We have yet another case of an excessive retirement package for a public employee — and politicians insisting that they are not responsible because they never really read the contract’s details.
Wayne Township Schools Superintendent Terry Thompson received an over than $1 million retirement package in 2007, but the full value only came to public attention with his retirement this year.
Thompson, 64, retired in December and has already banked more than $800,000 of his retirement deal. He was being paid $225,000 annually. The contract also allow him to continue after retirement as “superintendent emeritus” and to receive $1,352 a day. That position has already yielded more than $200,000 in addition to a payment of $15,000 for “retirement planning.”
Board members insist that they really didn’t read the find print of the contract. Mary McDermott-Lang, the district’s spokeswoman, explained that the board members were unaware of the details when the signed the deal. A curious defense.
The fact is that, unless there is a charge of fraud, this is not Thompson’s fault. He demanded a renegotiated contract and received it for his continued services. The problem is a board that signs contracts without reading the ultimate cost to the district.
Source: IndyStar
This reminds me of the Dick Grasso debacle at the NYSE. From wikipedia:
“On August 27, 2003 it was revealed that Grasso had been given a deferred compensation pay package worth almost $140 million. This caused immediate controversy, as the hand-picked compensation committee consisted mainly of representatives from NYSE-listed companies over which Grasso had regulatory authority as head of the Exchange.
Following criticism of the deal from U.S. Securities and Exchange Commission chairman William H. Donaldson, who preceded Grasso as Chairman of the NYSE, and several pension fund heads (who control some of the largest pools of equity investment capital in the U.S.), the Exchange board met and in a 13-to-7 vote asked Grasso to leave. He stepped down on September 17, 2003.
On May 24, 2004 Grasso was sued by New York state Attorney General Eliot Spitzer demanding repayment of the majority of the $140 million pay package. Prior to being dismissed Grasso had been in line to receive an additional $48 million over the $139.5 million he had already received; he was not paid the additional funds. Grasso has sued to be awarded those funds. According to the suit, Grasso, along with former NYSE director Kenneth Langone, misled the NYSE board about the details of his pay package. It was allegedly well beyond that of comparable chief executives. The NYSE was a non-profit institution during Richard Grasso’s reign, and as such was governed by State of New York rules governing executive compensation for same. That the NYSE was NON-profit goes to the heart of the matter of Grasso’s compensation. This is because FOR-profit companies have traditionally received much greater leeway in executive compensation matters, even when the compensation might appear to be excessive to stockholders. In addition, there were issues concerning premature withdrawals of Grasso’s retirement compensation. Retirement packages often have strict timetables as to when withdrawals can be made.
On May 26, 2004 Grasso responded with a counter-suit against the Exchange and its chairman John Reed. The counterclaim was twofold; It sought restitution of unpaid portions of his retirement package and further accused certain individuals at the Exchange of “besmirching his name”. Grasso went on to place a 1500-word op-ed article in the Wall Street Journal detailing this counter-suit as well as his grievances against Spitzer.
The lawsuit against Grasso continued to move toward trial in 2006 with neither side showing any interest in settling.
On October 19, 2006 it was reported that the New York State Supreme Court issued a summary decision ordering Grasso to repay a significant amount of excess compensation in an article entitled “Ex-NYSE chief ordered to return part of $188M”.[4] Although Grasso will appeal, the same article reports that Spitzer’s office has disclosed the amount of restitution to be in the tens of millions of dollars. In his ruling Judge Ramos wrote that Grasso’s failure to disclose the true extent of his total compensation prevented the compensation committee from exercising its fiduciary duties. The above CNN article also reported that Grasso’s counterclaim of defamation was dismissed….
On July 1, 2008 the New York State Court of Appeals dismissed all claims against Grasso. The majority opinion stated that since the NYSE was now a subsidiary of a for-profit multinational corporation the State of New York had no oversight over the affairs of the company in this matter and that prosecution was “not in the public interest.” Current Attorney General Andrew Cuomo stated that he had no intention to appeal this decision any further and that the case was effectively over. The court ruled that Grasso was entitled to the entirety of his compensation. The court also dismissed Grasso’s actions against the NYSE and other parties as related to this matter.”
Grassi bamboozled the “smartest guys in the room” by couching his retirement package not in dollars but in percentages of profits of the NYSE. To figure out what he would actually be paid in dollar figures you had to get out a calculator and do a “hypo,” which of course no one on the board bothered to do. The “hypothetical” would have revealed the obscene amount of money he was proposing to receive. Since the board members were all “Masters of the Universe” this was pretty embarrassing, but not surprising.
Overcompensated incompetence…. don’t tell me, it’s those evil unions again!
Not very likely… maybe the invisible hand.
This $1M is really just the cost of Thompson’s severance package.
