Four former Allstate employees were awarded more than $27million by a federal jury in a defamation lawsuit against thecompany, according to a recent report in the Chicago Tribune.

The employees, all part of a now-defunct equity division atNorthbrook-based Allstate, were fired in December 2009 forallegedly timing trades to boost their own incentive bonuses at theexpense of the company's investment portfolios, according to courtdocuments.

Allstate blamed “some employees” in a February 2010 Securities and Exchange Commission filing fortiming trades, which the company said may have cost the portfoliosmore than $200 million over six years, while netting $1.2 millionin bonuses for equity division employees.

Although they were never named by Allstate, Daniel Rivera,Stephen Kensinger, Deborah Joy Meacock and Rebecca Scheuneman filedthe defamation lawsuit in March 2010, claiming they were falselyaccused of wrongdoing by the SEC filing.

“If you connect the dots, you would be led to believe it was myguys who did this,” said Robert Sweeney, a Chicago lawyerrepresenting the four former Allstate employees. “It ruined theircareers.”

Sweeney said the four were simply following protocols andInvesting 101 — buy low and sell high — while executing trades atthe direction of the company. Rivera was head of the equitydivision, while the other three were part of the growth team.

The defamation lawsuit, filed in the federal district court inChicago, took six years to get to trial. The jury verdict,announced June 21, awarded the employees a total of $27.1 million,including $10 million in punitive damages.

“Allstate disagrees with the jury's verdict,” Allstatespokeswoman Laura Strykowski said in a statement Thursday. “Wecontinue to believe in our case and are reviewing our post-verdictoptions.”

According to the lawsuit, the equity division was in charge ofmanaging portfolios for Allstate and its pension plans. On mostoccasions, Rivera would receive directions from Allstate’sPortfolio Management Group or the pension plans manager regardingwhen to buy or sell for large program trades. The trades were thenexecuted within the parameters provided.

Equity employees were entitled to performance bonuses based on asystem that paid a premium for buying on a down day and selling onan up day for the markets at large, as opposed to measures based onabsolute return, according to the lawsuit.

According to documents filed by Allstate in the case, Allstatebrought in a consulting firm and launched an investigation intotrading practices within the equity division in the summer of 2009.The consultants estimated that the alleged trade timing may havecost the pension funds $91 million, with company portfoliosadversely impacted by $116 million.

“The inference was that there was wrongdoing by people in theequities department, and that they improved their bonuses as aresult,” Sweeney said. “We came back and showed it had nothing todo with that. This was a policy that Allstate had in place asresult of their performance measurement system, which has beenreferred to as arcane and imprecise.”

The company announced the decision to disband the equitydivision in October 2009, outsourcing management of its equities toGoldman Sachs. Two months later, the four employees were terminatedfor cause and told they had violated the conflict of interestprovision of the company’s code of ethics, according to thelawsuit.

Allstate is subject to further punitive damages related topotential violations of the Fair Credit Reporting Act for failingto provide the four employees with a summary of the investigationthat led to their termination. Motions on those issues will befiled within two weeks, Sweeney said.

The case is Daniel Rivera, et al. v. Allstate InsuranceCo.