Loans to Top Executives Are Common among Colorado Companies, Documents Show.

May 13-As the U.S. economy struggles to revive, companies that fight to borrow money to stay afloat are still lending millions to their top executives - often with no expectation of repayment.

Some say the personal loans are a sign of rampant executive excess and call for an end to the practice.

At least 22 public companies in Colorado loaned $94.8 million to 56 executives since 1997, a Denver Post survey of documents from the Securities and Exchange Commission found.

Companies say they provide the loans to top officials for a variety of reasons, including buying a house, covering relocation expenses, helping with taxes or encouraging stock ownership.

But in the wake of the Enron world of cooked books and massive layoffs despite huge stock-option profits for executives, some shareholder advocates want personal loans by corporations to stop.

"It's an outrageous abuse of power," said Marjorie Kelly, publisher of the Minneapolis magazine Business Ethics. "It amounts to another way executives treat the corporate treasury as their own personal checkbook."

The issue has recently captured national headlines as companies forgive these loans or lend millions while stock prices and profits wilt:

- WorldCom Inc. chief executive officer Bernard Ebbers resigned this month in the face of a plummeting stock price, a mountain of debt and investigations into $366 million in personal loans he received from the company.

- Kmart Corp. said recently it's investigating whether $30 million in loans to 63 senior managers should be forgiven, including a $5 million loan to former chief executive officer Chuck Conaway, who led the company before it filed for bankruptcy.

- Cable company Adelphia Communications faces a rash of shareholder lawsuits and an SEC investigation after revealing $2.3 billion in loans for partnerships owned by the family of chairman John Rigas.

- Mattel Inc. faced shareholder criticism after forgiving a $3 million loan to former CEO Jill Barad and sending her away with a $50 million severance package. The toymaker's stock declined more than 50 percent, from $28 a share to about $11 in the three years she ran the company.

Just last month, Qwest Communications loaned $4 million to chief operating officer Afshin Mohebbi to help him pay a premium on a life-insurance policy because the company doesn't have an executive pension plan.

Qwest officials did not disclose the size of the policy.

The company said the $4 million debt bears a 5.5 percent interest rate compounded semiannually. The note comes due 90 days after Mohebbi's death or 45 days following his termination.

The company already forgave a $600,000 loan to Mohebbi, explaining that the cash was included in his compensation package and was equivalent to a tax-free signing bonus.

Mohebbi makes a salary of $850,000 and a maximum annual bonus of $1.7 million.

Meanwhile, Qwest's own ability to borrow has been virtually shut off while it struggles with financial losses, an all-time low stock price and a federal probe into its accounting practices.

Qwest's dividend is at 5 cents annually, compared with $2.12 a year - the last dividend US West paid before it merged with Qwest.

A number of other local companies bankrolled their executives, including Apartment Management Investment Co., which doled out $30 million to 10 of its officers.

TeleTech Holdings Inc. forgave a $900,000 loan to former CEO Scott Thompson, who left after just a year in the job.

TeleTech spokesman Chris Arnold said the loan was set up to be akin to a bonus payable over a year's time.

It was needed to recruit executives during the boom market when people were hard to find and keep, he said.

"It was the cost of doing business," Arnold said.

Thompson was paid $1.2 million while at TeleTech, during which time the company's stock price fell to $10 a share from $40.

The company "banks" typically bear a low interest rate or, in some cases, no interest at all. Some companies, in disclosures to shareholders, said executives were expected to repay the loans with immediate gains made on the sale of stock options.

Some executives did just that, but some CEOs, such as Vail Resorts' Adam Aron, walk into the deal knowing they would undoubtedly be let off the hook.

The ski resort owner next year will forgive a $645,750 loan to Aron to buy a lot in Bachelor Gulch, an upscale mountain community in Beaver Creek, SEC documents show.

Aron, whose annual salary is $675,000, also will get a one-time cash bonus from the company to cover the costs to buy his $1.2 million Vail Valley home, which is owned by the company but provided to him for free.

The company also will give Aron another $600,000 bonus to cover the purchase of a lot on the Red Sky Ranch golf community, where Vail pays for Aron's golf club membership.

The company promised five other executives $3.3 million in loans to buy homes as well.

Most executive compensation experts say loans to executives have been used for years to help executives buy stock or relocate.

"Encouraging stock ownership is legitimate. Executives should feel the same pain and gain of shareholders," said Mike Bergmann, senior executive vice president at AMG Guaranty Trust, which provides financial planning services to executives.

But when things go bad and the company crumbles or the stock plummets, shareholders begin to question whether the loans were made in good judgment, said Frank Glassner , CEO of Compensation Design Group, a New York firm specializing in executive pay.

Companies forgive the loans because they want to avoid complete financial ruin of the executives despite their big salaries, said Bergmann.

"The thing is supposed to be an incentive package," Bergmann said. "`But how much incentive is there when the stock crashes and they owe millions?"

Companies will probably continue to make such loans, said Drew Hambly, senior research analyst with Investor Responsibility Research Center, which tracks corporate governance issues.

Shareholder suggestions for changing company policy, also called proxies, rarely pass shareholder votes.

In April, the SEC called for more disclosure to shareholders of executive loans by companies and will likely be handling any regulatory accounting reforms in the wake of Enron.

