Though he demanded they step down and gave them until yesterday to do so, Governor Carcieri allows George H. Nee and Henry R. Boeniger to remain on the board of Beacon Mutual Insurance Co. to appeal their removal.

01:02 AM EDT on Wednesday, April 26, 2006

BY LYNN ARDITI
Journal Staff Writer

Governor Carcieri yesterday agreed to allow George H. Nee and Henry R. Boeniger to remain on the board of Beacon Mutual Insurance Co. for another week so they can contest their removal at a hearing.

The governor had threatened to oust the two men "for cause" if they did not resign voluntarily by the end of the day yesterday.

But by mid-afternoon, a labor lawyer representing Nee and Boeniger had fired off letters on behalf of his clients to the governor saying that the two refused to resign.

The letters, from lawyer Marc B. Gursky, stated that his clients' forced removal from the Beacon board of directors amounts to "illegal" and "discriminatory treatment" based on their labor union ties.

Nee is secretary-treasurer of the Rhode Island AFL-CIO; Boeniger is government relations director for the National Education Association, Rhode Island.

Gursky also said that his clients have a "due process" right to a hearing before an "unbiased, fair and impartial decision maker."

He has asked the governor to provide his office with the names of possible hearing officers, stating, "neither you nor officials under your control would be capable" of acting in that capacity.

The governor, in turn, blasted Nee and Boeniger for refusing to step down from the board voluntarily.

"Mr. Nee and Mr. Boeniger have presided over the mismanagement of Beacon Mutual for over a decade," Carcieri said in a statement. "They were either complicit in that management or they were incompetent in not discovering it. Either is a cause for termination."

Board members since 1994, Nee and Boeniger both hold gubernatorial appointee posts. They were appointed by former Gov. Bruce Sundlun and reappointed by former Gov. Lincoln Almond.

The two labor-backed Democrats are at the center of the Republican governor's battle to overhaul Beacon's leadership in the wake of allegations of preferential treatment for certain policyholders.

Beacon is a nonprofit mutual created by the General Assembly to provide workers' compensation insurance to Rhode Island employers at the "lowest-possible price."

An investigation headed by Almond found that the company gave breaks to some large policyholders and maintained "inappropriate relationships" with certain insurance agents.

The state attorney general's office and the state police have been investigating Beacon. And a Rhode Island grand jury has opened a criminal investigation.

Last Thursday, Carceri moved to oust Nee and Boeniger from the board after learning that they had cast the two dissenting votes against firing, "for cause," the company's chief executive officer, Joseph A. Solomon.

If the board had not fired Solomon "for cause," he would have been eligible to collect a $3-million severance package.

Nee and Solomon were outvoted 4 to 2, with another board member abstaining.

Carcieri, citing examples of "gross negligence and dereliction of duty," stated in his letter last week that he would forcibly remove Nee and Boeniger "for cause" if they did not resign from the Beacon board by the end of the day yesterday.

But the governor also agreed in the letter to "suspend the effective date" of their board removal for one week if they requested, in writing, a hearing about his decision to remove them "for cause."

"If they cared about the well-being of Beacon Mutual," the governor's spokesman, Jeff Neal, said yesterday, "they would willingly remove themselves from the Beacon board."

It remains unclear to what extent Nee and Boeniger will be permitted to participate in running the insurance company.

The Beacon board has taken no official position on the board members' participation, said spokesman Bill Fischer. And Nee and Boeniger have hired their own lawyer to fight their removal. (The board's law firm, Partridge Snow & Hahn, advised Nee and Boeniger last week that they would not represent them in any challenge.)

Fischer said last night that the board's chairman is conferring with legal counsel about Nee's and Boeniger's participation in the board meeting scheduled for 5:30 p.m. today at the company's Warwick headquarters.

Asked whether Nee and Boeniger would be entitled to participate in board deliberations and collect the $450 meeting fee for attendance, Fischer replied, "The only thing I have to say tonight is [chairman] Carl Hayes wanted to confer with legal counsel on these matters."

Nee, for his part, said yesterday that he plans to attend the board meeting. Asked if he would bring along his lawyer, he replied, "No, I don't see a need for it."

Boeniger did not return phone messages left at his office yesterday.

The agenda for tonight's board meeting includes discussion of how to implement the Almond Committee recommendations, said Fischer.

"The board has agreed to all of the recommendations in principle," said Fischer.

larditi@projo.com/ (401) 277-7335