CalPERS Settles Lawsuit With W.R. Grace & Co.; Pension Fund Recoups Nearly $4 Million in Losses

Business Wire, Oct 13, 1999

SACRAMENTO, Calif.--(BUSINESS WIRE)--Oct. 13, 1999--

The California Public Employees' Retirement System (CalPERS) announced today that the New York Supreme Court has approved a settlement of a shareowner's lawsuit against the former officers and directors of W.R. Grace & Co. (Grace).

The settlement has recovered nearly $4 million of shareowners dollars that were part of a severance package that was alleged to have been improperly paid to J.P. Bolduc, former CEO of W.R. Grace.

"This is a clear victory for CalPERS and shareowners of W.R. Grace," said Charles P. Valdes, Chair of CalPERS Investment Committee. "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."

Additionally, Grace has agreed to adopt a strong policy on sexual harassment which CalPERS believes can be a model for corporate sexual harassment policies throughout the country.

In March of 1995, Grace directors awarded Bolduc approximately $20 million in severance benefits, consisting of the repurchase of shares and various cash payments, when he resigned as president and CEO. The severance package was bestowed upon Bolduc even though his employment agreement, in effect at the time of his resignation, reportedly did not require or provide for such payment. A March 30, 1995 New York Times article reported that Bolduc "resigned" under pressure because of allegations of sexual harassment against him by at least five Grace employees.

In 1996, CalPERS intervened in an existing shareowner lawsuit against Grace and was later named lead plaintiff in the case. In papers filed in the Supreme Court of the State of New York, the pension fund alleged that an agreement to pay enormous severance payments to Bolduc was a breach of fiduciary duty by the board members and a waste of the company's assets.

Prior to the pension fund's intervention, a settlement had been proposed that would have returned no money to the corporation, and would have required the adoption of a sexual harassment policy that CalPERS believed was seriously inadequate. After CalPERS intervention, Grace adopted a number of corporate governance reforms, including the appointment of independent outside directors to serve on the company's Audit, Compensation and Nominating committees.

CalPERS is one of Grace's largest shareowners, owning approximately 1.3 million shares of common stock. The System was represented in the litigation by Robinson, Curley & Clayton, Sachnoff & Weaver of New York, and the law office of Klari Neuwelt.

CalPERS is the nation's largest pension fund with assets of nearly $160 billion. The System provides retirement and health benefits to more than one million state and public employees and their families. For further information on CalPERS, please visit the System's Web site at www.calpers.ca.gov.