E*Trade figure does not compute…

January 4, 2008

images1.jpegEvery now and then, I stumble upon an old episode of Lost in Space. What’s this have to do with SEC filings? Because the line “does not compute” came to mind after taking a closer look at the 8-K that E*Trade (ETFC) filed late Wednesday. The filing was a follow-up to the press release E*Trade put out about the resignation of former CEO Mitchell Caplan. Caplan stepped down as CEO at the end of November after Citadel Investment Group pumped $2.25 billion into the company after it got into trouble with sub-prime mortgages. On Dec. 31, Caplan stepped down from the board. Wednesday’s events were widely reported, and mostly focused on the $10.9 million that Caplan was receiving in severance.

But here’s where it gets interesting. As both the release and the multiple press reports noted, the $10.9 million was based on “two times the sum of his base salary and bonus during 2006”. So I decided to go back to the proxy that E*Trade filed back in late April to do a bit of fact-checking. Turns out that two times Caplan’s 2006 salary and bonus is only $1.5 million (his salary was $750K and the bonus was listed as zero). Even adding on the options and stock awards that Caplan received ($1.7 million and $2.6 million respectively) and doubling that figure gets you closer: $10.17 million and throwing in another $300K for the doubling of “all other comp” gets you closer still. But that’s not the same as “two times salary and bonus during 2006”.

As footnoted regulars know, when a company stretches the truth about something that’s easily checkable (it took me less than 5 minutes to find those numbers in the proxy), it kind of makes you wonder what other numbers they’re monkeying around with — numbers that are often a lot more cumbersome to fact-check.

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