MassMutual’s board terminated the company’s CEO in June in part because he allegedly made unauthorized trades in a shadow retirement account, according to a report in the Wall Street Journal.

The board agreed to set up the account in 1999, when it hired Robert J. O’Connell away from American International Group Inc., New York, where he had been president of AIG’s domestic life insurance unit. The account was intended to compensate O’Connell for benefits he lost when he left AIG.

A shadow account permits hypothetical trading in financial instruments, allowing the account value to rise and fall on paper, in line with the return on the actual investments.

Under the rules set for the account, O’Connell was to trade only in mutual funds and selected blue-chip stocks. But he allegedly also traded in a number of initial public offerings, lifting the value of the account from an initial $4 million to more than $30 million, according to the report.

A MassMutual investigator concluded O’Connell was able to grow his account at least in part by trading early in the morning on some stocks’ previous-day closing prices, allowing him to take advantage of late-breaking, favorable news about the companies.

O’Connell denies the allegation, contending he followed the rules set by the board, the report says.

The board also charged O’Connell approved a large separation agreement with an executive who at one time challenged his shadow account trades, an allegation he also denied.

According to the WSJ, the inquiry began after O’Connell’s wife told a board member the CEO was having an affair with the company’s chief human resources executive, Susan Alfano, whose duties included reviewing executives’ trades in shadow accounts.

Although the subsequent investigation found no substantiation for that charge, it led the board to question other activities by O’Connell, according to the report.

O’Connell is pursuing arbitration to challenge the terms of his separation.