Labor's Enron

Labor leaders used insider positions to rake off millions

opinion by Charles Walker

If union members thought that the board of directors of Union Labor Life Insurance Company (ULLICO), a union-owned firm, was merely resisting washing its dirty laundry in public when it refused to reveal an internal investigative report into its financial dealing, they were only partly right. The board also wanted to cover-up the investigative report's conclusion that individual directors, who profited big-time from their control of the firm's stock prices, should pay back the millions they ripped-off. Labor unions and their pension funds own almost all of ULLICO's stock, according to the New York Times (April 2, 2002).

The labor leaders' manipulations of the firm's stock prices, using their insider positions, netted them more than $6.5 million dollars. At least five directors have resigned so far. One of the first to leave the board was AFL-CIO president John J. Sweeney, who reportedly did not take part in the insider trading. Nevertheless, how Sweeney missed the abuse hasn't been mentioned, let alone explained.

Why has Sweeney failed to scream bloody murder about the corrupting influence of such wealth on these self-proclaimed leaders of working stiffs? The answer lies in the lack of democratic elections at the top. Not one of these leaders has ever had to explain his actions to rank and file union members in a direct, democratic election.

So-called elections in organized labor more closely resemble appointments from the top. Labor leaders who abuse their power are shielded from the indignation of the rank and file.

According to one report, "Virtually all of the union presidents on the company's board hold seats on the 54-member AFL-CIO Executive Council, the group that makes decisions affecting 13 million union members and their families." (Harry Kelber, www.laboreducator.org )

The details of the scheme didn't take any brainpower. Since the board members themselves annually set and re-set the firm's stock prices, they merely bought or sold in advance of their setting of the stock's prices. No more difficult than putting a thumb on the meat market's scale, though certainly far more lucrative.

Surprisingly, the 138-page report concluded that the self-serving directors hadn't violated any criminal laws, although they had clearly breached their fiduciary duties. Whether on-going government investigations agree with those conclusions remains to be seen; a grand jury in Washington is investigating. Either way, breaching fiduciary duties amounts to betrayal of the rank-and-file, and the perpetrators of the rip-off are surely guilty of that.

The stolen millions may or may not be paid back. The thieves may or may not be jailed. But there can be no restitution to the ranks for the damage done to union solidarity. The ranks have lost more than some money. They have further reasons to oppose organized labor's leaders.