Bermuda-based insurance company Argo Group International Holdings must pay a $900,000 civil penalty in a settlement reached with the Securities and Exchange Commission to resolve charges that it failed to fully disclose perquisites and benefits provided to its former chief executive officer.

According to the SEC order, in proxy statements for 2014-2018, Argo disclosed that it had provided a total of approximately $1.2 million in perquisites and personal benefits, chiefly retirement and financial planning benefits, to its then-CEO Mark Watson. However, these same proxy statements failed to disclose over $5.3 million Argo had paid on the CEO’s behalf, including in filings for 2018 after a shareholder issued a press release alleging undisclosed perks to the CEO, according to the order.

The SEC order states the perks Argo paid for, but did not disclose, included “personal use of corporate aircraft, helicopter trips and other personal travel, housing costs, transportation for family members, personal services, club memberships, and tickets and transportation to entertainment events.” As a result, Argo understated perks and personal benefits paid to the CEO over this period by more than $1 million per year.

“In February 2019, an Argo shareholder issued a press release in which it alleged, among other things, the misuse of Argo assets by Watson, including undisclosed personal usage of corporate aircraft,” the SEC order states. “On April 12, 2019, during a proxy contest with this shareholder in connection with Argo’s May 2019 annual shareholders meeting, Argo filed a definitive proxy statement that failed to disclose over $1 million worth of perquisites, including over $230,000 related to Watson’s use of corporate aircraft. From 2015 through 2019, Argo incorporated its definitive proxy statements into its annual reports by reference.”

Watson resigned as CEO in November 2019 and agreed to reimburse Argo for certain perquisites and/or personal expenses

“Even after being made aware of potential inaccuracies in its disclosures related to executive compensation, Argo did not accurately and adequately inform shareholders about the perks and benefits it provided its highest-ranking executive over a five-year period,” said Kelly Gibson, Director of the SEC’s Philadelphia regional office. “We continue to focus on whether companies are fully disclosing compensation paid to their top executives and have appropriate internal controls in place to ensure that shareholders receive information to which they are entitled.”

The SEC’s order charges Argo with violating federal securities law provisions concerning proxy solicitation, reporting, books and records, and internal controls. Without admitting or denying the SEC’s findings, Argo consented to the SEC’s cease-and-desist order, which requires Argo to pay a $900,000 civil penalty.

Independent review

Argo Group’s independent directors launched a review of Argo’s governance and executive compensation matters last year, following the receipt of an SEC subpoena seeking documents concerning the company’s disclosure of certain compensation-related perquisites and following earlier accusations made against it by activist fund Voce Capital Management, which owns a 5.4 percent stake in Argo’s shares and had accused the CEO of misusing corporate assets.

Beginning with a public letter to shareholders on Feb. 25, 2019, and supported by a number of subsequent communications, including Voce’s 131-page white paper, “Righting the Ship,” Voce said it has “chronicled Argo’s decrepit corporate governance, particularly as it relates to the board’s lack of proper oversight of management and the absence of any delineation between corporate assets and priorities and those of management.” It also called for “a top-to-bottom investigation of Argo’s corporate governance practices.”