But it's unclear how far the SEC will go. SEC chairman Harvey Pitt spent part of his career as a lawyer representing major accounting firms that appeared before the SEC.

He also advocated for a hands-off regulatory approach.

Nonetheless, some groups hope to make enough noise with shareholders to pressure companies to make changes.

"They should ban loans to executives altogether," said Betsy Leondar-Wright, a spokeswoman for United for a Fair Economy, a nonprofit group that advocates against economic injustice.

The group cited executive loans in a recent report as one of the top 10 corporate practices that led to Enron's downfall.

"We see loans as part of excessively cushy deals for corporate executives," she said. "The boards are supposed to be the watchdogs over the companies. But they're giving special favors and cushy treatment to their friends - corporate executives."

THE COMPANY BANK

Loans to executives by corporations is widespread among Colorado public companies, a survey of Securities and Exchange Commission documents shows. Here's a look at which public companies doled out loans, who received the money and how much was loaned since 1997:

Ciber (Denver information technology consulting firm)

Joseph Mancuso, chief operating officer, $300,000.

Mac Slingerlend, chief executive officer, $1.5 million line of credit.

StorageTek (Louisville computer storage firm)

Alain Andreoli, corporate vice president, $300,000.

Michael McLay, vice president of U.S. and Canada division, $550,000.

On Command Corp. (Denver provider of in-room hotel movies)

David Simpson, senior vice president of engineering, $211,058.

Liberty Media Corp. (Douglas County media company)

Jerome Kern, director and former COO of Liberty subsidiary On Command, $25 million.

Ribozyme Pharmaceuticals (Boulder biotech firm)

Marvin Taneer, accountant, $200,000.

Robin Howard, CEO, $400,000.

Nassim Usman, chief scientist, $130,000.

Lawrence Blatt, vice president of research, $75,000.

Wayne Cowens, vice president of media affairs, $240,000.

Archstone-Smith Trust (Denver real estate investment trust)

Richard Banks, president of Western division, $807,500.

Dana Hamilton, executive vice president of national operations, $237,490.

Charles Mueller, chief financial officer, $285,000.

Scot Sellers, CEO, $1.8 million.

Apartment Management and Investment Co. (Denver owner and manager of apartment complexes)

Terry Considine, chairman and CEO, $15.7 million.

Peter Kompaniez, president and vice chairman, $1.94 million.

Harry Alcock, executive vice president and chief investment officer, $755,780.

Joel Bonder, executive vice president of legal and regulatory affairs, $1.3 million.

Miles Cortez, executive vice president and general counsel, $3 million.

Joseph DeTuno, executive vice president of redevelopment, $250,000.

Patrick Foye, executive vice president, $2.58 million.

Paul McAuliffe, chief financial officer, $2 million.

Ron Monson, executive vice president of property operations, $886,730.

Lance Graber, executive vice president of acquisitions, $1.9 million.

Chateau Communities (Denver equity real estate investment trust)

Gary McDaniel, CEO, $1.6 million.

C.G. `Jeff' Kellogg, president, $2.7 million.

Rees David Jr., COO, $1.8 million.

Tamara Fischer, CFO, $1.78 million.

ProLogis Trust (Aurora manager of industrial distribution centers)

K. Dane Brooksher, chairman and CEO, $2.6 million.

Irving F. Lyons III, vice chairman and chief information officer, $1.86 million.

Walter C. Rakowich, CFO, $931,300.

John W. Sieple, North American division president, $931,300.

Robert J. Watson, European division president, $1.2 million.

Champps Entertainment (Arapahoe County owner/operator of Champps Americana restaurants)

William Baumhauer, CEO, $550,000.

Vail Resorts Inc. (Vail-based ski operator)

Andrew P. Daly, president of resort operations, $300,000.

Adam Aron, chairman and CEO, $645,750.

Heska Corp. (Fort Collins maker of animal pharmaceuticals)

Robert Grieve, CEO, $100,000.

Fischer Imaging Inc. (Denver maker of medical imaging equipment)

Louis Rivelli, president, $252,000.

Colorado MEDtech (Boulder medical supply and outsourcing firm)

Stephen Onody, chairman and president, $250,000.

Charles Klasson Jr., president of CIVCO Medical Instruments, $150,000.

Charles Philipp Jr., vice president of sales, $74,999.

Frank Maguire, former COO, $149,998.

Greg Gould, CFO, $150,000.

Mail-Well Inc. (Arapahoe County envelope maker)

Michael Salbaing, CEO, $100,000.

TeleTech Holdings Inc. (Denver manager of call center operations)

Scott Thompson, former chief executive, $900,000.

Richard Erickson, president of North American division, $850,000.

RainDance Communications (Boulder Web conference firm)

Paul Berberian, chairman, $100,000.

Roguewave Software (Boulder software developer)

David Rice, vice president of business development, $165,000.

UnitedGlobalCom Inc. (Denver international cable company)

Mark Schneider, chief executive, $2.8 million.

New Frontier Media (Boulder adult entertainment firm)

Tom Nyiri, senior vice president of technology, $1.2 million.

MDC Holdings (Denver homebuilding holding company)

Larry Mizel, chairman and CEO, $1.9 million.

David Mandarich, president, $1.33 million.

Paris Reece III, CFO, $259,484.

Michael Touff, senior vice president and general counsel, $270,000.

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