Judge backs ruling in favor of fired MassMutual chief

A Superior Court judge upheld a finding that MassMutual Financial Group unjustly fired chief executive Robert J. O'Connell in 2005 and should pay him termination benefits his lawyers put at $50 million.

Tuesday's ruling was a setback for the Springfield insurer, which argued that O'Connell's firing was justified because he misused special trading accounts and improperly flew on company aircraft, among other things.

O'Connell's attorneys had called the charges "a total character assassination" in order to escape paying termination benefits . An arbitration panel backed O'Connell last fall, and MassMutual sued to overturn the findings.

But in a 12-page ruling Superior Court Judge Allan van Gestel dismissed the company's suit and ruled "there is no evidence of any failings in the procedural aspects of the hearings" the panel held, or fraud on the panel's part.

Van Gestel also was careful to avoid taking sides on the facts in dispute, except to note that whatever O'Connell's actions, they were not extreme enough to sway the arbitrators. "Many may be appalled at the way America's corporate executives are compensated and at the lifestyles that they assume are their due," van Gestel wrote, but added that it wasn't his place to decide whether O'Connell's actions had a negative effect on the public.

"This was a private tug of war, over money, created, facilitated, and dominated by a contract between the participants in the scrum," van Gestel wrote.

MassMutual said it plans to appeal the decision and it is "disappointed that the court failed to recognize the vital public policy and fiduciary duty issues at stake in this matter."

The company said further that "in addition, we maintain that this matter has serious consequences for the entire system of corporate governance and the duty of every board to set appropriate standards of behavior for management."

An attorney for O'Connell, Michael Keating of Foley, Hoag, called the ruling a victory that affirms a state policy that "courts will not interfere with binding arbitration, absent some narrow circumstances that weren't present in this case."

"If there's any issue here, it's the failure of MassMutual to honor the contract they entered into," Keating said.

According to the arbitration panel's earlier findings, the matter began in February 2004 when O'Connell's wife voiced concerns he was having an affair with another executive at the company, leading to investigations. Eventually the company's board claimed O'Connell misused trading accounts, funded by MassMutual, that were set up in place of awarding him stock options typically given to chief executives. The mutually owned company does not have stock options to issue.

The board alleged that O'Connell used these accounts to make illicit profits. But the arbitration panel noted MassMutual approved the arrangements in the first place. It did rule the company could keep $23.6 million of his gains. The panel found O'Connell had affairs with two women, including one who was a company general counsel, but said there was no evidence the affairs harmed the company. They also did not uphold other claims against O'Connell, including the charges he improperly used company aircraft and interfered with an internal investigation.

In backing the arbitrators, van Gestel also dismissed a claim by the company that the panel's chairman, former FBI director William S. Sessions, violated impartiality rules by failing to disclose he "was terminated from a high-level (governmental) position for misusing (governmental) assets and personnel," an apparent reference to criticisms Sessions received over his use of government jets before he was dismissed as FBI director by then-president Bill Clinton in 1993.

But van Gestel wrote that Sessions's removal in 1993 also could have been related to the beginning of the Clinton administration. The judge also noted the panel's findings were unanimous, and Sessions "is not shown to have overwhelmed the actions or opinions of his equally competent colleagues, nor is he shown to have been the deciding vote" in the matter.

Ross Kerber can be reached at kerber@globe.com.