Flanked by legal counsel, Emma Schwartzman, the great, great granddaughter of a Safeco founder, announced the filing of a lawsuit on behalf of Safeco shareholders against former CEO Mike McGavick. The central claim in the suit is that McGavick was not entitled to the $28 million he received from Safeco after he resigned as Safeco’s CEO. The suit also alleges Safeco’s board of directors violated federal securities laws by concealing the magnitude and extraordinary nature of the payout.
“If you or I take money that doesn’t belong to us, it’s called theft. When a Board of Directors and their CEO do it — that’s called corporate waste. Mike McGavick didn’t earn the $28 million, he knew he wasn’t entitled to it, but he took it anyway,” said Schwartzman. “I have brought this lawsuit to protect the assets and integrity of Safeco Corporation — a company that is important to me, my family, and my community.”
Attorney Knoll Lowney of Smith & Lowney is one of the attorneys representing Schwartzman in the case. Lowney appeared with Schwartzman at the press conference and quickly emphasized that the case was about an illegal corporate transaction, not excessive officers’ compensation.
“Mr. McGavick’s employment contract clearly stated that if he resigned he would forfeit his right to all compensation, including bonuses and stock options, and would get only his last paycheck. Instead he received $28 million. This did not represent a ‘golden parachute’ but a ‘stolen parachute,'” Lowney said.
“So, how was it that Mr. McGavick found himself walking away with $28 million including stock options and a bonus? Fraud — in the form of a document called an Executive Transition Services Agreement that McGavick and Safeco executed in December 2005,” Lowney asserted.
The agreement required McGavick to provide transition services during the first two months of 2006 as an employee of Safeco. The suit alleges that agreement was a fraudulent transaction to carry out an illegal giveaway of Safeco assets, including returning all of the stock options and bonus McGavick would have forfeited upon resigning. The suit alleges numerous other examples of improper payments to McGavick.
Lowney also addressed the “800 pound gorilla” in the room — McGavick’s bid for the U.S. Senate. “Inevitably, some people will try to dismiss this lawsuit as a political attack on McGavick. But this lawsuit is about corporate corruption, not partisan politics. Indeed, two of the defendants in the lawsuit are prominent members of the Democratic Party, including a former governor.”
The Democratic and Republican parties both learned about the lawsuit today for the first time.
Lowney stated that the suit could not wait until after November’s election since McGavick is considering using part of this $28 million payment to fund his Senate Race. “It is the plaintiff’s position that these improper payments must be returned to Safeco shareholders, and we will take actions to prevent this money from being spent on politics or anything else.”
The complaint and much of the documentary evidence is posted on the website, www.mcgavicklawsuit.com.
Source: Smith & Lowney