Mayor issues statement; see A5.
While Bonneville Pacific teetered on the edge of bankruptcy, top executives took millions of dollars out of the coffers in salaries, bonuses and severance pay.While the company scrambled for loans to keep it afloat, those executives had private use of the corporate jet at no cost and demanded signing fees as high as $1 million just for taking on a leadership position with the company.
A report on Bonneville Pacific finances filed with U.S. District Court paints a picture of Bonneville Pacific chiefs fiddling while Rome burned.
Robert N. Pratt served as president of Bonneville Pacific for less than two years: from Jan. 1989 to Nov. 1990.
But during that time, Bonneville Pacific paid Pratt $1 million to sign on as president, $728,363 in salary and $1 million in severance pay.
Pratt received the signing bonus and presidential salary after working for the company for only one year as a director. During that year - 1988 - he made $118,000.
Bonneville Pacific did not pay Pratt his signing fee or severance in cash. Instead, when Pratt became president, Bonneville Pacific bought one of his companies - R.N. Pratt Enterprises - and gave Pratt $1 million worth of Bonneville stock for the company.
"This bonus was structured as a tax-free exchange," Bankruptcy Examiner Alan V. Funk reported to a federal judge.
However, Pratt said that by the time he actually received the Bonneville Pacific shares, their value had declined to $500,000.
The hefty salaries and bonuses paid to executives in the last three years were paid against a backdrop of mounting debt and dropping stock prices.
In addition to Pratt's salary and sign-up fee, Sallah International, an offshore company owned by Bonneville Pacific executives, also made a $63,938 loan to Pratt to cover a personal mortgage.
When Pratt left the company in 1990 - at a time when Bonneville Pacific was desperately seeking an infusion of cash - the company cut another deal with Pratt. It agreed to hire another of Pratt's companies - Moriah Enterprises - as a consultant. Bonneville Pacific paid Pratt $450,000 upfront for the consulting work and $550,000 later on, records show.
Pratt's severance package was part of a company policy to pay its executives a severance sum amounting to 2.9 times their salary when they left, court records show.
Stephen Nadauld's tenure with Bonneville Pacific was as short as Pratt's. But during his two years there, he made $849,152 in salary and severance pay.
His severance pay was $500,000, according to court records. In the year before it went bankrupt, Bonneville Pacific paid out more than $2 million in severance pay to a handful of executives, court records show.
But Nadauld and other executives who received hefty severance packages within a year before Bonneville Pacific's bankruptcy may be required to give the money back, Funk reported to Allen.
Federal law allows a bankruptcy court to review the payment of bonuses, severance pay, perks and expense reimbursements given to company insiders within a year before a company's bankruptcy. If the court deems those payments were not fully earned or in proportion to services rendered, it can require the insiders to return the money.
Nadauld entered an employment agreement with Bonneville Pacific in late 1990 at the request of a Bonneville Pacific investor: Portland General. The agreement spelled out his severance pay, Nadauld said. "I didn't negotiate the contract, I just signed what they gave me."
In the summer of 1991, Portland General asked Nadauld to leave the company as part of a planned corporate consolidation. They offered Nadauld the $500,000 severance package. "I didn't negotiate for that amount. I accepted what they offered me."
Some executives continued to receive a salary after they left the company. Raymond Hixson was chairman and then a director of Bonneville Pacific until October 1990. But he received $103,584 in salary from the company in 1991, according to court records.
From the mid-'80s to 1990, Hixson's annual salary ranged from a high of $349,121 to a low of $161,683. In addition, Hixson made $911,089 the first time he, Deedee Corradini, Wynn Johnson, Robert Wood, Carl Peterson and John T. Dunlop offered their private stock in Bonneville Pacific to the public.
The six made the public offering in 1986. They each made between $700,000 and $911,000 from the sale of their stock.
Hixson also collected $250,000 in salary that year. When Bonneville Pacific made a secondary offering of stock in 1987, Hixson made $1 million from the sale.
When Bonneville Pacific offered an employee stock option plan in 1989, Hixson received $750,000 from the offering. In five years, Hixson gleaned $4 million from Bonneville Pacific, court records show. That amount does not include his $1 million at Sallah. That $1 million includes that $440,100 mortgage Sallah holds on Hixson's home.
Sallah held a total of $1,423,835 in home mortgages for Dunlop, Corradini, Peterson, Hixson, Johnson and Wood.
In addition to the millions of dollars they made, the upper echelon of Bonneville Pacific management were each allowed to use the company's jet for personal use 10 hours a year. Funk estimated the value of that perk at $13,000.
But for some executives, there never seemed to be enough money.
Managing Director John T. Dunlop was forced to resign from the company in March after executives discovered that he embezzled $2.1 million from Bonneville Pacific by creating three shell companies, telling company officials they were legitimate power enterprises and diverting company funds to them.
From 1986, when Dunlop made $700,830 by taking his private stock in Bonneville public, to the day of his resignation, Dunlop made $5.4 million off of Bonneville Pacific.
In addition, an off-shore company called Lio Cam has an account for Dunlop that lists more than $9 million in assets. Additionally, in 1990 Sallah held $1.6 million in assets for him, which included the $249,412 mortgage on his home.
The stock sales, off-shore assets and five years of salaries and bonuses come to $16.3 million.
That wasn't enough. A shareholder proxy report reveals that in 1989, Bonneville Pacific advanced Dunlop $301,000 for personal reasons. When Dunlop left the company three years later, $300,000 of the loan was still outstanding.
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(Additional information)
Statement from Mayor Deedee Corradini
I have now received a copy of Mr. Funk's report. It consists of four thick volumes and refers to thousands of pages of additional exhibits.
Few pages even mention my name.
I have asked Harold G. Christensen, former deputy attorney general of the United States, to give me his independent review of the report. He has agreed to do so, but feels he needs a week to 10 days in view of its length and the exhibits and schedules.
He has asked me to withhold comment during this time, and I will follow that advice - even though you know how difficult it is for me not speak my mind at any time, especially now.
However, I would like to make these points:
First: I also am a victim of the BPC bankruptcy.
Contrary to the representation in the Report that I sold my stock on March 20, 1987, after the company went public, I still own over 200,000 shares, which were once worth over $3 million and now have no value.
Second: I may, in some instances, have misplaced my trust, but I can assure you that I have never defrauded BPC or anyone else.
Third: The people of Salt Lake City are fair, and I am confident that they will withhold judgment until I have had an opportunity to respond to the report. I will do so soon and forthrightly.