United Way must pay its criminally convicted former president, William Aramony, his full $4.4 million pension because his deferred compensation plan did not include a clause addressing criminal behavior, a federal judge in New York ruled Tuesday.
U.S. District Judge Shira A. Scheindlin made her decision after a federal appeals court decision raised the possibility that United Way could cut its payment to Aramony by nearly $1.5 million because of the way one of his two pension plans was structured.
Despite Scheindlin's ruling, the Alexandria-based charity won't have to fork over the entire sum to Aramony, 72, who was convicted in 1995 with two colleagues of defrauding the nonprofit group to pay for a lavish lifestyle.
Scheindlin found that Aramony, who is serving a seven-year prison sentence, owes United Way $2.02 million for salary he received from 1989 to 1992, while he was diverting contributors' money to fund cruises on the Nile and Manhattan weekends with his girlfriends. Aramony has also been ordered to pay a $300,000 fine in connection with the criminal case.
"I am so pleased, and so is Bill," said Aramony's attorney, Dennis Houdek, of the judge's decision.
The charity's chief administrative officer, Chris Admundsen, said in an e-mail message announcing the decision to the 1,400 local United Ways, "United Way of America is disappointed with the court's ruling and disagrees with the . . . reasoning."
And United Way spokesman Anthony DeCristofar said, "We are looking to see if there is a basis for an appeal."
The organization's legal costs are being covered by a liability insurance policy because Aramony has been convicted of a felony, he said.
Tuesday's decision focused on a narrow question of tax and pension law. But Scheindlin had ruled previously that United Way of America left itself liable for the pension money because of a crucial error that occurred when the charity's board approved a deferred-compensation plan in 1984 that gave Aramony special benefits.
The United Way board had requested a plan from its New York insurance company that would have ruled out such benefits if an executive was convicted of a felony. But the Mutual of America plan that a board representative, Stephen J. Paulachak, eventually signed did not include the "bad boy" clause.
The charity had argued that the clause's disappearance was suspect because Paulachak was also convicted of stealing from the organization, but the judge ruled that United Way had failed to provide evidence of collusion.
Aramony resigned and donations to local United Way campaigns plummeted after a 1992 Washington Post investigation into the way Aramony ran the organization during his 22 years as president.