Union-friendly investor defends pension plans

WASHINGTON - Last month, a Republican-run, intensely partisan House subcommittee held a hearing, on what its majority claimed are financial ills affecting multi-employer pension plans, notably in construction.

Citing an editorial by the Wall Street Journal, panel chairman Phil Roe, R-Tenn., declared many such plans, jointly run by unions and firms, are underfunded and in financial trouble. The cumulative shortfall is in the billions of dollars, and workers are scared they might not get their pensions, the congressman charged.

Regardless of whether Roe is right - it depends on whose analysis you read and believe-the multi-employer pension plans and the rest of the union movement have had a knowledgeable partner to help insulate it from such struggles for years.

It's called Ullico, Inc., a union-friendly financial services firm with a history of providing insurance and investment solutions to union workplaces. It's also known as the Union Labor Life Insurance Company, and it's also gone beyond life insurance.

The $5.6 billion firm and its affiliates are run by a board of directors, which includes labor union leaders, independent directors, and outside insurance and investment professionals. It provides investment vehicles for multi-employer pension plans, other union pension plans - and jobs for unionists, and not just in construction, either.

"We are beginning to explore lending opportunities again after temporary restraint," due to the Great Recession, says CEO Ed Smith, a longtime business agent for Laborers Local 773 in Illinois and Laborers official before joining Ullico in a top post in 2007. Ullico, through its flagship investment product J for Jobs, lends to developers who use union labor to build hospitals, hotels, housing, shopping centers, even synagogues, aiming for good returns on its - and the unions'-investments.

"We recently had a meeting with our brokers at the JW Marriott in Chicago's Loop," Smith notes. "Not only was it built with union labor, but we put a clause in the loan agreement mandating card check recognition if the Marriott staff wanted to unionize." It did. "Henry Tamarin, president of Unite Here Local 1, thanked us."

The recession forced the company to slow its lending temporarily and restructure some $1.6 billion in contracts and construction schedules, says Smith, who's been CEO for 18 months, after being president since 2008. The slump also gave Ullico's J for Jobs fund a loss that year. "The loss wasn't so much a surprise as was the shock of how really bad the economy was," Smith says.

But now, lending is returning, with the "use-union-labor" condition, and more. "J for Jobs has invested over $30 billion invested in construction projects, and now we're looking for similar deals in manufacturing facilities," Smith adds.

The Union Labor Life Insurance Company, founded in 1927, doesn't even have to lend most of the money to a project to gain that leverage. It can take minority stakes in big projects, while lending enough money to get agreement to use union labor.

That's what Ullico achieved when it invested approximately $10 million in a $90 million expansion at Pace University in New York City. "We still had enough control that it was 100% union built and created 180 jobs," Smith says.

Since Ullico's ownership comes from the labor community, Smith said the shareholders expect the company to seek business opportunities that will benefit unions and union members, while providing a return on shareholder investment.

In addition to its investment vehicles, Ullico's insurance companies seek new product lines to help union members, leaders and union workplaces. Those new lines include one for union construction contractors, creating insurance "captives" to help pay for workers' comp claims - marketing "stop-loss" insurance to unions health and welfare plans to cover the costs of big claims and similar expenses.

They even include union liability insurance, to provide coverage for legal costs for union leaders accused of wrongdoing. It's even considering how to help unions with insurance against cyberspace losses due to hackers, "worms," and similar attacks.

Ullico may get to increase its role in the health care market, too, Smith says, given the U.S. Supreme Court decision upholding the Affordable Care Act, the Obama-pushed labor-backed health care law.

But the point of all the initiatives is the same: Finding areas that can make money for investing unions and investing union pension plans - and put union members to work.

"There's real power when you can control the money. That's the point of the Pace project. We are Labor's company. We are them, and we want them to use our services to make money and jobs," Smith concludes.

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