Louis Lower, the insurance company chief executive jailed two weeks ago for drunk driving, didn't alert his board to his arrest though his attorney knew for several weeks that prosecutors were pushing for jail time.

Lower's attorney alerted the board of directors at Horace Mann Educators Corp. (HMN) to Lower's late-May arrest in Florida on Sept. 9, the day after the executive was given a 60-day sentence and had begun serving the time in the Indian River county jail. The board placed Lower on leave and appointed the company's chief financial officer as interim CEO. Lower remains on the board.

A spokesman for the Springfield, Ill., insurer said last week that Lower hadn't informed the board before Sept. 9, but had discussed his arrest with company executives in July, and that it was viewed as having no impact on his ability to do his duties.

At the Sept. 8 court hearing, the state prosecutor on the case sought a six-month jail term, according to an audio recording of the proceeding. Lower's attorney, Andrew Metcalf, told the judge there was "a gentleman's agreement" with a prior prosecutor on the case "that if my client pled to the court they would be seeking somewhere in the neighborhood of 60 days," according to the audio. (The initial prosecutor had been promoted during the summer.) Lower pleaded no contest to the drunk-driving charge.

Metcalf at the hearing argued Lower should be sentenced to house arrest. In interviews this week, Metcalf declined to say whether he told Lower he risked jail time. However, Metcalf said the "implication that it was clear that Mr. Lower would most likely receive a jail sentence from the judge is not accurate. In this case, until the judge ruled, it was impossible for anyone to know what the sentence was going to be.... The judge determines the sentence, not the prosecutor."

The disclosure of the prosecutor's tough stance reinforces dismay among some corporate-governance specialists that Lower didn't tell Horace Mann's board of directors about his arrest. U.S. securities law mandates that public companies promptly disclose material events to shareholders and the public. Several management specialists said possible incarceration of a CEO is material.

"It's material information because it goes to the question of his judgment and his stability," said Jay Lorsch, a Harvard Business school professor who has advised some boards about governance.

At the sentencing hearing, Lower said his decision to drive while intoxicated was a "terrible mistake" and an "isolated incident." Lower was arrested after driving the wrong way on a Vero Beach, Fla., road and crashing head-on into a sport-utility vehicle containing two 17-year-olds.

"I should never ever put myself or anyone else, including the two young people in the other car, at risk," Lower said. "It's never happened before. It will never happen again."

He also apologized to his wife and family, and said: "I've put the 2,000 employees of my company in jeopardy and the shareholders of my company." He said he'd recently been dieting and lost 37 pounds, which exacerbated the effects of the alcohol.

The prosecutor in the case, David Dodd, said in an interview, "in all negotiations, the state indicated they would be seeking incarceration." He added, "There was a chance the judge wasn't going to give him jail time. But they knew all along that's what we were seeking."

Ivan "Doc" Holiday, the head bouncer at Vero Beach's Riverside Cafe, said in an interview that a bartender cut Lower off from drinks around 11 p.m. or 11:30 p.m. on the night of the crash, and that Lower was ejected at around midnight when the staff felt he had become a "nuisance" to other patrons.

At the scene of the accident less than a half mile from the bar, Lower refused police requests to perform field sobriety tests or give a breathalyzer, so police obtained a warrant to take his blood. Video taken by police at the scene captures Lower repeatedly asking for an attorney, while police repeat that he isn't entitled to one at that stage of their investigation.

When the blood was drawn more than three hours later, a police lab determined he had a blood-alcohol content of .21 - almost three times the legal limit of 0.08.

Lower's family and friends describe the incident as wildly out-of-character for a well-respected, long-time insurance executive. Lower has been CEO of Horace Mann for a decade, and previously headed Allstate Corp.'s (ALL) life insurance operation.

"He has taken full responsibility. He is a man of faith, a man of family, and a man of his company," his wife of 40 years, Adrienne Lower, said in an interview. "If you look at the individual and the record, other than this one incident, you cannot find fault."

A Horace Mann spokesman said Thursday the board, as previously stated, continues to consider additional disciplinary action. For the first time, the spokesman added that the board's review process "includes its own investigation."

-By Erik Holm, Dow Jones Newswires; 212-416-2892; erik.holm@dowjones.com
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