no criminal actions have been brought to date regarding 
ULLICO.
    Last week, the Committee distributed what it claims to be a 
``Report of the Committee'' on the activities of ULLICO. It 
enumerates various factual matters regarding the ULLICO 
investments, but omits numerous self-correcting actions by the 
new ULLICO Board and reforms proposed by ULLICO board members. 
The Minority was never asked or permitted to participate in 
preparing the report.
    We are surprised that the ``Committee Report'' notes that 
the Majority ``stands ready'' to consider legislation to 
``ensure that the protections included in ERISA are sufficient 
to protect plan participants''.
    In fact, Majority members have repeatedly voted against 
amendments offered by the Minority to strengthen ERISA 
protections for the retirement security of millions of 
employees.
     LThey rejected amendments that would prevent 
future executives like Ken Lay from dumping company stock 
without notifying employees (21D-25R).
     LThey rejected efforts to make sure that corporate 
abusers like Ken Lay and Bernard Ebbers are held accountable 
for the pension losses they caused, and that funds are 
available to pay the victims (21D-24R).
     LThe Majority rejected proposals to give employees 
a voice on pension boards (19D-25R). They rejected a proposal 
to curtail lavish pension perks set aside for company 
executives (20D-26R).
     LThey rejected an amendment to allow employees to 
diversify their own 401(k) investments in company stock after 
one year (18D-27R).
     LThey rejected an amendment that would provide 
workers with independent investment advice, rather than the 
Majority's proposal to allow financial firms to offer 
conflicted investment advice to employees for the first time 
since ERISA was enacted (21D &1R- 25R).
     LFinally, they rejected an amendment to ERISA that 
would ensure that older employees would not have their benefits 
reduced by as much as 50% if their plan was converted to a cash 
balance plan (19D & 1R-23R).

                 II. Discussion of ULLICO Transactions

    The details of the ULLICO dispute are contained in Governor 
Thompson's Report to the ULLICO Board. This document was 
prepared at the request of the ULLICO Board and the ULLICO 
Board has adopted its findings. As a result of the findings and 
recommendations of the Thompson Report, a number of directors 
voluntarily returned their stock profits, and the Board of 
ULLICO has demanded that all those who profited from the 
transactions in question return said profits. ULLICO has 
removed from the Board, for cause, any director who had not 
made arrangements to return their profits. Earlier this month, 
ULLICO filed a counterclaim in U.S. District Court in 
Washington DC alleging breaches of fiduciary duty, violations 
of employment contracts and other wrongful acts by former 
officers and seeking tens of millions of dollars in damages. 
ULLICO has told Minority staff that further litigation against 
all other directors who have failed to make arrangements to 
return profits is imminent.
    The evidence provided to the Committee amply demonstrates 
that these events are the culmination of an effort by current 
directors and shareholders of ULLICO to determine the facts of 
the stock transactions at issue, and to hold those who 
committed wrongful acts accountable. While this Committee's 
efforts to obtain the Thompson Report are commendable, they 
followed by more than six months similar efforts by leaders of 
the labor movement. The most unfortunate aspect of the 
Majority's report is its refusal to recognize this sustained 
and ultimately successful effort by the labor movement to 
initiate an independent inquiry, obtain the release of the 
results, remove those who committed wrongful acts from office, 
and hold them legally and financially accountable for their 
actions.
    As Business Week pointed out, there is no comparable record 
of aggressively dealing with corporate wrongdoing in the world 
of business. (``Big Labor's Governance Lesson; At Scandal-
Tainted ULLICO, AFL-CIO Leaders Oust One of Their Own as CEO 
and Set an Example Corporate America Should Heed,'' Aaron 
Bernstein, Business Week Online, May 27, 2003).
    This Committee's unbalanced report fails to acknowledge 
those in unions who acted responsibly and sought to hold those 
who acted improperly accountable, and ignores the ongoing 
effort of the new management of ULLICO to recover wrongfully 
obtained stock profits to the company.

