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CEO Harry You has replaced a number of top executives at BearingPoint Inc. since taking the helm more than a year ago. When You decided to clean house in the legal department, however, things got complicated. David Black, who had been general counsel since 2000, was terminated in January by BearingPoint, the former KPMG Consulting Inc. (In February the McLean, Va.-based company announced that it had hired Laurent Lutz as general counsel.) Before Black cleared out his office, however, he collected a $2.56 million payment from BearingPoint. Now the company is questioning whether he should have gotten the money. According to BearingPoint’s latest 10-K, filed on Jan. 31, it “is investigating the circumstances surrounding the payment . . . [and is] disputing whether Mr. Black was entitled to receive all or any of such amount.” BearingPoint declined to comment for this article, and Black could not be reached, so details of the dispute are unclear. But on Feb. 2, You told The Washington Post that Black had been fired for violating BearingPoint’s code of conduct. He didn’t specify how Black breached the code, which is posted on the company’s Web site and covers everything from media relations to hiring relatives. Although BearingPoint hasn’t publicly explained the reason for Black’s payout, it could well have been triggered by the special termination agreement that Black and other officers first signed with the company in 2001. Under this agreement, an officer would receive three years’ salary plus bonus if he were terminated for any reason except cause. According to BearingPoint’s latest annual report, Black’s salary was roughly $600,000 in 2004. However, Black’s payout could also have resulted from a January 2005 amendment to the managing director agreement that covered the general counsel and seven other officers. The provision said that if, in the next 18 months, BearingPoint replaced Roderick McGeary (then acting CEO) and fired any of the officers covered by the agreement, that officer would receive “a lump sum cash amount equal to the sum of [his] current annual salary . . . and target incentive compensation.” However, the provision adds that none of these payments would be made if an officer received severance compensation under his special termination agreement. Though BearingPoint’s beef with Black hasn’t gone to court, another dispute between the company and a former executive has. Former COO Michael Donahue, who sued BearingPoint after he was terminated in February 2005, claims that the company violated his termination agreement. Unlike Black, Donahue didn’t walk away with a multimillion-dollar payout. According to BearingPoint’s most recent 10-K, Donahue “received [a] lump sum cash severance payment of $350,000,” plus “$750,000 . . . in lieu of six months’ salary he would have received as severance.” In addition to Black and Donahue, You has also replaced at least 13 other top executives, including BearingPoint’s former chief accounting officer, chief administrative officer, corporate controller and corporate tax director. You took over as BearingPoint’s CEO in March 2005, after stints as CFO at Oracle Corp. and Accenture Ltd. The turmoil at BearingPoint first boiled up five months before You’s arrival. On Nov. 10, 2004, CEO Randolph Blazer resigned after four years in the post. Twelve days later, BearingPoint announced a $93 million accounting error and said CFO Robert Falcone would retire at the end of the month. The disclosure prompted an internal review, several shareholder lawsuits and a Securities and Exchange Commission investigation. (An SEC spokesperson declined to comment on the status of the agency’s probe.) In January BearingPoint filed a 2,000-page annual report with the SEC. The company detailed numerous accounting problems and almost $98 million in adjustments to its previously announced results for July 2001 to September 2004.
Catherine Aman and Joshua Lipton are editors at Corporate Counsel magazine, an ALM publication.

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