NIA | In The News | Officers, board resolve year-long dispute

The year-long dispute that placed board members and management of Royal Neighbors of America at odds has been resolved without damages for either side, pending court approval.

Officers of Royal Neighbors of America had requested that all counts of a civil suit be dismissed against former employee and board member Dr. Paula Arnell.

In a joint agreement, the remaining four defendants and the plaintiffs have asked the court to dismiss the civil case. The parties believe the issues in the case will be resolved before trial, according to a statement from Royal Neighbors of America, a Rock Island-based fraternal benefit society.

The statement said the four remaining defendants deny the allegations of the lawsuit. No payments will be made by the four defendants or the plaintiffs as part of the settlement.

The statement released Thursday said, “the settling parties voluntarily agree to work toward implementing changes in RNA’s governance structure as recommended by the Illinois Department of Insurance.’’

The Illinois Department of Insurance has been providing assistance to work out the unusual case of executives suing their own board of directors.

“Our focus is to put this behind us and move the organization forward,’’ said Royal Neighbors president and CEO Karen Anagnos and chairman of the board Kathleen Wheeler in a joint statement. “We look forward to a vibrant future for RNA.’’

The suit filed in June 2003 by Anagnos and Royal Neighbors vice president Kathy Michel accused Arnell, Wheeler, Ann Oakley, Lanell Switzer and Cecelia Wilhelm of awarding themselves compensation well above the standard for board members of other fraternal societies and of impeding executives from carrying out their responsibilities.

The suit asked that the defendants return the overcompensation to Royal Neighbors and asked that the defendants be removed from their director positions and be barred from ever holding positions within the organization.

The suit claimed that board members were receiving salaries of more than $113,000, or approximately $100,000 over the standard for similar organizations.

The suit was filed two months after the society reported a net income loss of nearly $40 million in the previous fiscal year. Over the past two years the organization last lost more than $42 million combined.

Arnell, who was a board member and medical director for the Rock Island-based fraternal benefit society until she resigned from both positions in July 2003, had separate counsel from the other four defendants. Arnell is a pathologist and a partner in Metropolitan Medical Laboratory in the Quad-Cities.

“Dr. Arnell is pleased that the officers of Royal Neighbors of America have proposed that all claims asserted about her be dismissed, pending settlement of the RNA suit with the four other board members,’’ said her attorney, Arthur Eggers of Moline, in a statement. “Dr. Arnell chose not to participate in a settlement as she knew the claims about her were false, and she wanted to be free to speak openly and truthfully about her long and positive association with RNA.’’

The claim against Arnell was dismissed with prejudice, meaning that the plaintiffs cannot re-file the claim at a later date.

The additional four defendants are being represented locally by Robert Noe of Moline.

The resignation of Arnell last July left the board with six members and a super majority of five was required to remove Anagnos from office. The suit claimed directors had been trying to remove Anagnos.

Arnell’s resignation made it virtually impossible for unhappy national delegates, some who also wanted to remove Anagnos, to assemble the five required board votes needed to remove her.

Last month RNA delegates voted to change the organization’s form of governance, in effect strengthening Anagnos’ position and taking power away from national delegates.

Under bylaws changes that passed, the board of directors will be expanded from seven two 11 members. Nine of the members will be outside directors. Nominations have been sought for new board positions.

The top executive positions have become board-appointed positions rather than elective positions.