(CN) — The Federal Circuit sided with the government for shredding an executive’s golden parachute when it took over Freddie Mac as part of the 2008 bailout.
Anthony “Buddy” Piszel was denied his $7 million termination package two weeks after the government placed Freddie Mac into conservatorship in 2008 to prevent the mortgage giant’s collapse.
In a letter to Freddie Mac’s CEO, the Federal Housing Finance Agency recommending that Freddie Mac fire Piszel as its chief financial officer immediately without cause.
The letter stipulated that Piszel should not be paid for another day of work, any annual bonus, stock vesting grants, or any termination payment.
Piszel had been hired in 2006 at an annual salary of $650,000, plus performance-based incentive compensation of $3 million a year in stock.
His salary allowed him to maintain a $5 million six bedroom-six bathroom vacation home in Maryland on 4.5 gated waterfront acres.
If he was fired without cause, Piszel’s contract provided that he would be paid a cash payment of double his annual salary and that certain stock units would continue to vest. The total value of this “golden parachute” was approximately $7 million.
To date, no charges have been filed against Piszel — even though the Securities and Exchange Commission fired off a so-called Wells notice in 2011, informing Piszel that it might soon file civil charges against him stemming from his tenure at Freddie Mac.
He filed suit six years after losing his job at Freddie Mac, claiming that the FHFA’s instructions to Freddie Mac about his benefits package constituted an illegal taking in violation of the Fifth Amendment.
A claims court judge dismissed the suit, however, and the Federal Circuit affirmed Thursday.
“There can be no doubt that the golden parachute provision of HERA [Housing and Economic Recovery Act] did not take away Mr. Piszel’s ability to seek compensation for breach of his employment contract in a traditional breach of contract suit under state contract law,” Judge Timothy Dyk said, writing for the three-judge panel.
Freddie Mac moreover could have requested permission from the government conservator to make the promised severance payment to Piszel, the panel found, given that a government investigation uncovered no wrongdoing on the part of Piszel or any other Freddie Mac officer for the lender’s financial distress.
“It appears possible that the right to enforce the terms of the contract may have been left substantially intact after the government’s actions,” Dyk said.
Piszel is now barred by the statute of limitations from bringing a breach of contract claim against Freddie Mac.
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