Best Buy investigation of ex-CEO widens

  • Article by: THOMAS LEE , Star Tribune
  • Updated: May 10, 2012 - 12:07 PM

Investigators are working to uncover whether leaders failed to report allegations about Brian Dunn to the board of directors.

Best Buy Co. Inc.'s investigation of alleged misbehavior by its former CEO has expanded in an effort to determine whether some top leaders within the company improperly withheld information from the board of directors, the Star Tribune has learned.

Brian Dunn abruptly resigned as chief executive last month after the company informed him that it was investigating allegations that he used company resources to carry out an improper relationship with a female employee.

The company's investigators already have spoken to the 29-year-old woman, and she has retained a lawyer, according to a source close to the company.

"If leadership was found to suppress legitimate grounds for an investigation, then that would warrant discipline," said Jacob Frenkel, who leads the white-collar crime practice at Shulman Rogers, a law firm in Maryland.

Best Buy's investigative team -- led by former U.S. Attorney Tom Strickland and William McLucas, a former director of enforcement for the Securities and Exchange Commission -- also are looking into whether Dunn used company-leased aircraft in connection with the alleged improper relationship, according to a source with knowledge of the investigation.

Best Buy leased airplanes and chartered aircraft services from Minneapolis-based Best Jets International over the past five years for $3.56 million, according to SEC documents. Best Jets is owned by Richard Schulze, Best Buy's chairman and founder.

Company officials declined to comment about the Star Tribune's report.

"As we have said, the investigation is ongoing," said Greg Hitt of H&K Strategies, a spokesman for the company. "The board's findings will be made public and appropriate action will be taken if warranted."

When Best Buy announced Dunn's departure in April, company officials said Dunn left by "mutual agreement." Best Buy later issued a statement that the board's audit committee was investigating Dunn's conduct and vowed to take "appropriate action" if warranted. Analysts criticized the company for not being more forthcoming.

Best Buy officials quickly pledged to disclose the results of the Dunn inquiry in a "matter of weeks." The company released its annual proxy statement on Wednesday, but the document shed little light on the probe.

Best Buy will hold its annual shareholder meeting on June 21.

If the allegations against Dunn are true, Best Buy could seek restitution from Dunn, perhaps by demanding the former CEO reimburse the company for the use of corporate jets, Frenkel said.

Dunn, who is married with three children, also stands to lose quite a bit of his compensation package. The company didn't pay Dunn his annual performance bonus, "pending the results of an ongoing independent investigation by the Audit Committee of the Board into Mr. Dunn's personal conduct," the proxy statement said.

Based on the performance money Best Buy paid to other top executives, Dunn would likely earn anywhere between $1.05 million and $1.13 million. Also at risk is Dunn's severance package. Upon his resignation, Dunn stood to receive $3.13 million in cash and stock awards, according to the proxy statement.

Frenkel said Dunn and the board are likely negotiating what, if any, severance the former CEO will receive.

"Unpaid compensation is often a negotiating point in the separation of an executive from the company," Frenkel said, especially if it relates to personal conduct vs. business performance.

Thomas Lee • 612-673-4113

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