Senator Collins’ Committee to Hold First Congressional Hearing on ULLICO Stock Deals

WASHINGTON, D.C.—Senator Susan Collins (R-ME), chairman of the Governmental Affairs Committee, announced today that the committee will hold a hearing on Thursday, June 19, 2003, to examine questionable stock transactions by senior officials at ULLICO, Inc., a union-owned insurance company. The hearing will focus on an extensive investigation of the questionable deals. Former Illinois Governor James R. Thompson, who led the investigation at the request of ULLICO’s board of directors, is scheduled to testify.

Certain ULLICO directors and officers have been criticized for allegedly engaging in manipulative stock transactions that enriched themselves at the expense of the company’s other shareholders — primarily unions and worker pension funds.

“These types of scandals shake the confidence of those who have invested their money in companies they trusted,” Collins said. “I intend to determine why this occurred and whether legislation is needed to prevent it from happening again.”

The stock transactions involved ULLICO’s investment in Global Crossing, which grew to become ULLICO’s primary asset in the late 1990s. ULLICO’s stock price was closely tied to the value of Global Crossing’s publicly traded stock. Insiders were able to profit at the expense of the company’s other shareholders by arranging to purchase ULLICO stock before the full growth of its Global Crossing investment was reflected in ULLICO’s annually readjusted stock price. Later, insiders arranged for ULLICO to repurchase their stock at the inflated price, which did not reflect Global Crossing’s declining value.

The Thompson report concluded that a “compelling argument” could be made that certain ULLICO directors and officers failed to satisfy their fiduciary duties to the company. Thompson “strongly recommended” that 18 of ULLICO’s directors and officers return $5.6 million in profits they made from the questionable ULLICO stock deals. In addition, Thompson recommended that the board of directors review a number of other transactions worth millions of dollars to the senior officials to determine whether those profits should be returned as well.