The last time Daniel Mudd left a high-profile job (Fannie Mae, back in 2008), he walked away with a separation payment worth more than $9 million. Now, less than four years later, it seems that lightning has struck again, with Mudd’s recent departure from Fortress Investment Group (FIG) garnering him nearly $16 million, albeit most of it in stock.
Mudd took the job as chief executive at Fortress in the summer of 2009. He might still be there today, if the SEC hadn’t sued him last December (along with other former Fannie Mae and Freddie Mac executives), alleging that the top brass hadn’t disclosed to investors the full extent of the exposure that the mortgage giants had to risky subprime mortgages.
For his part, Mudd vowed to fight the SEC’s charges and blamed the matter on “politics.” Yet less than a week later, on December 21, 2011, Mudd arranged to take a leave of absence from Fortress “to ensure that any time or attention I need to focus on matters outside of Fortress will not affect the business or operations of the company.” Just a month later, Mudd resigned, telling Fortress, “I do not want the uncertainty associated with a leave of absence, on my part, to become a distraction for either Fortress or its investors, and thus, I have decided to resign.
While Fortress filed an 8-K and press release on January 25 to announce Mudd’s departure, it didn’t release the terms of his departure, even though judging by Fortress’s 189-page 10-K, everything was settled by then. (See Exhibit 10.14, which outlines the terms of Mudd’s departure and is dated Jan. 24, the day he resigned.) Because Fortress also released its sobering earnings report yesterday, it appears that Mudd’s agreement flew under the radar.
The Separation Agreement disclosed that even though Mudd resigned January 24, he would remain on Fortress’ payroll as an employee until February 23. During that time, he’d collect his paychecks (based on a salary of $200,000 per year) and be obligated to “discharge any duties the Company requests of you in a diligent manner and otherwise act as a loyal Company employee.” Yet simultaneously, Fortress told Mudd that he wouldn’t have access to its “email and systems,” which left us wondering how he was supposed to “discharge his duties” in a “diligent manner.”
Like a lot of investment companies, it’s not the salary, but instead the equity awards and stock options (in various flavors) that really boost comp. The biggest windfall Mudd is getting relates to two awards of “Sign-On RSUs” – the first, a grant of 3,621,789 RSUs, and the second, a grant of 3,621,788 RSUs that he got when he joined Fortress. The filing states:
“As of the date of this Agreement, you previously vested in 1,810,895 Shares…. As further consideration for entering into this Agreement, the Company hereby agrees to waive the continuing employment requirements associated with vesting of the unvested portion of the Sign-On RSUs, subject to (x) your ongoing compliance with this Agreement and (y) the Award Agreements and the Plan, such that you shall continue to vest into the next two unvested tranches of each RSU award (i.e., 1,810,894 Shares collectively, or the —Remaining Shares) on the regularly scheduled vesting dates set forth in the Award Agreements,….”
At this morning’s current stock price of $3.87 per share, that puts the approximate value of those RSUs at approximately $14 million, setting aside the fact that Mudd’s RSUs don’t vest all at once.
Fortress also agreed to pay Mudd $1.25 million in a cash, lump sum payment for his 2011 bonus.
And still another part of the agreement states that Mudd got an equity award of 545,455 RSUs for the “2010 Bonus Grant.” He’s actually forfeiting 360,000 of those RSUs, but that still leaves the remaining 185,455 RSUs that have vested. Again, at today’s stock price, that stake is worth more than $721,000.
Finally, Fortress agreed to waive the post-termination non-competition restrictions that Mudd would have been bound by, meaning he can start competing with Fortress pretty much any time he wants; and it also agreed not to charge him any “management, incentive, and other applicable fees on any investments” managed by Fortress through February 28, 2013.
Mudd hasn’t had much luck with his career lately, though it certainly hasn’t been bad for his bank account. Maybe the third time is the charm, and his next job will work out for the better. Then again, maybe another flop would be more rewarding still.
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