United Airlines CEO Jeff Smisek resigned on Tuesday amid a federal corruption investigation.
At the same time, United informed the Securities and Exchange Commission that Smisek would be receiving $US4.9 million in cash and over 60,000 shares of stock in his severance package.
However, there’s catch.
The separation agreement also includes a “clawback” clause which — if triggered — would require Smisek to return much of his severance benefits.
According United Airlines’ SEC filing, the clause would take effect if Smisek is found to have done anything illegal while running the airline.
It’s currently unclear whether Smisek will be able to walk away from United with a clean slate.
The New York Times reported that he stepped down as a result of a federal probe into efforts by the airline to “influence senior officials at the Port Authority of New York and New Jersey.”
According to Business Insider politics correspondent Hunter Walker, the federal investigation is focused on United Airlines’ relationship with David Samson, the former chairman of the Port Authority of New York and New Jersey.
The Port Authority operates Newark Liberty International Airport — United’s largest hub on the east coast.
Investigators are trying to determine if United lavished Samson and other high-ranking officials with expensive dinners and even a special plane route to make is easier for Samson to fly to his South Carolina vacation home. United was making a bid to lower fees at Newark Airport, Walker reported.
Samson stepped down from his role at the Port Authority in 2014.
Before joining United, Smisek was the CEO of Continental Airlines when it merged with United in 2010. Smisek is credited with engineering the $US3-billion merger that created one of the world’s largest airlines. Although some have criticised Smisek for United’s slow return to profitability, investors seem to have regained confidence in his leadership after initially concluding that the merger failed to live up to expectations.
In addition to relinquishing his CEO role, Smisek, 61, will step down from his jobs as chairman, president, and as a director, all effective immediately, according to the company.
In a filing with the Securities and Exchange Commission, United Airlines outlined the terms of Smisek’s departure from the company.
Here’s what Smisek will get:
- A lump sum cash separation payment of $US4.875 million.
- 60,746 shares of United Airlines (UAL) common stock.
- An annual performance bonus pro-rated to the date of separation.
- Long-term performance bonus.
- The title to his current company car.
- Flight benefits for life.
- Free parking for life at predesignated parking locations.
- Company health benefits until he is eligible for medicare.
- United will help Smisek find a new job through outplacement services.
Here’s what United will no longer pay for:
- Gym membership.
- Accounting services.
- Legal services.
- Disability insurance.
According to the clawback clause, Smisek must repay or return the $US4.875 million separation payment, his pro-rated annual bonus, 60,746 shares of United stock, and outplacement services if he is found to have:
- Is convicted of or pleads guilty or no contest to any felony or…
- Is convicted of or pleads guilty or no contest to any crime of “moral turpitude,” or…
- Failed to cooperate with the company on legal proceeding or investigations stemming from events while Smisek was employed by United.
If the clawback clause is triggered, Smisek will have no more than 10 days after the receipt of a written request to repay or return the above benefits.
In addition, Smisek also signed a 2-year non compete, as well as a confidentiality agreement.
According to Fortune, Smisek made $US11.3 million in total compensation in 2014.
United Airlines said in a press release that it is conducting its own internal investigation of the matter, and that the company is continuing to cooperate with the government on the ongoing federal investigation.