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Board Members, Executives and Family Members Can Still Benefit

In a report to the SEC, TeleCommunication Systems said it "entered a lease with Annapolis Partners LLC to explore the opportunity of relocating our Annapolis offices to a planned new real estate development." Under the lease, the TCS board reserved the right to cancel the deal and will consider alternatives, the company reported.

The chairman of TCS's audit committee, Richard A. Kozak, said there is no conflict of interest because it has not made a final commitment to Annapolis Partners. Any agreement would be reviewed by the board, would have to be at competitive rates or better, and would probably be negotiated by the chief financial officer and chief operating officer, Kozak said. Those executives report to Tose.


TeleCommunications Systems chief executive Maurice B. Tose is developing an office park where his company has agreed to lease space. (James M. Thresher -- The Washington Post)

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"I don't think they're negotiating with their boss," Kozak said. "They'll be negotiating a lease with the partnership or preferably whoever's going to be the property manager." Tose did not return calls seeking comment.

NVR, the big homebuilder, reported a deal involving the chief executive's son-in-law. But the wording, like many disclosures in corporate reports, is in obtuse, legalistic language, making it hard to understand. NVR reported that last year it "entered into a forward lot purchase agreement to purchase finished lots for a total purchase price of approximately $6,000,000 with Comstock Blooms Mill II LLC ('Blooms Mill'), an entity controlled 100 percent by an entity in which Mr. Schar's son-in-law is a principal." NVR said it purchased lots from Blooms Mill last year for about $2 million.

In addition, NVR bought $15 million of lots from Elm Street Development Inc., which is controlled by NVR board member William A. Moran, who is not considered an independent director. NVR also "entered into forward lot purchase agreements to purchase finished lots for a total purchase price of approximately $36,000,000 with Elm Street Development," the company said in its proxy report.

In each case, the purchases were at market prices and the agreements to buy were approved "by a majority of the disinterested members" of the board, NVR reported.

NVR's Schar and a company spokesman declined to comment. Moran referred questions to NVR, and Comstock personnel did not return calls.

Some complex transactions have the potential to benefit both sides. Sunrise Senior Living Inc. founders Paul J. Klaassen, the chief executive, and Teresa M. Klaassen, the chief cultural officer, in 1994 transferred ownership of their Fairfax County house to the company, which used it as collateral for a loan. At the time, they owned the company privately and received no payment for the real estate, Sunrise officials said, but they took back a 99-year lease on the house under which they pay the company $1 per month.

The Klaaseens moved out of the house, and for the last 10 years the house has primarily been used for Sunrise business purposes, including meetings and housing out of town employees, spokeswoman Sarah Evers said by e-mail. Sunrise currently pays average monthly expenses of $8,800 for real estate taxes, utilities, lawn service, housekeeping, maintenance, trash and supplies for the house, according to Evers.

Evers said the arrangement saves Sunrise money because it is less expensive than putting employees in hotels. The Klaassens "retain the economic value of the home," according to Evers. The property was assessed in 2004 at $363,070.

As of July, the Klaassens' son had lived in the house for about 18 months, Evers said.

Several companies, including Sensytech, MicroStrategy, NVR, and Friedman, Billings, Ramsey Group Inc., have paid to use their chief executives' airplanes, another transaction that companies say benefits both sides.

Sensytech chief executive S. Kent Rockwell said he charges Sensytech, a government contractor in defense and intelligence technologies, less than market rates under an arrangement approved by the government. Sensytech's payments help him defray the costs of owning his turboprops, and using the planes for business allows him to receive tax benefits in the form of depreciation, he said. Plus, Rockwell is more comfortable in his own planes, which are maintained and piloted by people he trusts, he said.

FBR said it saved more than $1 million last year using co-chief executive Eric Billings's plane, Ginivin said. MicroStrategy reported that it reimbursed chief executive Michael Saylor a total of $109,000 over 16 months, using the equivalent of first-class airline fares for each passenger, up to a limit of $10,000 per flight. NVR reported that it paid market rates, a total of $85,000, to sublease a plane from Schar.


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