Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Miami developer Armando Codina should be compelled to turn over documents detailing his role in the recent American Airlines executive pay scandal, argue lawyers who are suing for the return of huge and controversial payments made to top FPL Group executives. The documents are relevant to the FPL case “because they bear on whether Codina ignored key executive pay issues” while sitting on the compensation committee of AMR Corp., the parent of American Airlines. They are the same issues he may have “turned a blind eye to” while sitting on the FPL compensation committee when it approved $62 million in special “change-of-control” payouts to eight FPL executives in late 2000, according to a motion filed in shareholder litigation in Miami federal court last month. “It is FPL’s position that this request is irrelevant and outside of the scope of the complaint,” Codina said. Codina, who sits on the boards of BellSouth, General Motors and AMR, resigned from the FPL board earlier this year. FPL said that Codina resigned from its board because of conflicts with his numerous other board commitments. FPL Group, parent of Miami-based Florida Power & Light Co., did not respond to e-mailed questions about the demand for the AMR documents, which if produced could give a revealing inside picture of the high-profile executive pay scandal that erupted at the Fort Worth-based company this spring. American Airlines did not respond to e-mailed questions about the matter before deadline. Florida’s largest utility has been embroiled in its own pay scandal ever since executives refused to return the change-of-control payments for a failed merger with Entergy Corp., a Louisiana utility. The $62 million was paid to FPL executives based on a December 2000 shareholder vote approving the merger, which later fell apart. FPL executives kept the money despite the fact that a change-of-control never occurred, prompting irate shareholders to sue for the return of the payments. Three shareholder lawsuits filed after the deal was called off in April 2001 were consolidated. All three are derivative actions in which the shareholders are suing for the benefit of the corporation, alleging injury to FPL as a result of the executives collecting huge change-of-control payouts for a change of control that never occurred. Boca Raton lawyer Kenneth J. Vianale, who filed the motion demanding the AMR documents, argues that Codina’s involvement in approving the airline company’s bonuses was an example of his overly close relationship with the carrier’s management, the same approach he exhibited with FPL management by approving change-of-control payouts for a failed merger. “Codina granted compensation that was controversial at American Airlines, in the same manner he did at FPL,” said Vianale, who represents FPL shareholder William Klein of Philadelphia. While saying he respects FPL’s position that the AMR documents might be irrelevant to the FPL executive payout case, Codina said he personally would “welcome a review of my role on any matter that transpired” at AMR, if that review were held in the “appropriate forum.” “I’m quite proud of the role that I played,” Codina said. Nell Minow, editor of corporate governance watchdog group The Corporate Library, said Codina played a central role in top management changes at AMR in the wake of the pay scandal. The generous executive pay package was revealed in an April regulatory filing just one day after pilots, flight attendants and machinists approved about $1.5 billion in pay concessions to keep the airline afloat. The revelation created a firestorm of protest from unions. “I’ve been told that Armando Codina played a leading role in removing [AMR chairman and chief executive] Donald Carty,” said Minow, adding that she applauded that outcome at the time. The Corporate Library has been highly critical of the FPL board and its role in approving the change-of-control payouts, which included a $22.7 million payment to former FPL chief James Broadhead, who retired in late 2001, and $6.7 million to current chief executive Lew Hay. The governance group gave FPL a corporate governance rating of “D” this March, basing its near-failing mark mostly on the board’s failure to seek the return of the payouts from executives. Two weeks ago, FPL said its board had formed a special committee to look into allegations made by Vianale in a May 2 demand letter that the Entergy deal had been a plan by officers and directors to enrich themselves at the expense of the company. The committee is also looking into allegations that Broadhead’s acceptance of his change-of-control payout amounted to insider self-dealing, according to FPL. FPL lawyers, led by Bruce Coolidge, a partner at Washington, D.C., powerhouse Wilmer Cutler & Pickering, moved to dismiss the shareholder suits after a special evaluation committee of the FPL board last September rejected the shareholder demands for the return of the payouts. Vianale, of Vianale & Vianale in Boca Raton, has argued that the evaluation committee was a sham, the independence of its members suspect because they were mostly the same board members who sat on the compensation committee, which approved the payouts. In addition to sitting on the compensation committee, Codina also was on the evaluation committee. Codina declined to discuss for the record the reason why he rejected the shareholder demands, but the committee said in its report that it had to accept Wilmer Cutler’s legal opinion that the payouts had been made as a result of a valid contract. FPL lawyers argue that, according to the provisions of FPL’s long-term compensation plan, all that was necessary to trigger the change-of-control payouts was a shareholder vote approving a merger, a provision known as a “single trigger” change of control. Vianale has argued that the merger had to be consummated before any payouts were made. Companies usually have “double trigger” change-of-control provisions, requiring that the merger actually occur before any change-of-control payouts are disbursed. After the shareholder suits were filed, FPL’s board changed its long-term compensation plan to necessitate a double trigger as a condition for any payouts. In February arguments on the motion to dismiss, Broadhead’s attorney, Michael Nachwalter of Miami’s Kenny Nachwalter Seymour Arnold Critchlow & Spector, argued that the independence of the evaluation committee members was beyond reproach. He pointed to Codina’s numerous seats on corporate boards as evidence of that independence, specifically mentioning the Miami developer’s membership on the AMR board. Vianale claims the documents he is seeking from Codina are relevant to a defense of the motion to dismiss because of Nachwalter’s assertion that Codina’s membership on the AMR board was evidence of his independence. Vianale also claims the documents are relevant to plaintiff’s arguments alleging cronyism on the FPL board. Neither Coolidge nor Nachwalter returned phone calls seeking comment.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.