WARWICK – It was a day of losses for the state’s largest workers’ compensation insurer.
Beacon Mutual Insurance Co.'s chief executive officer and a vice president were fired. Two members of its board of directors were terminated. And it was confirmed that the company is under investigation by a grand jury for possible wrongdoing.
Early this morning, Beacon’s board of directors fired CEO Joseph A. Solomon and vice president of underwriting David Clark, after meeting for nearly nine hours behind closed doors.
Both men were let go "with cause" and not offered severance packages, Bill Fischer, a company spokesman, said.
This afternoon, Governor Carcieri fired long-time board members George Nee and Henry Boeniger.
The men, board members since the company’s formation by the General Assembly in 1994, had cast the two “no” votes against firing Solomon “for cause,’’ the governor’s spokesman, Jeff Neal, confirmed today.
Instead, they had argued in favor of allowing the former CEO to resign or be fired without the legal stipulation of cause.
If Solomon had been let go without cause, he would have been entitled to collect a severance package worth about $3 million. His total compensation last year was $558,210.
Solomon could not be reached phone today, but he e-mailed a Journal reporter at 4:35 p.m. to relay the following statement:
"My family and I are deeply hurt by last night's actions and are coping with this personal situation,’’ Solomon wrote. "I am proud of my 14-year involvement with Beacon. This decision cannot conceal the unqualified success that Beacon Mutual Insurance company and its policyholders have earned as a result of my leadership."
Even though state sheriffs today delivered Carcieri’s termination letters today to Nee and Boeniger, the governor in his statement also noted his belief in a Beacon as a "strong company with a bright future."
Still, he said it was necessary his authority to remove board members appointed by governors.
“I regret that I was forced today to remove both George Nee and Henry Boeniger from the Beacon Mutual board of directors,” he said in a statement. “As I have said before, these board members were either complicit in the company’s mismanagement or they were incompetent. In either case, they violated their fiduciary duty and cannot be allowed to preside over Beacon Mutual’s future.”
Meanwhile, a spokesman for Atty. Gen. Patrick Lynch confirmed today, a Rhode Island grand jury is investigating possible wrongdoing at Beacon.
Lynch spokesman Michael Healey said that grand-jury subpoenas have been authorized for "a number of different entities concerning allegations about Beacon Mutual Insurance Co.’’
Healey said that the Rhode Island state police and the attorney general’s office have been investigating the insurer "for a period of time.’’
All the moves come in the wake of a scathing audit of Beacon issued a week ago yesterday, and days after the board suspended Solomon and Clark with pay.
The company-commissioned audit by Guiliani Security & Safety detailed “mismanagement and abuse of policyholder funds” at the nonprofit company dating back years. It alleged Beacon gave breaks to some large policyholders and maintained "inappropriate relationships" with certain insurance agents, some of whom were treated to lobsters at Christmas and golf outings.
The board was also facing demands by Carcieri for a “complete overhaul” of the management at Beacon.
Its vote to fire Solomon and Clark came during a closed meeting that started at 4 p.m. yesterday and did not conclude until about 2:15 this morning.
Fischer said Solomon was called in to the company’s board meeting early this morning, after midnight and more than eight hours after the board began deliberating.
The board had additional questions for Solomon about the audit. Solomon was represented by legal counsel, as was Clark, whose presence the board also requested at the meeting, Fischer said.
At the board’s request, Clark remained in the building while the board deliberated in the company’s headquarters about his fate. He was then told of the board’s decision, Fischer said.
Solomon had gone home after meeting with the board, and he was told of the decision by phone around 2 a.m., Fischer said. Fischer said he does not know if the board had asked Solomon to wait in the building as they voted.
Under state law, Fischer said, the two are entitled to accrued vacation time and their retirement funds and to extend their health care benefits through the COBRA program.
With the firings effective yesterday, Solomon and Clark will be entitled to any investments that went into their pension funds up until that day, Fischer said.
The members who attended last night's meeting were the board's chairman, Carl I. Hayes, Boeniger and Nee, John A. Holmes Jr., Adelita Orefice, Brendan Doherty, and Richard J. DeRienzo.
Hours before his own firing, Boeniger said that a majority of the seven board members at the meeting voted to fire the two men. "I'm not at liberty to discuss what the vote was," he said, though Neal later confirmed that Boeniger and Nee were the only “no” votes.
Boeniger, a lobbyist for the National Education Association and a former Democratic state representative from Westerly, said the board did not detail the reasons for the firing.
“We may be facing litigation at some point, and we were advised that we shouldn’t say anything more,” Boeniger said.
The board’s more-than-10-hour meeting last night was its second in six days. A meeting Friday lasted nearly nine hours. Another board meeting has been scheduled for Wednesday at 5:30 p.m.
Carcieri last week threatened to intervene if three of the governor-appointed members – Boeniger, Nee, and Holmes -- did not step aside.
In Carcieri’s announcement today, he noted that he has requested a private meeting with Holmes, a fellow Republican who has only been on the board since 2002 and who supported a management change in the audit's wake.
Last week, a Beacon board member appointed by policyholders, Edward J. Braks, resigned.
Braks is the chief financial officer for Paul Arpin Van Lines in West Warwick, which, the Giuliani report found, was given credits on its policy with Beacon that were "unearned and unwarranted due to a history of losses," as well as "incorrect" classifications of workers.
Meanwhile, state regulators have been fighting to obtain access to Beacon records to complete a "market-conduct" study of the company's practices.
State examiners also have not been granted access to copies of computer hard drives and e-mail tapes in an evidentiary vault in Kent County Superior Court. Beacon has argued that the records contain confidential information.
After receiving the grand jury subpoenas, Beacon spokesman Fischer said today that the company would be more forthcoming with information.
"This is a new day at Beacon,’’ Fischer said. "We have nothing to hide. The board, management and employees of Beacon intend on cooperating fully with both the state police and the Department of Attorney General. The doors are wide open.’’
Board member Doherty, named by Carcieri in February, spoke of the future of the company.
“I have confidence the company will move on,” he said. “There are good employees at Beacon.”
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