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HOUSTON--The founder and chief executive officer of HCC Insurance Holdings Inc., Stephen L. Way, has resigned after an independent probe uncovered improper stock option granting practices by the insurer.
The probe--conducted by an audit committee of HCC's board of directors, the law firm Skadden, Arps, Slate, Meagher & Flom L.L.P. and forensic accountants LECG L.L.C.--found that HCC "used incorrect measurement dates for certain stock option grants covering a significant number of employees during the period from 1995 through 2006," the insurer said in a statement.
Corrections for the errors will likely cost Houston-based HCC no more than $37 million pretax, HHC said. Whether or not a restatement of previously filed earnings is necessary has yet to be determined, the insurer said.
Mr. Way, who founded HCC in 1974, among other things is credited with taking the company public in 1992 and growing company assets from $162 million to more than $7 billion. Under the terms of his resignation, effective last week, Mr. Way will continue as a director of the company and serve as nonexecutive chairman of the board of directors.
Replacing Mr. Way as CEO is Frank J. Bramanti, an HCC board member since 1980 and former chief financial officer and interim president at the company.
Additionally, HCC in its announcement said Chris L. Martin, executive vp and general counsel, has resigned.
Both Messrs. Way and Martin agreed to pay HCC the difference between the initial strike price and the closing price on new measurement dates for options they exercised that were incorrectly priced.
HCC said it intends to continue cooperating with the Securities and Exchange Commission regarding the agency's informal inquiry into this matter.