Risk Management

CNA Sues Its Ex-CFO over Stock Loan

Insurer is said in a press report to be seeing repayment of a 10-year-old, $2.8m loan that allowed the former finance chief to buy company shares.
Stephen TaubFebruary 23, 2009

CNA Financial Corp. is suing its former chief financial officer over a loan that it allegedly made to him, but that the big insurer says he refuses to repay.

Peter E. Jokiel, who left CNA in 2001, is alleged in the suit to owe the company more than $2.8 million from a loan he took out 10 years ago to buy shares of stock in the company, according to a report in the Chicago Tribune. The $2.8 million includes $1.65 million he allegedly originally borrowed, plus interest that has accrued during the past decade, the article said.

It said that the lawsuit alleges that Jokiel won’t repay the money so the company is seeking a court order.

It was fairly common during the 1990s for companies to lend executives money to buy shares of their stock. However, Sarbanes-Oxley prohibits this practice, the Tribune noted in its account.

Jokiel still owns the shares, which are collateral for the loan agreement, according to the Tribune report, which cites the lawsuit as saying that CNA wants Jokiel to surrender the collateral. The shares have lost about three-quarters of their value since Jokiel bought them, the paper said.

Jokiel, who has spent more than 30 years in the insurance industry, according to the Tribune, is currently CFO, treasurer, and a director of Specialty Underwriters Alliance Insurance. He has spent more than 30 years in the insurance industry. From April 1997 to January 2001, Jokiel was president and CEO of CNA Financial Corp.’s life operations. From November 1990 to April 1997, he was CFO of CNA.

A spokeswoman for CNA declined to comment on the suit, saying only that  “we don’t want to debate this in the media, rather than in the court.” A call to Jokiel from CFO.com was not immediately returned.

According to the press report, Jokiel bought shares of CNA at market price under the company’s Officer Stock Ownership Plan, which was opened to higher-level officials. At the time, the markets were surging. CNA alleges in its lawsuit that Jokiel borrowed $1.65 million, and purchased 47,264 shares of the company’s stock, according to the report.

Under the loan agreement, interest would accrue and the loan was to be repaid within 10 years at the most. The maturation date came on Oct. 10, 2008, according to the paper, citing CNA.

The company reportedly asserts that Jokiel has refused to repay “despite repeated requests” from his former company. 

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