|Marijuana Arrest is a New Spotlight|
Posted by FoM on January 11, 2000 at 08:18:04 PT|
By Mary Ethridge, Beacon Journal Business Writer
Source: Akron Beacon Journal
When news of the marijuana arrest of Peter B. Lewis, head of the Mayfield-based Progressive Corp., raced through the financial and philanthropic communities yesterday, few seemed downright shocked.
After all, the colorful chief executive officer of the insurance giant had long made known his support for legalizing the medical use of marijuana. He had, for years, been rumored to use the drug personally, analysts said.
But the arrest of the high-profile Lewis -- a trustee of Princeton University and director of the board of the Guggenheim museums -- was cause for some concern among analysts keeping an eye on his company.
``Frankly, no one is particularly surprised. He's always made his feelings on the issue known,'' said Blair Sanford, an analyst with Cochran, Caronia Securities in San Francisco.
Sanford said one of the strengths of Progressive, the fourth-largest U.S. insurance company, is decentralized management. The chief executive's leadership is less important at Progressive than at other companies that rely heavily on the CEO, he said.
``The bench is very deep at Progressive. It's a great company separate from Lewis,'' said Sanford.
Lewis, 66, son of Progressive co-founder Joseph Lewis, was arrested Wednesday in New Zealand and charged with possession of 3.5 ounces of marijuana, according to Bloomberg News.
He reportedly appeared in court Friday, and the charge was later dismissed after Lewis made a donation to a drug treatment center in Auckland. Lewis had been on vacation in New Zealand. Through his company spokesperson, he declined comment yesterday.
Peter B. Lewis has never cultivated a particularly low profile. In 1994, he moved his company into a $75 million showcase headquarters on 42 acres in Mayfield. It contains a travel agency, health club and vast collection of contemporary art. Some of the art was commissioned to be featured in Progressive's offbeat annual reports.
Lewis is also a generous philanthropist. He has given $15 million to Case Western Reserve University and $10 million to the Guggenheim museums in addition to other concerns and causes, including marijuana law reform.
This fall, Lewis announced a gift of $55 million to Princeton in honor of his graduating class of 1955. Lewis once gave $2.5 million to a senior fitness center with the stipulations he be given a lifetime membership and they never ask him for money again.
Tara Renk, a spokesperson for WCPN (90.3 FM), a public radio station in Cleveland that has often received donations from Lewis, said the executive's reputation for generosity has not been eclipsed by the arrest at all.
``The philanthropic activities of Peter Lewis in the community are very much appreciated by WCPN,'' said Renk. ``Our relationship with him remains unchanged.''
Peter Lewis has struggled mightily with health problems in recent years, undergoing numerous operations because of circulatory problems. In January 1998, one of his legs was partially amputated.
And Lewis has suffered financially as well. As owner of 12 percent of Progressive's stock as of late last year, no one has been hurt more deeply by the stock's precipitous slide of the last six months.
In July the stock was trading at more than 143. It's been hovering around 70 for the past week. Yesterday it closed at 695/16, down 1 3/8.
Before Christmas, the company warned that fourth-quarter profit -- to be announced officially later this month -- will be significantly below forecasts because of bigger claims than expected.
And that was bad news on top of bad news for Progressive. The company's earnings fell 56 percent in the third quarter.
Progressive is not the only insurer now suffering. Others, including Allstate Corp., have struggled in recent quarters as rising claims and costly advertising campaigns dented profits. (Progressive sponsored the halftime show of last year's NFL Super Bowl at a cost of $5.6 million.)
The company said it is taking action to turn itself around. At the time Progressive issued the news about fourth-quarter earnings, Lewis said the company has raised premiums in 22 states since June and is seeking regulatory approval for more.
Progressive is now withdrawing from the Canadian market to focus on U.S. operations. And the company has also set aside $33 million to boost its reserves.
Lewis joined Progressive in 1955 after his graduation from Princeton, where he was a classmate of consumer advocate Ralph Nader.
Lewis helped engineer Progressive's expansion outside Ohio in the early 1960s. When his father's partner, Jack Green, retired in 1965, Peter Lewis gained control of the company through a leveraged buyout. Six years later he took the company public.
Despite recent difficulties, Progressive has been one of the best-performing insurance stocks in recent years and has shown average annual growth of 20 percent during the last three decades.
In the Akron Beacon Journal's most recent survey of publicly traded companies in the area, Progressive ranked fourth.
Published: January 11, 2000
Government Queries Court Sentence on Billionaire- 1/11/2000
Second US Man Let Off Over Drugs - 1/09/2000
Drug Count Against CEO at Progressive Discharged-1/08/2000