                       III. Chronology of Events

    As the Thompson Report indicates, the misconduct in 
question occurred during the period from 1998 to 2001, with the 
sales of stock by officers and directors occurring in 2000 and 
2001. As the Majority report indicates, critical facts about 
the events were withheld from ULLICO's Board of Directors. (See 
Majority Views on page 7)
    In mid-March 2002, detailed accounts of the key events in 
question appeared in the Wall Street Journal and in Business 
Week, apparently as a result of a leak from company insiders. 
Within days of the appearance of these accounts, John Sweeney, 
the President of the AFL-CIO and at the time a Board member of 
ULLICO, sent a letter to Robert Georgine, then Chairman and CEO 
of ULLICO, asking that ULLICO's Board launch an independent 
investigation with independent outside counsel.
    At a special Board meeting in late April, the Board of 
ULLICO appointed Governor Thompson as special counsel to 
conduct the investigation. The Board resolution gave Thompson a 
broad mandate to inquire into matters related to stock trading 
by ULLICO officers and directors.
    Thompson conducted his investigation in the summer and 
early fall of 2002. As the Majority report notes, the 
management of ULLICO asked that he not address issues of ERISA 
and labor law in his report. However, the Majority report fails 
to note that Thompson agreed with the request and has continued 
to say that this was the right decision, largely it appears 
because he felt that the core issues at stake in this matter 
involved corporate, securities, and criminal law, not labor law 
or ERISA.
    In September 2002, Thompson began to conclude his 
investigation, and ULLICO management began an effort to prevent 
his report from being released. This led to a series of 
increasingly hostile letters between Thompson, John Sweeney of 
the AFL-CIO, and Robert Georgine, which focused on whether the 
Thompson Report would be made in writing and if so, whether it 
would ultimately be made available to shareholders. It was also 
in this period that United Brotherhood of Carpenters President 
Douglas McCarron, a ULLICO board member, announced prior to the 
release of the Thompson Report that he was returning to ULLICO 
his profits on the sale of ULLICO stock.
    The Thompson Report was completed and made available to the 
Board of ULLICO on November 26, 2002. Rather than be party to 
withholding the report from shareholders, ULLICO directors John 
Sweeney, Linda Chavez-Thompson and Frank Hanley, President of 
the International Union of Operating Engineers, all resigned 
from the Board in protest. Shortly thereafter Carpenters 
President Douglas McCarron resigned from the Board in protest. 
This was followed by benefit plans affiliated with the United 
Auto Workers filing suit in federal court in Detroit seeking 
the release of the Thompson Report.
    ULLICO then appointed a Special Committee to review the 
Thompson Report. Hotel Employees and Restaurant Employees Union 
President and ULLICO director John Wilhelm and Laborers 
International Union of North America President Terrence O 
Sullivan both served on that committee and fought for the 
adoption of the Thompson Report's recommendations that those 
who profited from the stock transactions return their profits. 
When O Sullivan and Wilhelm found themselves in the minority, 
Wilhelm resigned from the Board, and O Sullivan took a leading 
role from within the Board in working with ULLICO shareholders 
and the broader labor movement to effect a change in ULLICO 
management on May 8, 2003.
    On May 8th, the new Board members joined with certain 
continuing Board members to elect Terrence O Sullivan Chairman 
and CEO, and to adopt the Thompson Report. They also demanded 
the return of the stock profits, and to take the steps that 
resulted in the removal from the Board and the company all 
individuals who refused to return their profits from the 
improper stock transactions. The new majority of the new Board 
consists of current officers of labor organizations, and the 
Board also includes individuals like former Congressman, 
Federal Judge and White House Counsel Abner Mikva, former 
Secretary of Labor Alexis Herman, and former Chairman of the 
New York Metropolitan Transit Authority Richard Ravitch. Judge 
Mikva has led since May a special subcommittee of the Board 
charged among other things with implementing the Thompson 
Report.
    ULLICO has demanded the return of the stock profits as 
recommended by Governor Thompson. Directors and Former 
Directors Morton Bahr, Martin Maddaloni, Douglas McCarron, 
James La Sala, and Kenneth Brown have done so voluntarily or 
are in the process of doing so. Since the Majority noted the 
presence of John Sweeney, Douglas McCarron and Martin Maddaloni 
on the ULLICO Board during the events in question, it seems 
only fair to note that John Sweeney demanded the investigation 
that enabled this Committee to have the benefit of the Thompson 
Report; that Douglas McCarron was the first person to return 
his stock profits voluntarily to ULLICO and later resigned in 
protest over management's efforts to suppress the Thompson 
Report; and that Martin Maddaloni, the only one of the three 
who is a continuing director, voted to adopt the Thompson 
Report and is in the process of voluntarily returning his stock 
profits as well.

                             IV. Conclusion

    The Majority's ``Committee Report'' fails to recognize the 
initiatives of labor leaders who acted aggressively to protect 
their members and their members'' pension funds even when that 
meant driving from office and ultimately suing their own 
colleagues. While no one condones the improper actions ascribed 
to the former ULLICO Board, it seems only fair to recognize 
leaders in our society who act responsibly and forthrightly at 
a time when there have been so many examples of others looking 
the other way while the companies they were responsible for 
were destroyed and the life savings of innocent men and women 
were lost. The Majority's biased and distorted report ignores 
these responsible actions by the leaders of the labor movement 
that occurred not in response to congressional inquiries, but a 
year before the Committee even scheduled a hearing on the 
ULLICO matter. We are still awaiting comparable scrutiny of far 
larger abuses by the executives of Enron, Global Crossing and 
other corporations.


GEORGE MILLER

                                   - 
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