Another stormy summer day in Washington, another high-profile lawsuit from the Securities and Exchange Commission — this one against Citigroup and former senior executives of the company.

Once again, it’s about disclosure, and the agency’s press release puts it succinctly:

“Citigroup repeatedly made misleading statements in earnings calls and public filings about the extent of its holdings of assets backed by subprime mortgages. Between July and mid-October 2007, Citigroup represented that subprime exposure in its investment banking unit was $13 billion or less, when in fact it was more than $50 billion. “

Two executives are also named in the case: Gary Crittenden, the company’s former chief financial officer, and Arthur Tildesley Jr., once head of investor relations and now head of “cross marketing” at Citi. Like Citigroup, both men are settling along with the announcement of the charges.

Getting from $50 billion of exposure to $13 billion is more than a rounding error. Apparently, by the SEC’s account, Citi was neglecting to count “super senior” tranches of collateralized debt obligations — the ostensibly safer slices of pooled bonds or bond-like assets — and “liquidity puts,” effectively a customer’s right to hand failing instruments back to Citi. The agency cites at least four occasions in which Citi lowballed the number in public, even as internal documents recognized the total. At one point, officials even considered information that the company’s disclosures on the issue were misleading, according to the SEC.

Citi, as is usual in these circumstances, isn’t admitting or denying wrongdoing, though it is coughing up $75 million. Crittenden, who is paying $100,000, and Tildesley, who is paying $80,000, also don’t admit wrongdoing.

So far, the company doesn’t seem to have the gumption that General Electric did a couple days ago when it all but admitted foreign-corruption allegations against it; Citi doesn’t appear to have put out a formal statement yet.

Meantime, we see from today’s Wall Street Journal that Citigroup is among the financial firms cracking down on potty-mouthed emails, out of concern for the corporate image. There’s software for that, of course — as the WSJ article mentions, Bloomberg terminals have long declined to let employees send messages containing certain indelicate words.

Too bad financial firms can’t cobble together filters for questionable disclosures. that might do an even better job of protecting their images.

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For many titans of government and industry, a spot on a corporate board or two is just the thing when a long career begins to draw to a close, or to bridge the gap between one endeavor and another. But what to do when you want to retire from the corporate board?

Newmont Mining Corp. (NEM) — a big gold-producing outfit with operations in the U.S., Australia, Peru and elsewhere — seems to have found one answer: Keep the departing official’s counsel by appointing them to head a new advisory board.

In this case, the bigwig is Robert J. Miller, governor of Nevada for the entire 1990s and a member of Newmont’s board for a decade since then. The company announced Miller’s retirement from the board ahead of its April 23 annual meeting, and elsewhere in the company’s proxy it noted that, Miller would be 65 years old as of March 30, and eligible for a $50,000-a-year lifetime pension from the company. (Mandatory retirement age for directors at Newmont is 72.)

At the same time, the company assured investors that Miller was leaving on good terms. “Newmont expects to be able to consult with Governor Miller from time to time and to seek his advice and guidance as needed,” the proxy said.

That might sound like like Miller would to take the occasional call from Newmont officials, as a courtesy after years of amicable involvement in the company (and as an owner of not quite 8,000 shares as of Feb. 22).

In fact, Newmont has invited Miller to head the company’s Nevada Advisory Panel, which, according to the offer letter filed with the company’s quarterly report yesterday, “will provide high-level strategic advice on Nevada political and operational issues.”

That makes the panel sound new, and it seems to be: The company’s previous filings and its website don’t mention the panel that we could find. And Chief Executive Richard T. O’Brien, in his letter to Miller, explains that

“Over the coming months, I will be outlining the composition, operating model and budget for the Advisory Panel, and will look forward to your input and advice on these issues.”

Miller’s pay for a two-year stint running the new board will be $215,000 a year, just a hair less than the $218,000 he made last year as a Newmont director. O’Brien assures Miller in the offer letter: “I anticipate that your services as Chairman would require a time commitment of no more than 275 hours per year.”

That works out to about five hours a week, at just over $781 an hour, on top of Miller’s $50,000-a-year pension. At that rate, we hope Miller’s advice on all matters Nevadan proves to be a bonanza for the company and its shareholders.

Image source: BullionVault via Flickr

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We all hear a lot about health-care inflation. We hear less about inflation in director compensation at health-care companies. Yet it seems to be very real at Hospira (HSP), the specialty pharmaceutical supplier to hospitals, clinics, nursing homes and other institutions.

On June 16, Hospira’s board voted itself a decent pay raise: It increased its annual retainer to $65,000 a year from $50,000 a year, according to an attachment tacked on to the end of the quarterly report it filed this morning. Given that the board met six times last year, according to its most recent proxy filing, that would mean $10,833 a board meeting, up from $8,333.

The company also increased the retainers paid to committee chairmen, in some cases substantially. Chairing the audit committee brings in $25,000 a year, up from $10,000. The compensation-committee chair now brings $20,000 a year, up from $7,500. The two remaining committees — Science, Technology & Quality and Governance & Public Policy — saw their chairmanship retainers rise to $12,500 from $7,500.

The Hospira board did decide to reduce or eliminate two fees: The lead director retainer went to $50,000 from $75,000 (in both cases on top of the regular retainer), and the company eliminated the $1,500 per-meeting fees it had been shelling out (or $1,000 for those attending “other than in person” — presumably meaning by telephone rather than some sort of psychic attendance).

But then the board more than made up for that by adding a new committee-membership retainer, ranging from $17,500 for serving on the audit committee and $10,000 for the compensation committee to $5,000 for the other two. An annual $150,000 award of restricted stock appears to be unchanged. All told, excluding the restricted stock, the total for the company’s nine board members and four committees lands somewhere around $860,000 a year. With restricted stock, it’s closer to $2.2 million.

