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Sunday, November 17, 1996
Camaraderie may fall before the parachute
Jeff E.
Schapiro
The latest flap at the Virginia Retirement System brings to mind a line from a venerable tune: ''It seems to me I've heard that song before.''
Once again, the source of controversy is RF&P Corp., the pension fund's real estate development subsidiary.
All was going smoothly toward the expected sale of RF&P when word leaked that a handful of executives would divvy a half-million bucks when the firm is turned over to Lazard Freres & Co. next month.
It's not a lot of money, given the $570 million price tag of the RF&P deal, but these golden parachutes -- they apparently could have been even more generous -- tarnish what VRS trustees consider a crowning achievement: the tax-free, mostly cash sale of a pain-in-the-caboose property.
Not only does it appear company brass are cashing out at the expense of 75,000 retirees, but that RF&P -- if only for its last days as a state asset -- has reverted to the roguish contempt it previously showed for VRS.
Or as trustee Donald L. Cahill, who -- as a Prince William County police officer -- is also a future VRS beneficiary, put it: ''We just passed this constitutional amendment to avoid political interference at VRS from the outside. But now we're getting it from within.''
Doesn't understand the fuss
Another trustee, Charles B. Walker -- he's also chairman of the RF&P board of directors -- doesn't understand the fuss.
When the RF&P went on the block in 1995, he said, the company started a program providing the president and others with cash awards for ginning up RF&P's value in anticipation of sale.
A number of RF&P execs pull down six-figure salaries to begin with. And they're eligible for traditional bonuses that can increase their remuneration, in some cases, by about 50 percent.
Further, the officers collect severance if they're let go -- a distinct possibility for some with a Lazard takeover, scheduled for Dec. 1. Severance at RF&P is roughly a year's salary, but more for those at the very top.
What grates, however, is that these disputed payouts -- Walker's explanation notwithstanding -- just look like last-minute lagniappes awarded for no other reason than the fact these people did their jobs.
Admittedly, they performed under duress. The General Assembly was never hep to the acquisition of the RF&P, and imposed major change on the VRS. Then, there were state and federal criminal investigations of the RF&P.
New VRS trustees, selected by Gov. George Allen and the legislature, reined in the RF&P. They replaced most of the company's directors and demanded accountability.
Going to be run like a business
Put another way: The RF&P was going to be run like a business -- never mind that the company's only stockholder, the VRS, questioned the appropriateness of the state running a business.
The golden parachutes, to be paid out of proceeds from the sale to Lazard, have been defended as common corporate practice.
But that doesn't cut it with VRS trustees, most notably Edwin T. Burton III, lead negotiator in the RF&P sale.
At a meeting of the VRS board Thursday, Burton is expected to press Walker and another trustee cum RF&P director, Clifford A. Cutchins III, to spike the payments. There's talk of putting it to a very public vote.
Trustee R. William Bayliss III, who opposed the sale of the RF&P as a ripoff, even hopes that the dispute provides a second chance for the VRS to keep the former railroad. ''I'm just sitting here with a quiet smile on my face, hoping that it blows the deal apart,'' he said.
That's not likely. What is, though, is that the camaraderie that has generally guided VRS deliberations since the reform trustees were installed two years ago is about to take a big hit.