W. R. Grace & Co. said yesterday that it would recover $3.7 million from an insurance company for excess payments and benefits that were paid to two former chief executives, who themselves disagreed over the disclosure of such payments.
Charles P. Valdes, chairman of the investment committee of the California Public Employees' Retirement System, or Calpers, said the recovery was a victory for Grace shareholders like Calpers, which owned 1.4 percent of Grace and joined in lawsuits over the payments in 1996.
"This settlement serves as a reminder to all corporations that shareowners won't stand by and let their interests be taken for granted and their capital wasted," Valdes said.
The case involved benefits that J. Peter Grace negotiated when he retired in 1992 after running the company for 48 years. The benefits, which included nursing care, continued use of a company jet and other perquisites, were not disclosed to shareholders then.
After J. P. Bolduc succeeded Grace as chief executive officer, he learned of those and other payments and wanted to disclose them to shareholders, said his lawyer, Gerald Walpin.
That prompted an ugly battle between the two men that resulted in Bolduc's abrupt resignation in March 1995. The resignation stunned investors who believed that Bolduc had been reviving the company by shedding losing operations and focusing on a new strategy.
Soon it came out that five women had accused Bolduc of sexually harassing them, accusations that Grace used to force Bolduc to resign.
At least four lawsuits were filed in New York Supreme Court against Grace directors, contending that they improperly allowed more than $11 million in payments to Grace, who died in 1995, and $20 million to Bolduc. The insurance company, Corporate Officers and Directors Assurance, will now pay $3.7 million to settle the litigation against the Grace directors.
Bolduc denied any harassment, and the one lawsuit brought against him was withdrawn.
However, a nonprofit organization that Grace organized to expose government waste did pay $400,000 to settle a claim by one woman who said that she had been retaliated against after she made her harassment claim against Bolduc, lawyers for Calpers and Bolduc said.
Walpin said no payments had been made to anyone based on alleged misconduct by his client, Bolduc.
Bolduc, who runs a rope company in Maine and Maryland, objected to any payment to settle complaints that $5 million of his severance was improper, Walpin said.
A lawyer for the Grace estate did not respond to a request for an interview.
Grace, now a specialty chemicals company in Columbia, has an entirely new team of directors and executives, said Bill Corcoran, a spokesman.
"We think the settlement is fair," he said. "Since we do have a new group of directors and a new management group, we want to get all legacy litigation behind us."