Jury awards $27 million in
defamation lawsuit to fired
Rosalie L. Donlon, PropertyCasualty360.com
Four former Allstate employees were awarded more than $27 mil- lion by a federal jury in a defamation lawsuit against the company, according to a recent report in the Chicago
The employees, all part of a now-defunct equity division at Northbrook-based Allstate, were fired in December
2009 for allegedly timing trades to boost
their own incentive bonuses at the expense of the company’s investment portfolios, according to court documents.
Allstate blamed “some employees” in a
February 2010 Securities and Exchange
Commission filing for timing trades,
which the company said may have cost
the portfolios more than $200 million
over six years, while netting $1.2 million
in bonuses for equity division employees.
Although they were never named by
Allstate, Daniel Rivera, Stephen Kens-
inger, Deborah Joy Meacock and Rebecca
Scheuneman filed the defamation lawsuit
in March 2010, claiming they were falsely
accused of wrongdoing by the SEC filing.
“If you connect the dots, you would
be led to believe it was my guys who did
this,” said Robert Sweeney, a Chicago
lawyer representing the four former Allstate employees. “It ruined their careers.”
Sweeney said the four were simply following protocols and Investing 101 — buy
low and sell high — while executing trades
at the direction of the company. Rivera
was head of the equity division, while the
other three were part of the growth team.
The defamation lawsuit, filed in the
federal district court in Chicago, took six
years to get to trial. The jury verdict, announced June 21, awarded the employees
a total of $27.1 million, including $10
million in punitive damages.
“Allstate disagrees with the jury’s
verdict,” Allstate spokeswoman Laura
Strykowski said in a statement Thursday.
“We continue to believe in our case and
are reviewing our post-verdict options.”
According to the lawsuit, the equity di-
vision was in charge of managing portfo-
lios for Allstate and its pension plans. On
most occasions, Rivera would receive di-
rections from Allstate’s Portfolio Manage-
ment Group or the pension plans manag-
er regarding when to buy or sell for large
program trades. The trades were then
executed within the parameters provided.
Equity employees were entitled to performance bonuses based on a system that
paid a premium for buying on a down day
and selling on an up day for the markets
at large, as opposed to measures based on
absolute return, according to the lawsuit.
According to documents filed by Allstate in the case, Allstate brought in a
consulting firm and launched an investigation into trading practices within the
equity division in the summer of 2009.
The consultants estimated that the alleged
trade timing may have cost the pension
funds $91 million, with company portfolios adversely impacted by $116 million.
“The inference was that there was
wrongdoing by people in the equities department, and that they improved their
bonuses as a result,” Sweeney said. “We
came back and showed it had nothing to
do with that. This was a policy that Allstate had in place as result of their performance measurement system, which has
been referred to as arcane and imprecise.”
The company announced the decision
to disband the equity division in October
2009, outsourcing management of its equities to Goldman Sachs. Two months later, the four employees were terminated for
cause and told they had violated the conflict of interest provision of the company’s
code of ethics, according to the lawsuit.
Allstate is subject to further punitive
damages related to potential violations
of the Fair Credit Reporting Act for failing to provide the four employees with a
summary of the investigation that led to
their termination. Motions on those issues were filed last month according to
The case is Daniel Rivera, et al. v. Allstate Insurance Co.