Senator Orrin Hatch today released Jack Lew's responses to 147 written questions that the Utah senator asked him after this month's Senate hearing on Lew's nomination to become Treasury secretary. Some of the questions concerned Lew's compensation agreement with Citigroup Inc., which was the subject of my column last week.
Of note is a series of questions that Hatch, the Senate Finance Committee's ranking Republican, asked about Lew's stock-based pay. Under his 2006 compensation agreement, if Lew left Citigroup in 2008 or later to accept a high-level U.S. government position, all of his outstanding equity awards, including restricted stock, would vest immediately. Alternatively, Citigroup had the option of paying Lew the cash equivalent of any shares he forfeited upon leaving.
The terms didn’t mention other kinds of public-service work, such as a midlevel U.S. government job, a position in municipal or state government, or working at a nonprofit organization. If Lew had quit to become a teacher, say, or to run the March of Dimes, he wouldn't have gotten accelerated vesting. Lew was appointed deputy secretary of state in 2009.
Among Hatch's questions: Why didn't Citigroup agree to accelerate vesting if Lew left to work for a charity? Or for a company that wasn't a Citigroup competitor? Or if Lew retired? Did Lew believe Citigroup was pleased to have one of its senior employees accept a full-time high-level U.S. government position? Could there be any potential advantage to Citigroup?
Lew responded: "Given my long history of public service, and interest in potentially returning to it, I sought this provision. I believe Citigroup agreed to include it, because such an agreement was consistent with Citigroup's goal of using deferred compensation, such as the vesting of stock compensation over time, to discourage employees from leaving and joining competitors. I did not have a similar personal history with private sector non-competitors or with charities, and I had no plans to retire at the time. When I left Citigroup, there was general agreement that my departure to become deputy secretary of state satisfied the provision." Additionally, Lew said he has "no knowledge of Citigroup current business dealings."
It's interesting that Lew said he asked for this pay provision, although this doesn't change the substance of the incentives. As I wrote last week, the wording of the pay clause makes it seem as if Citigroup might have agreed to award Lew some sort of a bounty to seek out, and be appointed to, a top U.S. government position. It still looks that way, at least to me.
One part that's odd is Lew's statement about not having "a similar personal history" with charities. Before joining Citigroup in 2006, Lew was an executive and a professor at New York University.
I would consider NYU to be a charity. The Internal Revenue Service does. NYU is a tax-exempt, charitable organization under section 501(c)(3) of the Internal Revenue Code. Donations to NYU are tax-deductible.
Who knows? When Lew said he had no similar history with charities, perhaps he meant he had never worked for a charity that took TARP money. Here's hoping Hatch will seek a clarification.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)
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