Carolina First's Whittle continues to put himself first
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As reported in The Columbia Star in September 2006, in August 2006, Greenville's Mack Whittle, CEO of The South Financial Group (TSFG), was recognized by SNL Financial as one of "America's over-compensated bank executives." TSFG's subsidiary, Carolina First Bank, runs roughly 100 branches in the Carolina's and is the holding company for Florida-based Mercantile Bank, which was also the case in mid-2006. SNL Financial recognized Whittle's unusual pay based on 2004 numbers, when he was paid a total of $3.2 million, a combination of salary, bonus, restricted stock, and other compensation.
For 2004, TSFG had a return on average equity of 10.2%. Peer banks' performances averaged a return of 16.2%. As reported by SNL, among the same peer banks, Whittle's pay package rose above the average by 69.6%.
Ten years before his 2004 costly compensation, as previously reported in The Columbia Star, Whittle demonstrated savvy pre-public offering positioning. In September 1994, Carolina First CEO Mack Whittle began to place about $1 million of his bank's money into what became Affinity Technology Group, a Columbia- based startup that went through an initial public offering (IPO) on the Nasdaq Exchange in the spring of 1996. Whittle was instrumental in the firm's formation and the finance, an insider's insider. Still, he managed to identify himself as an outsider to avoid restrictions on his stock, also known as the Security and Exchange Commission's Rule 144.
The SEC's Rule 144 protects the non-savvy stock purchaser from a shady startup in that the startup's insiders cannot issue themselves stock at an IPO they can readily - almost immediately - flip before the stock falls in value. The insiders have to hold the stock for typically one year before they can unload. In other words, the company they are selling to the public has to perform and hold value for at least a year so the company's organizers and other insiders can make money on their shares.
According to The Wall Street Journal, Whittle and two other members of his TSFG board of directors voted themselves fat ownership positions a few months before the Affinity IPO in 1996. As CEO of Carolina First, Whittle was well paid to do his job, to lend the bank's money. None of the money Whittle directed to Affinity was actually Whittle's money. He risked no personal capital. He risked the bank's money. Upon the IPO, Whittle had done his job, and Whittle was paid well in the years since, according to SNL Financial. And the bank made a little money off Affinity. Affinity went public on the Nasdaq Exchange in the spring of 1996, and within two weeks, the stock was worth more than $24 per share.
Whittle was able to declare himself and his two fellow members of the board as non-insiders, and they were privileged to sell their shares for the $24, about peak value for the history of the stock. Whittle and the two agreeable board members voted themselves 666,634 shares, about $16 million at peak value.
In the past year, Affinity Financial Group has gone belly up, legally bankrupt, and the stock is worthless. For reasons unexplained by Whittle or anyone at Carolina First, TSFG's shares still owned by the company were recently counted at just above 4,000,000, or $96 million at peak value, the time when Whittle and his fellow stock- awarded members of the board could have sold their shares.
Under Rule 144, TSFG could have sold its shares one year after the IPO. The Affinity board voted a share buy- back deal, about $2 million worth, in August 1997, and the stock price held for a short while at more than $5, leaving the opportunity cost to TSFG at $20 million for not selling its 4,000,000 shares in the late summer of 1997. TSFG held on to its shares for another 11 years while the share price fell and fell some more.
Point being, Whittle made money and the bank got no more than its loan paid back with market interest.
And now Whittle expects $18 million in a severance package for a job well done over the years. He did, after all, put the bank together in 1986, and he did continuously expand all the while. Since February 2007, however, TSFG stock has fallen from more than $24 to less than $3 in July. The stock closed Tuesday, Nov. 18, at $3.38., when Affinity was worth $0.002.
S.C. Governor Sanford is not impressed with Whittle's performance, but he is impressed with Whittle's money grab as he leaves the company. In fact, Sanford says he's appalled. So Sanford has asked the U.S. Secretary of the Treasury to look into it.
