Wednesday, June 11, 2008

Obama's VP Vetter a PEU

James A. Johnson, the chair (former) of Barack Obama's VP selection committee, did much more than take $7 million in below market loans from subprime lender Countrywide Financial. Johnson participated in egregious pay schemes as the top man at FannieMae, the huge mortgage lender. He lavished outrageous compensation on his CEO peers as a board member of five firms, frequently as chair of the compensation committee.

A corporate governance firm noted of the five companies directed by Johnson, two were involved in backdating stock options, while four paid executives extravagantly. The practice of dating option awards at the stock's lowest price of the quarter is considered cheating at best and in most cases is illegal under SEC regulations. The Bush administration's failure to hold corporate chiefs accountable for widespread illegal and unethical behavior is well known. That's how UnitedHealth Group CEO, William McGuire, ended up with a hand slap. He still took home much of his lavish pay, some $800 million garnered with the aid of compensation Committee Chair James A. Johnson.

The news finally left the political blogs, achieving feature article status in the New York Times. Here's my guess as to why. People are sick of political insiders making outrageous amounts of hay on our tax money. President Bill Clinton helped privatize portions of government, where CEO's and board members could be paid handsomely for their "public service". They include USIS, Fannie Mae, Sallie Mae, & Freddie Mac.

People are tired of CEO's and board members making huge money, while they worry about the next reduction in force or how much their health insurance will soon go up, if they have any at all. James A. Johnson made annually from the following:

Consulting arrangement with Fannie Mae, $375,000. While his protege replacement cooked the books to stabilize income (thus executive compensation), James wormed a long term consulting deal complete with staff and a car. Now that's public service!

His 2007 board fee for UnitedHealth Group totalled $334,413. He owns 383,080 shares of stock, either directly or beneficially. Should James want advice on flipping stock options for huge gains, he might touch base with VP candidate Evan Bayh. Evan's wife, Susan, sits on the board of another giant health insurer, WellPoint. The Bayh family grossed over $1.5 million the last few years from flipping options. Susan shared a chair with Al Hubbard, Bush's economic adviser, and William H.T. Bush, also known as Uncle Bucky to George W. And don't forget Gail Wilensky, Bush I's Medicare/Medicaid Chief. She just made bucket loads of money from The Carlyle Group's purchase of ManorCare and sits next to Jim on the UnitedHealth board.

Board compensation from Gannett Company $119,779. Before James stepped down on 9-27-06, he shared the board table with Donna Shalala, another ex-Clinton staffer. Donna took home $200,000 in pay from Gannett in 2007.

Oh, the alphabet soup of past political names and acronyms, it's so confusing! Pay attention to these names as they likely will consult on health care reform. And yes, they do have a dog in the fight. Or should I say a seat on the privatization train! But there's more to James A. Johnson's financial foundation than healthcare and media.

Temple Inland paid him $349,587 in compensation for his director services in 2007. It spun off Forestar Real Estate Group the end of 2007 and Mr. Johnson landed a spot on that board as well. He already beneficially owns 56,051 shares of the new company. Jame's board retainer is $125,000 a year in cash and stock option grants, plus $5,000 for chairing Forestar's compensation committee.

At Target Corporation Jim chairs the Compensation Committee in addition to serving on the board. For that he received $332,925 last year.

Huge Wall Street investment house Goldman Sachs paid Jim $695,569 in compensation for Board services in 2007.

KB Homes gave Mr. Johnson $85,422 in cash and other nonstock compensation. As the company's stock fell through the floor, his stock option grants had a negative value. With total holdings of 198,000 shares, James took the housing market fall squarely on the chin.

While this covers much of the Democratic VP selection chair's Board compensation, a full record of Mr. Johnson's transactions as an insider can be found on the Edgar website. Recall Jim has a full time job at Perseus, LLC, a private equity underwriter (PEU). It likely makes his $1.8 million in current annual board compensation look like chump change. (I didn't include his FannieMae consulting income or the Gannet fees in that total).

So how did the Barack respond? He offered, "“I am not vetting my V.P. search committee for their mortgages.” No, but your search chair is a serial executive compensation abuser.

The Obama campaign shifted to bait and switch. "Hey guys, rather than focus on my buddy James, look at all these cool VP candidates."

Sorry Barack, I'm not buying "change" that smells alot like the same old PEU. SOD off.