But now, on a warm Friday evening in June, he was scrambling to keep his job. Russell's top six managers were concerned about his management decisions, including Russell's promotion of his girlfriend, a graphic artist at the company, to vice president of investor relations. The managers had convinced some board members that Russell had to go.
A gregarious former salesman with a hint of Boston brogue despite years in the South, Russell moved fast to thwart his ouster. He called a client of FPIC. He called a reinsurance executive in London. He called a competitor. Then Russell called a Wall Street analyst at PaineWebber named Alice Schroeder.
After talking with Russell, Schroeder called James White, then-chairman of FPIC's board of directors, on Saturday morning to voice support for Russell. She told White she was "worried,'' White says. If FPIC's board of directors fired Russell, Schroeder told White, the company's stock price could suffer.
Schroeder's call was out of the ordinary. Companies routinely rely on the advice of analysts about the intricacies of Wall Street and may sound them out regarding the impact of management changes on share prices. But it's almost unheard of, say a number of analysts, for analysts to insert themselves so directly into a major management decision like whether to fire a CEO.
White says Schroeder's call "did seem unusual,'' but Schroeder's opinion mattered to the FPIC board. For one, White and the other board members aside from Russell were all doctors with little experience in overseeing a publicly traded company.
For another, Schroeder had been following FPIC since it went public in 1996, and she had consistently recommended the stock to her big institutional clients. She had a good reputation on the Street, burnished last year after she scored an interview with legendary investor Warren Buffett and was written up in Fortune magazine as The Analyst Who Talked to Buffett.
White says the board met via teleconference the next day. He says he doesn't recall the details of what he shared of his conversation with Schroeder, but he's "sure it came up'' at the meeting.
Ultimately, the board decided to keep Russell, but the incident marked the beginning of a period of turmoil for FPIC that has seen its stock price plummet. It also wasn't the first time Schroeder was directly involved in an FPIC management issue, and it wouldn't be the last.
The CEO
When he came to FPIC, Russell was an insurance industry veteran, with years of experience with a small insurance agency in southern Ohio and a stint as executive vice president and chief operating officer of a company in Petaluma, Calif. In 1988, David L. Rader, an industry acquaintance and president of Florida Physicians Insurance Co., hired Russell as his executive vice president and COO in Jacksonville.
At the time, FPIC, which was owned by the physicians it insured, was recovering from a near-collapse. A major crisis in Florida's medical malpractice insurance market had rocked the company a few years earlier, and FPIC had made a number of bad real estate investments.
Two years after Russell arrived, the board fired Rader and named Russell president and CEO. Under Russell, FPIC's fortunes steadily improved. By the mid-1990s, things were going so well, in fact, that the executives and directors decided to take the company public.
FPIC policyholders, who were also shareholders, had pretty much written off the expense of buying FPIC shares as part of the cost of buying medical malpractice coverage. Now, suddenly, the shares might have value.
Indeed, FPIC executives thought the company -- despite operating in the unglamorous theater of medical malpractice -- had enough potential that they positioned it as a growth company. The strategy: By using its common stock to acquire other malpractice carriers, FPIC could increase revenues, cut costs and then post strong earnings growth. In investment bankers' parlance, it was a classic roll-up strategy.
And for awhile, it worked: After going public in August 1996, the company concluded a string of acquisitions that climaxed with the $55-million purchase of a New York medical malpractice management company. The stock price soared from the initial $10 IPO price to $50 by the end of 1998.
From the beginning, Schroeder was one of FPIC's biggest boosters. When FPIC went public, Schroeder was an analyst at Oppenheimer & Co., the lead underwriter of FPIC's IPO. A native Texan and a CPA, she specialized in property and casualty insurance stocks. Schroeder issued her first "buy" recommendation on FPIC in July 1997. And as FPIC's stock price spiraled up, Schroeder continued to recommend the stock to her clients, mostly large institutional investors.
Along the way, she also developed a professional friendship with Russell. "Alice confided in him, and he confided in her," observes Robert O. Baratta, a Stuart ophthalmologist who replaced White as FPIC's chairman last August.
As 1999 dawned, FPIC stock was trading at around $50 a share. The company had new acquisitions in the works, and FPIC executives had every reason to be upbeat, particularly Russell. He was pulling down $500,000 a year in salary and bonuses and owned stock and options valued in the millions. He tooled around town in a gold Jaguar.
But at FPIC headquarters, at least a half-a-dozen managers had become disenchanted with Russell. Some were particularly troubled that he had promoted his girlfriend, Amy Ryan, a graphic artist at the company, to the position of vice president of investor relations.
The investor relations job typically entails promoting a company's story to Wall Street as well as answering queries from investors and analysts. It's not brain surgery, but it can be important to how investors perceive the company. Ryan's colleagues, however, say her lack of corporate knowledge was glaring. She hadn't mastered basic information such as FPIC's fiscal year, they say.
