Ex-PMUA execs in $1.2M severance pay skullduggery

Severance settlements for the former PMUA execs are based on their salaries.
Figures are taken from the Courier's online database, and are for 2009.

 
Plainfield's rumor mill was grinding PMUA grist over the weekend, concerning a possible settlement of the claims of former executive director Eric Watson and his deputy David Ervin that they are owed $1.2 million in severance pay -- to be extracted from the hides of ratepayers, of course.

The resignations, announced in a surprise move in March 2011 (see my post here; Mark Spivey's for the Courier here -- now behind a paywall), were voluntary on the part of both Watson and Ervin.

On June 14, 2011, the Board of Commissioners agreed to an initial severance payment to Watson and Ervin totaling $275,000, a fact which became known after DumpPMUA founder Philip Charles got the resolution through an OPRA request (posted online here).

It is clear from the language of the resolution that --

• The $275,000 was an initial payment, with further payment(s) contemplated;
• Any further claims would be addressed by arbitration;
• Watson's and Ervin's final work day was June 30, 2011; and
• '...it is arguable as to the extent of the employees [sic] benefit entitlement under the terms and conditions of the contracts...'

It is no surprise then, to hear that the matter has been in arbitration for some time.

It is said that, through their attorney, Yvette Sterling, Watson initially claimed he was owed about $760,000 and Ervin $451,000 -- for a total of a little over $1.2 million.

What is interesting to me is what the grounds for arbitration could be.

Watson and Ervin had one-year contracts for 2009, which DumpPMUA has posted on its website -- Watson and Ervin.

The language of both includes the stipulation under section 3.3 that --

'...if the Agreement is terminated...by the Employee for good cause, the Employee shall be entitled to his salary and continuation of his benefits for the duration of the term of the Agreement...'

An additional clause was added to the four-year contract entered into between the PMUA and Watson and Ervin in 2010 --

3.4  If Employee is terminated for cause or if Employee voluntarily terminates this Agreement prior to the end of its terms without just cause, Employee shall not be entitled to a continuation of salary or benefits beyond the termination date unless agreed to by the Employer.

This new clause could lead one to infer the possibility that there had been conversations prior to this 2010 contract renewal about termination -- either by the Employees or by the Authority, or both. Whether or not there was any conversation about issues of 'cause' we shall perhaps never know.

However, it does seem likely that what the Arbitrator is trying to sort out is whether whatever claims are being made by Watson and Ervin constitute 'just cause' for their unilateral action in terminating the employment agreement.

And this is what got the gossip mills going this weekend.

Here's the [alleged] poop --

• Watson is willing to settle for $475,000 (instead of the $760,000 initially demanded)
• Ervin would settle for $300,000 (instead of the $451,000 initially demanded)
• Each would accept partial payment over a period of two or three years

These are substantial knockdowns. Are Watson and Ervin nervous about the outcome of the arbitration (which is said, though, to be nonbinding)?

Besides this, it is said Watson and Ervin want their separation date to be made as of December 31, 2011, despite the resolution of the Commissioners recording their last work day as June 30 -- leading one to wonder how the Commissioners could lawfully undo the resolution of June 14th.

But wait, there's more!

Supposedly Watson and Ervin would like such a settlement to be made in a manner that would be more tax-friendly to them than a simple settlement (financial types will have to enlighten me on the ins and outs of such a maneuver).

And, of course, Watson and Ervin would like to interpret the Indemnification clauses of the contract (4.1 and 4.2) so that the PMUA would have to bear the costs of their attorney and the arbitrator -- said to be $80,000 and $15,000, respectively.

And, in a final bit of chutzpah, it is said that the pair are asking for a plaque honoring their contributions to the Authority to be put up at the PMUA Headquarters building.

The only thing not rumored is to seal the deal with a meal at Spain Inn.

Skullduggery on the part of Watson and Ervin? Only if you haven't been paying attention all along.

THE COMMISSIONERS' ROLE ... AND THE GOVERNOR'S

All of this, if it is true, will have to be decided on by the Commissioners. And what I heard over the weekend is that a SPECIAL MEETING is being called for this Wednesday, December 21. I could not find a legal notice in the weekend papers (or today), and will be checking this out this afternoon.

And therein lies a rub.

Two new commissioners were recently appointed to the PMUA Board of Commissioners: former Ward 3 Councilor Malcolm R. Dunn to a full seat, and developer Cecil Sanders as an alternate.

Will they be prevented from voting on any settlement resolution because they were not Commissioners when the 2010 contract was negotiated, or when the June 14, 2011, resolution accepting Watson's and Ervin's separation was voted, or when (presumably) an offer to settle was made on their behalf?

Beyond that, will Commissioner Dunn, well-known in the community as a long-time friend and supporter of Mr. Watson since the creation of the PMUA, recuse himself from playing any role in the settlement?

And then there's the question of whether the Governor -- whose veto of an Authority's minutes can void any actions taken by the Commissioners -- has been aware of our little Plainfield melodrama.

But that's a story for another day.

---

• Plainfield Today:  "Those PMUA resignations? Take with a grain of salt"
  
• Courier:  "PMUA executives stepping down in surprise move"
• Plainfield Today:  "First severance payment to Watson, Ervin totals $275K"
• Scribd: "Severance for Watson and Ervin" -- Also on the DumpPMUA website as a PDF here.
• DumpPMUA, 2009 Employment Contracts:  "Watson" | "Ervin"
  

-- Dan Damon [follow]

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