The full retirement cost would also include a regular pension based on his $225K earnings, a separate annuity account with state-funded “pickup contributions” called an ASA, and no doubt extensive taxpayer-funded health benefits… perhaps even free lifetime benefits seen elsewhere in Indiana.
My guess is that the actual value of his retirement is closer to $5M and likely more. Of course, Indiana has assets to cover less than one third of promised public sector pension benefits, one of the worst funding ratios among the states.
Indeed Mr. Thomson is not legally responsible, but he is certainly morally responsible. It’s too easy to use the law to legitimate immoral behavior. “American law allows me to take money from the school, so it’s all good”, “Sharia law allows me to marry a teenager, so it’s all good”, well there is such a thing as self-restraint. Just because it’s not forbidden doesn’t mean it’s mandatory.
As a superintendent, someone who wastes 1 million $ on himself certainly doesn’t deserve the title “emeritus”.
Stamford Liberal,
I believe he’s resigning from the “superintendent emeritus” position. In my opinion, this guy knew his “marks” …
Blouise,
Thanks for the post. IMHO, If the district was cutting back, and Thompson was so concerned about his district and the kids he served, he would have renegotiated the contract.
LOL – new title, indeed.
Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity.
–Martin Luther King Jr.
The board’s attorney sounds like he is trying to do the backstroke to avoid a malpractice claim.
I think I screwed up my email address … time to check it out
“Like other districts in this time of reduced revenues, Wayne — which has more than 15,700 students – has had to eliminate some programs, freeze administrators’ pay and reduce teaching positions through attrition.” …
“They probably neglected to calculate the actual amount they would be promising Thompson, Bailey said, adding that he now regrets not doing more to inform them. “Did they fully understand how much money was in that package? No, I don’t think they did,” said Bailey, who represented the school district at the time of the renegotiation. “I was asked to approve it as to form and legality, and that’s what I did.” …
“It was a very lucrative contract,” Bailey said. “With benefit of hindsight, rather than just doing the narrow task I was assigned to do, the board would have been better served had I grabbed them by the lapels and said, ‘Let’s slow this down.’ ” But, Bailey added, he doubts it would have made much difference. Thompson, the 2010 Indiana Superintendent of the Year, was considered among the area’s strongest school administrators, and other districts were trying to lure him away.”
“It came at a time when he was deciding whether to finish his career at Wayne or go somewhere else to finish his career,” said Bailey, an attorney at Bose McKinney & Evans in Indianapolis. “He possesses a package of skills that were very unique, and I think the board was quite frankly afraid to lose him.”
“In his written statement, Thompson said the contract was “mutually negotiated” and was “based in part on my record of service.” He touted the district’s accomplishments during his tenure, such as launching all-day kindergarten and a college-credit program for high school students.”
(Bill McCleery – IndyStar.com – Jan 28, 2011)
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I’d say the 2010 Indiana Superintendent of the Year has earned himself a new title.
“Board members insist that they really didn’t read the find print of the contract. Mary McDermott-Lang, the district’s spokeswoman, explained that the board members were unaware of the details when the signed the deal. A curious defense.”
I wouldn’t necessary call it a curious defense, but it sure as hell is a weak one.
I wonder how much the state cut Mr. Thompson’s district budget?
“In the business world, the rearview mirror is always clearer than the windshield.
Warren Buffett “
AY,
Maybe I should have said “You are” so greedy! Just the thought of making money makes me nervous!
AY,
Your so greedy! 🙂
In 2000, I sent an open records request to the City of Steamboat Springs Colorado and asked for their contract with Anthony Lettunich, who has been their city attorney since 1993, but the city clerk responded that they didn’t have a responsive record.
Recently I read about land on Emerald Mountain; the City financed a purchase of development rights and as part of that there was supposed to be a hut provided for use by hikers and skiers. That part of the contract was found to be unenforceable.
Another strange thing is that the City contracted with a search firm to find a new city manager. They only interviewed one person, Jon Roberts, who was I think 62 when they hired him and he was offered immediate vesting on a substantial pension. I saw the information provided by the search firm to city council candidates and it represented that the city was in great financial condition.
Hell guys….I am taking Chan L. approach on this one…where the hell to I sign up….I promise to work for 1 year unless I get a contractual extension for more than 15k that would be an insult to the township….
Why it’s almost like there’s some sort of cultural bias in America that says even lackluster high level administrators should be payed hundreds of times more than those working for them.
Buddha,
That even beats the old joke defense of “He needed killing”!
“We’re both stupid and incompetent.”
My. That is an interesting defense.
Can the taxpayers sue the board’s attorney for malpractice? This is an amazing golden parachute. You would think these board members would think of a more intelligent response other than we didn’t read it! I will have to ask my teacher wife if she can get a sweet deal like this!!