Still, board members say they were comfortable with Russell's selection of Ryan for the investor relations job. Why? Because Schroeder had supported it, Baratta says. In an interview at FPIC headquarters, Russell claimed Schroeder had not weighed in on Ryan's promotion, but Baratta corrected him.
For some of Russell's top managers, there were more troubling issues involving Schroeder: Russell, they told the board, may have been inappropriately disclosing non-public information to her.
It is not illegal to pass along insider information, as long as the recipient doesn't trade on the information. And there's no evidence that Schroeder passed along the information to her clients or traded on the information herself.
But the issue of so-called "selective disclosure" of market-moving information to stock analysts before it's released to the public is an issue in the securities business. The Securities and Exchange Commission frowns on it and has announced plans to crack down on the practice.
Showdown
On May 31, six of FPIC's managers, including Steven R. Smith, president of FPIC's biggest subsidiary, Florida Physicians Insurance Co., and Robert B. Finch, FPIC's chief financial officer, secretly met with White, FPIC's then chairman, at the Sea Turtle Inn, an oceanfront hotel near Jacksonville. The group -- which also included the company's controller, its director of information services, chief investment officer and director of marketing -- told White of their concerns about Russell. The managers later met with the board's executive committee and repeated their message, saying they believed Russell and Ryan should be removed.
Some on the board's executive committee initially agreed that the board needed to do something about Russell, either firing him or reducing his role at the company.
But word of the meetings leaked to Russell, who began calling Schroeder and his other allies. And when the entire board held its conference call -- after Schroeder's call to White -- the directors decided to stick with Russell.
Whatever her professional opinion was of Russell's management of FPIC, Schroeder had a personal interest in FPIC's stock as well. White says Schroeder told him that she and her mother owned FPIC shares.
Reached at her New York office, Schroeder refused to comment on the record about her dealings with FPIC. (Most investment firms allow their analysts to own stock in the companies they follow, but place tough restrictions on when they can buy and sell shares.) There's no evidence she or her mother traded on the information.
Russell says he thinks Schroeder played by the rules: She informed PaineWebber's compliance office about the advice she gave to White, he says, and temporarily suspended her coverage of the company. A PaineWebber spokesperson declined all comment on any aspects of this story, including any communications between Schroeder and the firm's compliance officers.
Spokespeople at other investment firms say an analyst's dealings with companies they cover involve a considerable amount of judgment, but a number said they had never heard of a situation in which an analyst played such a direct role in a management decision.
While Russell and Ryan kept their jobs, peace didn't last long at FPIC. Two months after the showdown, Finch and Smith raised new concerns about possible selective disclosure of inside information to Schroeder. In two August research reports, Schroeder raised the possibility that FPIC had not set aside sufficient reserves in 1997 and 1998 to cover future claims and that the company was considering hiring an outside actuarial firm to review its reserves. Both issues had been discussed in closed-door board meetings, but hadn't been released to the public.
How, Finch and Smith asked in memos sent to the board, did Schroeder know about these details? Russell says he didn't tell her. Baratta says he told Schroeder only about the possible hiring of an outside actuarial firm.
Meanwhile, FPIC's stock price tumbled in August when the company revealed it had to pull $8 million from its reserve accounts to meet second-quarter earnings expectations. The news stunned investors.
Finch and Smith, caught in the crossfire of finger-pointing, were fired. "Everybody had lost confidence in them," says Baratta, who says the two misled the board about the need to tap the reserves. "They felt they could hide it," he says.
Through their attorney, Finch and Smith insist Baratta and the board were completely informed about the company's finances. They contend they were fired because they called attention to the selective disclosure of inside information.
Since September, FPIC's shares have languished around $16. Stiff competition has driven down rates for medical malpractice insurance. FPIC is losing money on its healthcare insurance coverage for dentists, and the company has received a 40% rate hike from the Florida Department of Insurance. The company also needs to whack more costs out of the recently acquired New York operation, analysts say.
FPIC executives insist they're on the right track. An outside actuary found no problems with the reserves, FPIC officials say. In an ironic twist, Russell, who continues to have the support of the board, hired Rader, the man he replaced as CEO 10 years earlier, to come back to run the insurance subsidiaries. In addition, the company hired a new CFO, Kim Thorpe, a former CFO at a General Electric insurance company whom Schroeder helped the board find, Baratta says.
Ryan asked that her investor relations duties be reduced so she could spend more time as publisher of a FPIC-owned magazine called Women in Medicine, Baratta says.
FPIC has hired Boris Yavitz, a former dean of the Columbia University School of Business, to assist the board in the search for outside directors. Yavitz has helped the board establish a performance evaluation system for board members and Russell.
Baratta acknowledges that the board needs additional financial expertise. "I will accept blame," Baratta says. "We rode a crest of success and didn't watch what we were doing as carefully as we should have," he says. But "we feel good about ourselves now. This is a good turnaround story."
At PaineWebber, Schroeder has a "buy" recommendation on FPIC shares.