Jeffrey J. Steiner, chairman and chief executive of Fairchild Corp., has agreed to pay $1.5 million and cut his salary by 20 percent to settle a lawsuit alleging he received excessive compensation and improper payments.
Steiner's son, Fairchild President Eric I. Steiner, has agreed to a 15 percent pay cut, and both Steiners agreed that their employment terms will end sooner than they otherwise would have, according to a settlement document.
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The settlement, submitted Thursday for approval of the Delaware Chancery Court, resolves shareholder claims that the McLean company unjustly enriched the Steiners and other Fairchild officials.
The defendants denied any wrongdoing and settled to "eliminate the substantial burden, expense, inconvenience and distraction of continued litigation" and any uncertainty it might have caused, the settlement document said.
Fairchild, which is controlled by the Steiner family, distributes aircraft parts and motorcycle gear such as helmets and boots, some of which is marketed under the Harley-Davidson label. Jeffrey Steiner has long ranked among the Washington area's most highly paid executives, and his compensation has drawn repeated criticism from investors over the years.
The current lawsuit cited interest-free loans, advances on retirement benefits, the presence of other Steiner family members on the payroll, hundreds of thousands of dollars of business-entertainment expenses, payments for apartments in London and Paris, the use of Steiner-affiliated aircraft, and the construction and furnishing of a home office for Jeffrey Steiner.
The lawsuit protested millions of dollars of golden parachute or "change of control" payments that Jeffrey and Eric Steiner were awarded in connection with the sale of a major Fairchild subsidiary in 2002 though both executives remained at Fairchild.
The lawsuit also challenged $5.5 million that the company paid for Jeffrey Steiner's defense and for a bond posted on his behalf when he was investigated and prosecuted in France for allegedly facilitating and benefiting from the misuse of a French petroleum company's funds. In 2003, Steiner was given a suspended sentence and ordered to pay a fine of 500,000 euros, worth about $647,000 at today's exchange rates.
Steiner has told the Fairchild board that French authorities were retaliating for actions he took on behalf of a Fairchild subsidiary, according to the settlement document.
Under the settlement, Steiner agreed to pay $1.5 million to reimburse the company for some legal expenses incurred in France, with the money to come out of one of his retirement plans. The settlement calls for his current term of employment to be halved to a 2 1/2-year "rolling term," while Eric Steiner's current contractual term would be reduced to two years from three.