Bad Business People

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Bad Business People

A union owned company is now under investigation for accounting shenanigans. It seems like insider trading to me, but since the company is private, I don't know what the rules are.

What is by now well known is that Ullico is a private firm, and as such can adjust its own share price; an accountant performs a year-end review and suggests a price that is then ratified by the board. By 1999, thanks to an investment in Global Crossing (which was rocketing up the stock market), Ullico's finances were booming–suggesting that its own share price would soon be set higher. But in December 1999, Mr. Georgine sent a confidential invitation to the company's senior officers and directors offering to let them buy as many as 4,000 shares at the current Ullico price of about $53. Sure enough, the year-end audit suggested a new price of $146, which the board ratified in May 2000–thus voting to treble the price of shares they'd just bought.
If this exclusive purchase isn't bad enough, keep holding your nose. By 2000, with the stock market souring (and Ullico's investment in Global Crossing crashing), it was clear that the next audit would yield a lower price. Yet in November 2000 Mr. Georgine and the board authorized Ullico to buy back shares (at $146) that the directors and officers had purchased in 1999 (at $53). The buyback was crafted so that only "small" investors could participate, excluding Ullico's primary shareholders–union pension funds.

To me, this type of cheating is anti-capitalist behavior.

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