The severance came as losses were piling up and the stock price was in a free fall.
MoneyGram International Inc., the troubled St. Louis Park money-transfer company that has seen its shares plunge 96 percent in the past two years, paid a $13.1 million severance package to former chief executive Philip Milne.
At the same time, the company has eliminated a slew of longstanding perks, including use of a company aircraft and reimbursement of country club dues, for its current executives.
Milne, who stepped down last June after MoneyGram posted record losses from bad investments, received $2.05 million in salary, $7.45 million in cash bonuses, and $3.44 million in retirement benefits, among other payments. MoneyGram also has agreed to compensate Milne for any lawsuits arising out of his performance at MoneyGram, according to a filing Monday with the Securities and Exchange Commission (SEC).
Once a favorite among Wall Street analysts, MoneyGram last year lost more than $1.6 billion from investments in securities backed by risky mortgages. The losses led the company to sell a majority stake to Thomas H. Lee Partners and Goldman Sachs in exchange for a cash infusion. MoneyGram lost 89 percent of its market value under Milne's four-year tenure as CEO; its stock closed Tuesday at $1.18 a share and is in danger of being delisted.
In January, MoneyGram announced that Anthony Ryan, a longtime MoneyGram executive, would succeed Milne as CEO.
Robert Dodd, an equity analyst who follows MoneyGram for Morgan Keegan & Co., said he found Milne's severance package "overly generous" in light of the company's stock plunge. However, he said any criticism should be directed at MoneyGram's board of directors, which agreed to terms of the package well after the investment losses began mounting and some began to question whether MoneyGram would be able to continue as a goin concern.
"It raises the specter of a board of directors not taking its obligation as seriously as it should," Dodd said. "Certainly, it's the way things have been done at a lot of companies. But it's not the way things should be."
MoneyGram spokeswoman Lynda Michielutti said the executive team was traveling to Europe on Tuesday and could not be reached for interviews. However, in an e-mailed statement, she said, "Phil Milne was paid a severance in accordance with his employment contract with MoneyGram. He did not receive any compensation or benefits other than those he was already entitled to by the existing severance plan."
MoneyGram's board and senior management team has changed significantly since the company was acquired. Last March, seven MoneyGram board members resigned, and four Thomas H. Lee executives have since been elected board members. Pamela Patsley, former executive vice president of First Data Corp., a payments processing company, was also elected to the board as chairwoman.
After posting large losses late in 2007 and early 2008, MoneyGram has gradually returned to profitability, reporting a fourth-quarter profit of $122.9 million. Its money transfer business posted healthy transaction growth of 8 percent in the quarter.
However, the company just lost one of its hometown partners, U.S. Bancorp of Minneapolis, which last week said it had reached a deal with Western Union to provide money transfer services at its 2,791 branches. The agreement replaced MoneyGram's long-term contract with U.S. Bancorp.
"That showed that either Western Union is getting very aggressive on pricing or U.S. Bank was very unhappy" with MoneyGram, said Dodd. "Either way, the implication is not good for MoneyGram."
Chris Serres • 612-673-4308