ULLICO Reaches Settlement with Former President

BNA reports that Robert Georgine has agreed to forfeit or reimburse to the company $13 million in cash and tax benefits.   Terrence O’Sullivan, the union-owned insurance company’s current chief executive, estimated the economic value of the settlement for the company at $17 million.

The company has been under federal investigation since 2002 and involved in several lawsuits for alleged insider trading and financial malfeasance by Georgine as well as numerous top officers and board members.

An internal investigation in 2002 led by former Illinois governor James Thompson resulted in the lawsuit against Georgine(See  Report: Ullico Officials “Acted Inappropriately” in Stock Repurchase ).   Thompson said he found evidence that Georgine breached his fiduciary duties by self-dealing in company stock, and recommended the company seek a return by Georgine of profits from the stock deals.

Damon Silvers, counsel to the ULLICO chairman, said the settlement “is a model for what should go on in recovering money for shareholders in cases of corporate wrongdoing.”

Details of the settlement include:

• Georgine will return to the company all profits from his sale of the stock of about $2.6 million. The settlement cancels a 2000 stock purchase and credit agreement in which Georgine received 40,000 shares of ULLICO stock and also cancels 32,000 shares of stock still owed Georgine under this agreement.   Included in the $2.6 million repayment by Georgine of profit from the sale of company stock are profits realized on the sale of 8,000 shares of stock received under the stock agreement.
• Georgine will forfeit more than $10 million in compensation, most of which was held in bank trusts or so-called rabbi trusts for his benefit.   This includes profits from transactions in benefit plans linked to the price of company stock, known at ULLICO as “deemed stock profits.”
• Georgine will receive his ULLICO pension, which O’Sullivan said “is generally protected from civil litigation” under the Employee Retirement and Income Security Act.
• Upon the death of Georgine and his wife, their estate will receive the proceeds from a $7 million life insurance policy. O’Sullivan added, however, that all the premiums on this policy were paid before the 2003 change in company management. The insurance policy provides that at the time benefits are paid to Georgine’s estate, the company is to recover the premiums it paid, O’Sullivan added. Currently, Georgine is repaying the company for the present value of those premiums as part of the settlement, he said.
• Under other executive retirement benefits to which Georgine was originally entitled, he now will recover contributions he made from his salary to his deferred compensation plan and a portion of funds held for his benefit under his “supplement executive retirement plan,” of about $6.7 million, O’Sullivan said. Georgine also will receive an additional $1.4 million under the settlement of his “auxiliary pension plan.”

Neither Georgine, nor ULLICO conceded to any wrongdoing.   As a result of the settlement, ULLICO likely will move to dismiss in federal court its action against Georgine and that Georgine will move to dismiss his counterclaims against the company.

“ULLICO continues to pursue claims against several other former officers and service providers in relation to the insider stock transactions that were the subject of Governor Thompson’s investigation and other executive compensation issues,” O’Sullivan said.