An arbitration panel has ruled that Dynegy Inc. must pay $10.4 million in severance pay to former president and COO Steve Bergstrom, who resigned in October 2002. Bergstrom, at one time considered a top candidate to assume the role of CEO, resigned in October 2002 after the company restructured and closed its energy marketing and trading unit (see Daily GPI, Oct. 17, 2002).
Bergstrom was considered an instrumental member of former Chairman Chuck Watson’s energy trading operations, and together the two propelled the growth of Dynegy’s marketing and trading unit. Watson resigned under pressure in May 2002.
After hearing arguments from both sides, the arbitration panel ruled that under Bergstrom’s employment contract, he was entitled to the award. His attorney, Dennis Herlong, said that the ruling “completely vindicated” his client. Dynegy, which had set aside some funds considered “reasonable and appropriate,” disagreed with the ruling, but a spokesman said the company would abide with it.
Dynegy had argued that Bergstrom did not meet the terms of his severance agreement, which he signed after CEO Bruce Williamson asked him to leave, Herlong said. Dynegy was near bankruptcy at the time, and Bergstrom agreed in October 2002 to take a $2.9 million severance payment. The agreement also agreed to pay Bergstrom an additional $10.4 million three months after he resigned if an independent audit of Dynegy’s past financial statements led to a material restatement of earnings that would have affected Bergstrom’s 2001 bonus. The audit resulted in a restatement of Dynegy’s earnings, but Herlong said the arbitrators believed the restatement would not have impacted Bergstrom’s 2001 bonus.
The affirmative ruling for Bergstrom may prove positive for the pending severance claims by former chairman and CEO Watson, who claims he is owed $28.7 million, and ex-CFO Rob Doty, who is seeking $3.4 million from his employment contract. Doty resigned in June 2002 (see Daily GPI, June 25, 2002).
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