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Millions in severance for Wachovia execs?

No word yet on who, if anyone, would leave. CEO Bob Steel is not eligible for payments and has lost on his investment.

By Stella M. Hopkins
shopkins@charlotteobserver.com

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His time at Wachovia is likely to cost Bob Steel, who sank $16 million of his personal fortune into the bank's stock, which has since shed about 78 percent of its value.

But a trio of top executives could see fat checks if they leave following the Citigroup deal, which hasn't been finalized. However, they also would be stung by the stock's dismal plunge. Here are potential cash severance payments and the value of benefits such as health insurance:

Ben Jenkins, president of the general bank, with the company since 1971: $17.6 million, including $13.3 million in severance and a $3.7 million bonus.

Steve Cummings, head of corporate and investment banking, with the company since 1998: $20.3 million, including $14.3 million in severance and a $4.25 million bonus.

David Carroll, head of capital management, with the company since 1981: $19.1 million, including $14.1 million in severance and a $4 million bonus.

These payments also include up to $45,000 of financial planning services, $15,000 for “executive physicals” and $10,000 for “career transition and outplacement support services” for each man, according to a March securities filing. The report details several severance scenarios, including the executives choosing to leave for “good reason” following a “change in control.”

The Citigroup transaction is unusual because a scaled down Wachovia will continue. Many details remain unclear, and no management changes have been announced.

“These contracts have not been triggered at this time,” Christy Phillips-Brown, a bank spokeswoman, said in an e-mail. “Wachovia's management team has been and continues to be committed to the company and its constituencies, as well as ensuring the success of the Citigroup transaction.”

In addition to cash and benefits, the three longtime executives also have stock options and restricted stock.

The value of those holdings, as listed in the filing for severance, was calculated using a share price of $38.03, the Dec. 31 closing price.

Wachovia stock, which has been as low as $1.84 this week, closed Wednesday at $3.55.

Each of the executives also is eligible for payments, ranging from $7.5 million to $8.3 million, to offset taxes. However, those tax bills would likely be lower because of the stock decline.

Steel's deal

Steel's employment agreement, struck in July when he joined the bank as chief executive, doesn't call for severance payments.

In the case of a merger or acquisition, he could immediately exercise 1.5 million options to buy company stock. But those options would be worthless for now because the stock price is well below the option price of $9.08 a share.

Nearly 2 million shares of restricted stock he holds would remain subject to performance requirements, which include the stock price rising to $20 per share and higher within six years.

In July, Steel personally bought 1 million shares of Wachovia stock, paying just over $16 million.

“Wachovia is a great company, and I made the investment because I believe in the core strengths of the organization,” he said at the time.

At Wednesday's close, those shares are worth about $3.55 million.

Steel amassed substantial wealth during nearly 30 years at Goldman Sachs. Much of that was revealed in a financial disclosure form filed last summer, as required by the top post he took with the U.S. Treasury Department in 2006. His extensive holdings included more than $50 million of cash in one brokerage account and partnerships invested in Bordeaux wine futures, British pubs, office buildings in Greensboro and Cary, and Carolinas timberland.

In 2003, his last full year at Goldman, he made about $12.6 million. As of February 2004, he had compiled 1.6 million shares of Goldman stock, worth around $173 million at the time.

Stella M. Hopkins: 704-358-5173

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