Flying high with a Walgreen’s exec…

January 4, 2011

With all of the filings that are sent to the Securities and Exchange Commission every day, it’s inevitable that some of the juicy finds elude our detection. Consequently, we really appreciate it when an eagle-eyed reader spots a great find and sends it our way, as one reader did yesterday.

It involves Walgreen Co. (WAG), which happened to file its 10-Q yesterday. However, the nugget is actually from the Nov. 22 proxy that Walgreens filed just before Thanksgiving.

It concerns the 358 clinics that Walgreens owns, but which are operated by Take Care Health Systems, Inc. As Walgreens explained on p. 55 of the proxy, when it acquired Take Care in 2007, a “critical” factor was that Chairman Hal Rosenbluth stay on and attempt to grow the company. And then the filing added:

“Consistent with our discussions with him in connection with the acquisition, Mr. Rosenbluth, now President, Health and Wellness, travels extensively in connection with his duties, frequently on a private aircraft that is owned by him.”

And here’s where it gets even more interesting. In fiscal 2010, two charter companies, Talon Air, Inc. and World Link Jet Charter, operated Rosenbluth’s private jet. Walgreens noted that neither it, nor Rosenbluth, owned a stake in those two companies, and it stated that it paid charter rates for the jet that were at or below the market rate. (However, since no description of the aircraft is given, that’s impossible to confirm or dispute).

Walgreens paid Talon Air roughly $845,000 for Rosenbluth’s business travel for the nine months between Sept. 2009 and May 2010. Then the filing disclosed

“…and an entity controlled by Mr. Rosenbluth, in turn, received approximately $531,000 from Talon Air.”

Regarding World Link Jet Charter, Walgreens paid it about $345,000 to charter Rosenbluth’s jet during the period from June 2010 to the end of fiscal 2010. Rosenbluth’s “entity,” meanwhile, collected approximately $298,000 of that. The filing explained that while it pays the same undisclosed hourly rate to each company, Rosenbluth gets a bigger cut from World Link Jet Charter due to the terms of his agreement with that company.

Paying $1.19 million for an executive to visit some of Take Care’s 358 clinics – located in 18 states, mind you – seems like a lot of money to us, even before you get to the fact that the “entity controlled by” Rosenbluth subsequently received $829,000 of it. Shareholders aren’t given any further explanation about Rosenbluth’s “entity,” so they are left to draw their own conclusions.

Furthermore, Walgreen’s proxy failed to explain why 2010’s number is $1.19 million, whereas in the prior year, the 2009 proxy revealed that:

“…the Company paid Talon Air approximately $230,000 for the charter of Mr. Rosenbluth’s aircraft for his business travel, and Mr. Rosenbluth, in turn, received approximately $126,000 from Talon Air.”

We notice that there’s no mention of Rosenbluth’s “entity” in Walgreen’s 2009 proxy; it simply stated that Rosenbluth received the money.

A second contrast also caught our eye: Although the 2009 proxy is silent on the point, the 2010 proxy states that Walgreen’s “policy is not to pay for any personal use of chartered aircrafts.”

So, in light of the $1.19 million spent for travel on Rosenbluth’s jet – and the $960,000 increase from 2009 to 2010 – we find ourselves wondering: Has Rosenbluth started personally delivering the Band-Aids to each of the 358 Take Care clinics?

Image source: _rockinfree via flickr

Posted in: Disclosures, Legal, M&A, Operations, Perks

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Companies Mentioned: Walgreens Boots Alliance Inc.,
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