(Bloomberg News) Wilmington Trust Corp., a recipient of a $330 million taxpayer bailout, took back about $2 million in pay from Chief Executive Officer Donald Foley because the compensation broke U.S. Treasury Department rules.
Delaware's largest bank withdrew the payments Dec. 22 "in order to be in full compliance" with rules for the Troubled Asset Relief Program, bank spokesman William Benintende said in an e-mailed statement. The revoked pay includes a $1.75 million signing bonus in cash and restricted stock, and additional restricted shares valued at about $248,000 when they were granted, regulatory filings show. The stock has since fallen.
Treasury sought to stabilize the banking system by pumping $205 billion into 707 financial firms through TARP's Capital Purchase Program beginning in 2008. Along with the cash came restrictions meant to keep executives from profiting from bailouts. The rules ban cash bonuses and limit incentive payments in restricted stock to one-third of a top executive's total pay.
"These are rules of unprecedented scope," said Robert Jackson, a former Treasury lawyer who helped implement them and now teaches at Columbia University School of Law. "In their efforts to comply, companies have sometimes made mistakes."
Wilmington Trust declined to comment beyond the statement. Along with revoking the bonus and reducing the incentive payment, the board also boosted Foley's annual salary 25% to $1.5 million, effective Dec. 1, according to a Dec. 23 filing.
Mark Paustenbach, a Treasury spokesman, declined to comment on the bank specifically. The department "requires that all TARP institutions follow the relevant rules on executive pay and that management certify their compliance on an annual basis," he said in an e-mailed statement.
Paul Hodgson, who tracks executive compensation at Corporate Library, a corporate governance research and analysis company, said he was unaware of any other case of a bank rescinding pay because it didn't comply with TARP rules.
Facing regulatory pressure because of mounting losses on construction loans, Wilmington Trust agreed Oct. 31 to sell itself to Buffalo-based M&T Bank Corp. for $351 million, or $3.84 a share, about half the price on the previous trading day. Founded by members of the du Pont family in 1903, the bank has reported six straight quarterly losses.
M&T plans to assume Wilmington Trust's obligations under TARP. M&T has yet to repay its own $600 million TARP infusion. Both banks got the government payouts in December 2008.
Foley joined Wilmington Trust's board in 2006, serving on the compensation and audit committees. A former treasurer at ITT Corp., he stepped in as CEO in June after the departure of previous chief, Ted Cecala.
Foley's initial pay package incorporated a $1.75 million signing bonus, including $450,000 in cash and the remainder in restricted stock; an annual salary of $1.2 million; and an incentive payment of $600,000 in restricted stock. Foley acknowledged the company's decision to rescind terms of the package, according to the December filing.
"In making these changes, the board wishes to express its recognition and appreciation of the fact that since he became CEO in June, Mr. Foley has worked tirelessly and effectively to address both the challenges and opportunities facing Wilmington Trust," the bank said in the e-mailed statement.