That said, it’s hard to put an all-in figure on the overall increase, since we only know that meeting attendance last year was 97% — we don’t know how often board attended meetings in person as opposed to telephonically (or astrally, for that matter). The retainer alone, of course, represents a 30% rase, but factoring in six in-person meeting fees under the old system, it falls to closer to 10%.

Even a 10% overall increase would beat the 4.3%, for example, that Hospira expects its overall wages to go up overseas each year on average (as estimated for pension-accounting purposes in the company’s 10-K).

Suffice to say, Hospira’s directors aren’t likely to be hurting any time soon: Under the old pay structure, they made between $218,000 and $240,000. We’ll find out next spring, with the company’s next annual proxy, just how they have fared in the meantime.

Image source: Joe Shlabotnik via Flickr

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It isn’t every day that one of the biggest industrial companies settles foreign bribery charges — and almost acknowledges the allegations in the process. Given that the company didn’t tell investors that the investigation was even underway, that’s not half bad.

Today General Electric (GE) settled allegations by the Securities and Exchange Commission that several subsidiaries had paid the Iraqi government to win contracts under the U.N. Oil for Food Program, before the U.S.-led invasion of that country. The government alleged that two foreign subsidiaries, and two companies that GE later acquired,

“made illegal kickback payments in the form of cash, computer equipment, medical supplies, and services to the Iraqi Health Ministry or the Iraqi Oil Ministry in order to obtain valuable contracts …”

(Also see the SEC complaint (PDF).) GE, in its own press release notes that 14 of the 18 contracts in question went to Amersham plc and Ionics Inc. before GE owned them, while the other four went to GE units in Europe. Then it all but admits the allegations, saying of its own subsidiaries that they

“declined to make cash payments to the Iraqi Ministry of Health, but they acquiesced when their agent offered instead to make in-kind payments of computer equipment, medical supplies, and services to the Iraqi Health Ministry, and then failed to reflect the transactions accurately in their books and records. This conduct did not meet our standards…”

Then the company trots out the usual language about resolving the matter for the good of shareholders, “without admitting or denying the allegations.”

In the end, of course, it’s small potatoes for a company of GE’s size: a $1 million penalty “disgorgement” of $22.4 million of gains from the transactions.  That’s one reason, a GE spokeswoman tells us, that the company never disclosed that government investigations were underway in the first place. Here’s the crux of her emailed statement:

“Based on the amounts in question, the nature of the allegations being made by the SEC Staff, the misconduct having been confined to predecessor companies or foreign subsidiaries, and the absence of any involvement by personnel at the GE level, this matter was not material.”

We we can understand some reluctance to owning up for something acquired companies may have done before the acquisition — though of course the consequences are the same for shareholders — but we’re not quite sure why it matters that the GE subsidiaries involved were overseas: Presumably they’re subject to the same internal corporate oversight and market disclosure rules that U.S. units would be. (Update: Not to suggest that disclosure was necessarily required — just that the subsidiary’s location wouldn’t alter whether it was or not.)

As for the settlement’s size, was GE always certain it would be so small? Moreover, given the nature of bribery scandals — they call into question everything from corporate culture to internal controls — we can’t help but wonder if some kinds of investigations should be disclosed even where the penalties are likely to be minimal in dollar terms.

It turns out the settlement has some other interesting features, as Butler University’s Mike Koehler notes at his FCPA Professor blog. For one thing, it doesn’t include parallel Justice Department charges and settlement — in fact, GE notes that it “has received confirmation” from the agency that it “will take no action relating to these matters.”

Image source: stopnlook via Flickr

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At year’s end, Eli Harari is stepping down from a long stint as chairman and chief executive of SanDisk (SNDK), the company he co-founded and which makes those little cards that store your digital photos. So perhaps it’s no surprise that the company is thanking Harari with more than a pretty speech or two.

Harari will stick around for two years as a consultant to SanDisk — not an uncommon arrangement these days, but he’ll only get $50,000 plus expenses, according to the 8-K the company filed yesterday. That looks like a bargain to our jaded eyes: Not bad for part-time work, of course, but still well below what many companies are paying retired officers.

The rest of his retirement send-off should make up for it. For one thing, he’s getting a $3 million lump sum in return for giving the company “any intellectual property relating to the Registrant’s business that he creates” as a consultant, plus a non-competition and non-solicitation agreement lasting two years beyond his consulting gig.

Moreover, any restricted stock units and options that he holds will continue to vest while he’s a consultant; performance-based awards expire on Dec. 31 this year.

That doesn’t cover all of his equity awards. But never fear: He’ll get those as well. On Dec. 31, 2012 — or sooner, if SanDisk happens to be acquired or taken over — any remaining options and restricted stock units will vest as well. That’s not cheap for SanDisk: The company says it expects to record a charge of $11 million to $13 million in the year ended Jan. 2, 2011, “subject to future market conditions.”

Finally, Harari and his spouse are getting lifetime health benefits from the company — in the form of a lump-sum payment of $476,000 on Dec. 31 this year. SanDisk plans to pay Harari’s taxes on that amount as well, bringing the company’s cost for the benefit to about $950,000.

At the same time, we can’t help but notice that SanDisk doesn’t provide special retirement benefits for top officers — they participate in the 401(k) like everyone else at the company, with the same federal limits on contributions.

All in all, the sendoff should make Harari’s retirement years fairly comfortable, together with the 5 million or so shares he owned as of the last proxy statement. Then again, he did take the company from zero to nearly $10 billion in 22 years. Presumably shareholders think that’s worth more than a handshake.

Image source: Uwe Hermann via Flickr

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