Skeen' s Golden Parachute
01-05-2006, 07:14 AM
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Skeen' s Golden Parachute
Flyi's Skeen May Have Averted Pay Loss
CEO's Renegotiated Contract Makes $3.4 Million Harder for Creditors to Reach
By David S. Hilzenrath
Washington Post Staff Writer
Thursday, January 5, 2006; Page D04
Kerry B. Skeen, chairman and chief executive of Independence Air, may have avoided the loss of more than $3 million in deferred compensation by renegotiating his contract in March, months before the budget carrier entered bankruptcy protection, according to specialists in bankruptcy law and executive compensation and a review of company documents.
Skeen, 53, had built up $3.4 million in deferred compensation as head of Independence Air parent Flyi Inc. and its predecessor, but before the March contract revision, he had only an unsecured claim to that money, according to a document the company filed with the Securities and Exchange Commission. That could have made it difficult for him to salvage the money from the company's bankruptcy as Flyi's creditors battle over its assets, specialists said.
Independence Air chief executive Kerry B. Skeen had his salary cut 15 percent in a March contract renegotiation. (By Hyosub Shin For The Washington Post)
But as part of a revised benefits package in which Skeen also accepted a 15 percent salary cut, he was given control of a life insurance policy in which the deferred compensation funds had been invested -- in effect swapping his unsecured claim against the company for an asset that he came to own free and clear.
Flyi general counsel Richard J. Kennedy said the cash surrender value of the life insurance policy was about $3.4 million.
The bankruptcy court, Kennedy added, would have approved the same swap. However, other observers saw it differently, saying Skeen's previous, unsecured claim could have become virtually worthless in the bankruptcy proceeding.
"It would seem that he is better off" under the March agreement, said compensation consultant Brian Foley of Brian Foley & Co.
Without the renegotiation, "he would have been sort of out of luck on his deferred compensation," said Roger Frankel, a bankruptcy lawyer at Swidler Berlin LLP.
Kennedy said Skeen was not available for comment.
The Dulles-based airline is scheduled to shut down today after its effort to build ridership with extremely low fares failed amid rising fuel prices and stiff competition.
Skeen is not completely out of the woods on the insurance policy: Because the transaction occurred within a year of the November bankruptcy filing, creditors can challenge it in court.
"They will look at the transaction at the right time, and if they have issues with it, then they will raise them," Kennedy said.
The union representing Independence Air flight attendants yesterday filed an objection in the U.S. Bankruptcy Court in Delaware to one part of the airline's plan -- a request to pay $3.2 million in bonuses to a "wind-down team" of 180 employees. Skeen is not part of that team and would not receive any of that money.
SOP for Skeen
CEO's Renegotiated Contract Makes $3.4 Million Harder for Creditors to Reach
By David S. Hilzenrath
Washington Post Staff Writer
Thursday, January 5, 2006; Page D04
Kerry B. Skeen, chairman and chief executive of Independence Air, may have avoided the loss of more than $3 million in deferred compensation by renegotiating his contract in March, months before the budget carrier entered bankruptcy protection, according to specialists in bankruptcy law and executive compensation and a review of company documents.
Skeen, 53, had built up $3.4 million in deferred compensation as head of Independence Air parent Flyi Inc. and its predecessor, but before the March contract revision, he had only an unsecured claim to that money, according to a document the company filed with the Securities and Exchange Commission. That could have made it difficult for him to salvage the money from the company's bankruptcy as Flyi's creditors battle over its assets, specialists said.
Independence Air chief executive Kerry B. Skeen had his salary cut 15 percent in a March contract renegotiation. (By Hyosub Shin For The Washington Post)
But as part of a revised benefits package in which Skeen also accepted a 15 percent salary cut, he was given control of a life insurance policy in which the deferred compensation funds had been invested -- in effect swapping his unsecured claim against the company for an asset that he came to own free and clear.
Flyi general counsel Richard J. Kennedy said the cash surrender value of the life insurance policy was about $3.4 million.
The bankruptcy court, Kennedy added, would have approved the same swap. However, other observers saw it differently, saying Skeen's previous, unsecured claim could have become virtually worthless in the bankruptcy proceeding.
"It would seem that he is better off" under the March agreement, said compensation consultant Brian Foley of Brian Foley & Co.
Without the renegotiation, "he would have been sort of out of luck on his deferred compensation," said Roger Frankel, a bankruptcy lawyer at Swidler Berlin LLP.
Kennedy said Skeen was not available for comment.
The Dulles-based airline is scheduled to shut down today after its effort to build ridership with extremely low fares failed amid rising fuel prices and stiff competition.
Skeen is not completely out of the woods on the insurance policy: Because the transaction occurred within a year of the November bankruptcy filing, creditors can challenge it in court.
"They will look at the transaction at the right time, and if they have issues with it, then they will raise them," Kennedy said.
The union representing Independence Air flight attendants yesterday filed an objection in the U.S. Bankruptcy Court in Delaware to one part of the airline's plan -- a request to pay $3.2 million in bonuses to a "wind-down team" of 180 employees. Skeen is not part of that team and would not receive any of that money.
SOP for Skeen
