Riggs National Corp. executives would receive more than $7 million in severance payments if PNC Financial Services Group Inc. buys Riggs early next year as anticipated.
Riggs chief executive and Chairman Robert L. Allbritton is slated to received $850,000. Riggs Bank President Lawrence I. Hebert, a longtime Allbritton family lieutenant, would receive $1 million.
The payments would result from the change-in-control agreements that are part of the executives' contracts. As part of Riggs's agreements, if senior officers are fired without cause within two years after a merger they are entitled to twice their most recent annual salary and bonus. Both Riggs and PNC executives have said they do not expect the company's senior management to continue with PNC after the purchase, which is slated for the first quarter of next year. PNC has offered to pay Riggs shareholders more than $700 million in cash and stock.
PNC agreed to buy the bank after it was fined a record $25 million by bank regulators for failing to abide by laws designed to prevent money laundering. Riggs is under a cease-and-desist order that must be lifted for the acquisition to go through.
It is unclear whether federal regulators might try to block severance payments to Riggs executives. The bank and some senior officials are under continuing congressional, regulatory and law enforcement scrutiny for possible wrongdoing.
If the deal goes through, Riggs Bank executive vice president Henry D. Morneault will receive $651,000, and executive vice president Robert C. Roane will receive $621,000, according to merger papers filed by PNC with the Securities and Exchange Commission. Nine other executive officers will receive a total of $4 million.
Change-in-control agreements for corporate executives are common, and many are much richer than that offered by Riggs. Many companies guarantee three times an executive's salary and bonus if the executive is fired after a merger. In addition, the Riggs board's decision not to pay bonuses this year limited the value of executive severance payments in a change of control.
A Riggs spokesman declined to comment.
In addition to their severance, if the buyout is consummated, all of Riggs executives' "unvested" options will become immediately vested, or eligible for exercising. Options are a right to purchase stock at the market price of the stock at the time of the option grant. They typically vest, or become exercisable, over a number of years. If the market value of the stock increases, executives who are granted options make a profit.
All of Allbritton's more than 1 million stock options are vested already. Hebert's unvested options will be worth $560,786, based on the estimated $24.25 per share PNC is offering Riggs shareholders. Morneault's unvested options will be worth $241,790; Roane's options will be worth $229,018. All nine other senior executive unvested options will be worth $1.17 million.
Riggs directors' options, as well, are already vested.