The was the bottom line of a ruling by the Kentucky Court of Appeals, according to Washington-based legal publisher BNA.
Paul Perconti began working for Thornton Oil Corp in 1982, moving his way up the corporate ladder to the position of chief executive officer.
Along the way, Perconti became a participant in Thornton Oil’s profit participation plan for key executives, under which Perconti was granted a 10% interest in all Thornton Oil stores developed under his leadership and a long-term shadow stock plan, a 10-year profit sharing program with benefits to be paid at the end of the 10 years.
However, the owner of Thornton Oil decided to abolish both plans and signed an agreement with Perconti in 1993 which provided that Perconti would be entitled to payment of approximately $1 million if he stayed with the company until September 2000. The agreement also provided Perconti the opportunity to receive the entire amount if discharged prior to that date as a result of any reason other than for cause. Additionally, if his employment were terminated for “any other reason,” he would be paid according to a table that allowed for full payment after October 1998.
Other provisions of the agreement stipulated Perconti would receive up to $2.5 million if he were discharged for any other reason than disability, death, or other circumstances beyond his control.
Turn For The Worse
Beginning in the early 1990s, Perconti, with the permission of Thornton Oil’s owner, began using Thornton Oil funds to trade in the commodities market. In 1996, Perconti created a trading company from which he and Thornton Oil’s chief financial officer began personal trading. The company accumulated losses in the millions of dollars, reaching a level above that originally authorized by Thornton Oil’s owner.
A federal grand jury indicted Perconti and a subsequent trial produced a hung jury. Following the trial, Perconti sought to recover benefits under the 1993 agreement, to which Thornton Oil filed a counterclaim for breach of fiduciary duty, conversion, and fraud.
The question on the appeal was whether Perconti was entitled to recover $2,657,969 awarded him by the trial court. Factored into the court’s decision was the unique nature of the plan. The appeals court found that this agreement to be a “top hat plan”, designed to benefit only highly compensated executives that is exempt from certain provisions of ERISA.
Perconti was found to be entitled to the amount awarded to him by the trial court, since there was no language in the agreement indicating Perconti could be subject to forfeit of the benefits. The appeals court said “under both plans Perconti had amounts vested to which he was entitled at the time each of the plans was abolished.”
The case is Thornton Oil Corp v Perconti.