Ex-Salomon Executives Denied Compensation : Scandal: The decision came a day after congressmen had urged at a hearing that the four receive no more money from the firm.
Salomon Inc.’s board Thursday decided not to pay compensation or legal fees to four executives, including former Chairman and Chief Executive John Gutfreund, who resigned after disclosures of the firm’s cheating at Treasury auctions.
Salomon said its directors had decided not to give the executives any severance pay, bonuses or other compensation payments after their resignations last month to take responsibility for the scandal.
The board’s decision came a day after a hearing into the scandal in Washington. During the hearing, congressmen called on interim Chairman Warren E. Buffett not to pay the former executives any more money.
In addition to Gutfreund, the executives who resigned in the scandal are former President Thomas Strauss, former Vice Chairman John Meriwether and former General Counsel Donald Feuerstein.
Salomon’s top management has come under stinging criticism for failing to report bidding violations in Treasury securities auctions to authorities until August despite learning of them in late April.
“The action taken means that the (executives) will not receive any future compensation, by way of severance pay, bonuses or other payments,” the company said in a statement. “Nor will their future legal fees be advanced, or office or other expenses be paid by Salomon.”
However, Salomon said the firm would honor any existing legal obligations with the four. It did not provide details.
Salomon last week conceded that it was paying the legal bills of the former executives and had provided them with office space in the firm’s old headquarters in lower Manhattan. At a board meeting Aug. 18 shortly after the resignations, Buffett hadn’t ruled out severance packages.
The executives had also been eligible for large severance and compensation packages, and three of them would have been able to share in a $100-million deferred compensation pool to be doled out next year.
Gutfreund, Strauss and Meriwether together earned about $15 million in 1990, making them among the highest-paid Salomon executives.
In related developments, the rating agency Standard & Poor’s Corp. on Thursday lowered its rating of Salomon’s senior debt because of the possible financial impact of the scandal. Another rating agency, Moody’s Investors Service, lowered its ratings Aug. 27.
Salomon said the action by Standard & Poor’s will slightly increase the firm’s cost of borrowing, but said it “will have no significant impact on the firm’s overall liquidity, which remains strong.”
The firm also disclosed that 13 additional lawsuits have been filed against it by people claiming that they were hurt financially by Salomon’s misdeeds in the government securities market. In a filing with the Securities and Exchange Commission, Salomon disclosed that one of the suits seeks $500 million in damages.
A spokeswoman said that including these suits, there are 32 lawsuits pending against the firm related to the admitted wrongdoing.
On the New York Stock Exchange Thursday, Salomon stock fell $1 a share to $24. The firm’s stock has plunged from above $36 since the scandal. The announcements by Salomon came after the market closed.
Salomon also clarified remarks made in a report Wednesday about the bond activities. Buffett said the firm did not mean to imply that a customer, Tudor Investment Corp., had agreed before a Treasury auction to help Salomon exceed limits of government securities purchased, as was hinted in a report presented to Congress.
