A UnumProvident Corporation shareholder is suing officers and directors of the insurance firm, claiming they concealed “contingent commissions,” while “grossly overstating” company income.
The Chancery Court action was brought by Patrick Leonard.
The 49-page complaint is filed against former officer Harold Chandler and current officers Thomas R. Watjen and Robert C. Greving.
It also names directors Hugh O. Maclellan, A.S. “Pat” MacMillan, William Pollard, Ronald Goldberry, Lawrence Pugh, John Rowe, Jon Fossel, Michael Caufield, Thomas Kinser, William Ryan, William Armstrong, George Mitchell, Cynthia Montgomery, James Moody Jr., Steven Reinemund, Burton Sorensen and Lois Rice.
The suit says the firm concealed illegal contingent commissions paid to brokers, while “subjecting the company to enormous fines and penalties totaling potentially tens if not hundreds of millions of dollars.”
It says during the relevant period that Mr. Watjen was paid $2,003,648 in 1999, $1,106,800 in 2000, $4,237,085 in 2001, $1,049,140 in 2002 and $2,534,189 in 2003. He sold 47,137 shares of stock for $1,247,245.
It says Mr. Chandler was paid $5,853,648 in 1999, $2,306,800 in 2000, $2,552,266 in 2001, $1,107,234 in 2002 and $17,630,242 when he left UnumProvident. He was granted options to buy 500,000, 675,000, 550,000 and 550,000 shares of stock.
The suit says Mr. Greving, the executive vice president since May 2003 and chief financial officer since May 2002, was paid $509,548 in 2001, $379,649 in 2002 and $495,413 in 2003. During the period, he sold 2,700 shares of stock for $78,698.
It says during the period, Mr. Maclellan sold 814,000 shares of stock for $12,770,773.
The suit says Mr. Pugh sold 2,978 shares for $43,359.
The suit claims that during the period UnumProvident financial statements were false and misleading and violated generally accepted accounting practices.
The suit says UnumProvident directors receive annual retainers of $80,000. Chairs of standing committees get an additional $7,500. Directors receive $2,000 for each special meeting and $500 for each conference call meeting and committee meetings.
It says Mr. Pugh and Mr. Pollard “as the co-chairs of the office of the chairman of the board, receive an additional quarterly retainer of $50,000.”
The suit says as of March 26, 2004, several of the defendants owned millions of UnumProvident shares. It says Mr. Goldberry had 19,547, Mr. Maclellan had 12,217,084, Mr. Pollard had 52,895, Mr. Pugh had 40,488, Mr. Rowe had 8,500 and Mr. Watjen had 476,103.