New MDC CEO To Get A Fraction Of Nadal's Lucrative Pay

MDC and its new CEO Scott Kauffman have come to terms on a new employee contract. The company confirmed the agreement in a filing with the Securities and Exchange Commission, which continues to investigate the company’s accounting and trading activities.

According to the SEC document, filed last week, Kauffman will receive an annualized salary of $1.1 million retroactive to July 20, when he was named CEO. That will increase to $1.2 million in January 2016. He has also received a grant of 100,000 restricted Class A common shares, bringing his Class A holdings to 171,467 shares. Kauffman also holds options to acquire another 37,500 shares at an exercisable price of $5.97.

The company’s shares closed at $19.64 on the Nasdaq exchange Monday, down 2.6% for the day and down from a 365-day high of $28.40. Most of the decline came in the immediate aftermath of the company’s disclosure in April of the SEC investigation, which formally began last October after a whistleblower alerted the SEC to irregularities in early 2014. A few months later, Nadal sold off nearly 40% of his stock in the company for $81 million — a sale that the company said at the time was part of a portfolio diversification move.

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Kauffman also receives a prerequisite allowance of $6,250 per month through 2015, and he is eligible for a bonus of up to 100% of his base salary. Next year he will also become eligible for additional stock grants. If he is terminated “without cause” or quits “for good reason” between now and the end of the year he’s eligible for severance of one year’s base salary and accrued bonus. Next year that increases to 1.5 times his base salary plus accrued bonus.

Kauffman’s annual compensation is a relative pittance to what Nadal received — at least before the SEC caught up with him. Last year he received total compensation of $ 16.8 million and in 2013 $20.73 million according to previous SEC filings. But he has agreed to give back about $20 million in bogus expenses and incentive bonuses that he didn’t stick around long enough to earn. He departed under the cloud of the SEC probe last month when Kauffman took over as CEO.

Meanwhile, a class action suit related to the SEC inquiry and the company’s stock decline against MDC, Nadal, company CFO David Doft and former Chief Accounting Officer Michael Sabatino is proceeding in U.S. District Court in Manhattan. Motions for the appointments of a lead plaintiff and lead counsel are due September 29. 

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