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Jeff Smisek leaves United Continental Holdings Inc. $28.6 million richer. Keeping the money will take cooperation.
United tied Smisek’s exit to the carrier’s probe over its dealings with the Port Authority of New York & New Jersey. A clawback provision in Smisek’s separation agreement dated Tuesday requires him to comply with investigations into events that occurred during his employment. If he doesn’t, or if he’s convicted or pleads guilty to a felony or “any crime involving moral turpitude,” the company can rescind those payments, according to the agreement filed by the Chicago-based airline. No such language exists in Smisek’s employment agreement filed as part of the company’s annual report in 2011.
Smisek hasn’t been accused of wrongdoing and there’s no indication that he hasn’t cooperated. Federal investigators who are examining the airline’s dealings with the Port Authority as part of a broader probe, haven’t decided whether to charge anyone at the airline, a person familiar with the investigation has said.
Language that allows companies to claw back compensation after a crime is committed is common, said Michael S. Melbinger, a partner at Winston & Strawn LLP. “The ‘cooperation’ feature is a little less common, only because such cooperation is assumed or possibly required under other laws, but it still appears often,” he said.
Smisek’s exit follows an inquiry by U.S. prosecutors into whether ex-Port Authority Chairman David Samson got the carrier to restart a money-losing route to his weekend home in South Carolina in exchange for concessions sought by the airline. United dropped that service, once known as “the chairman’s flight,” days after Samson left the agency in 2014.
Megan McCarthy, a spokeswoman for United, declined to comment beyond the company’s statement Tuesday. It said that Smisek’s departure came in connection with United’s probe “related to the federal investigation associated with the Port Authority.” The investigations are ongoing and the company is cooperating with the government, according to the statement.
The separation contract stipulates that Smisek “agrees to cooperate fully with the companies in the defense, prosecution, or conduct of any claims, actions, investigations, or reviews now in existence or which may be initiated in the future against, involving, or on behalf of” United Continental Holdings and United Airlines, the filing shows.
United will reimburse Smisek for all “reasonable out-of- pocket expenses” he incurs in connection with the cooperation, the filing shows.
Smisek’s $28.6 million in payouts includes a $4.88 million cash severance and restricted shares that will vest early, worth $3.5 million at Tuesday’s close, according to data compiled by Bloomberg from the company’s statement and regulatory filings. It also includes performance-based awards worth $19.5 million at the company’s Dec. 31 fiscal year-end. He’s eligible to receive a pro-rated portion of his annual incentive award, which paid out $2.34 million to him last year.
He’ll receive perks including flight benefits, tax reimbursements on those benefits, and parking privileges for the remainder of his life, in addition to the title to his company vehicle, according to the statement.
–With assistance from David Voreacos in federal court in Newark, New Jersey, and David Kocieniewski in New York.
This article was written by Caleb Melby from Bloomberg and was legally licensed through the NewsCred publisher network.