$55 million pay claim by Gutfreund rejected

May 19, 1994|By New York Times News Service

NEW YORK -- John H. Gutfreund, whose tenure as chairman of Salomon Bros. ended in scandal in 1991, has lost a bid to collect $55.3 million in compensation from the firm he once ran -- a figure that largely reflected the rebound in the firm's stock since he was ousted.

Salomon Inc., the securities firm's parent, announced in a terse statement last night that an arbitration panel at the New York Stock Exchange had denied all the compensation claims filed by Mr. Gutfreund against the firm in March 1993.

According to exchange records, the unanimous decision came after 32 days of hearings before a three-member panel of arbitrators. The decision was made Friday but was not announced until last night.

Once one of the most powerful men on Wall Street, Mr. Gutfreund was forced to resign on Aug. 18, 1991, after the firm acknowledged that he had failed to promptly notify the federal government about Salomon's illegal bidding practices in Treasury auctions. In December 1992, without admitting or denying wrongdoing, he settled civil charges filed by the Securities and Exchange Commission by paying a $100,000 fine and agreeing that he would never again run a securities firm.

In a proxy statement in 1991, the firm disclosed that Mr. Gutfreund was seeking "more than $6.8 million" in compensation that he believed he was entitled to at the time he resigned. But paperwork at the New York Stock Exchange indicated that the claim was actually $55 million.

An individual familiar with the basis for the former chairman's claim explained that his pay package had included stock options and other stock-linked compensation that became increasingly valuable as the company's stock price improved. The company's shares had plunged from around $35 a share before the scandal to less than $25 a share in its immediate aftermath.

In 1992, the firm itself agreed to pay $290 million to settle government claims against it -- and then struggled to restore its reputation and preserve its business, initially under the leadership of Warren E. Buffett and then under Robert Denham after he became chairman of the parent company in June 1992.

The company's stock price has steadily recovered since the scandal. The stock closed yesterday at $51.125, up 87.5 cents.

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