Northern Rock to pay former finance director £270,000

http://www.guardian.co.uk/business/2012/apr/11/northern-rock-pay-former-director

Version 0 of 1.

Northern Rock is to hand around £270,000 to a former director following the controversial sale of the nationalised bank to Sir Richard Branson's Virgin Money.

Former finance director Jim McConville is to receive the payout through a long-term incentive plan (LTIP), put in place in April 2010, in two payments in 2013 and 2014.

The payout is likely to be confirmed in Northern Rock's next annual report – expected in June – but can be revealed by the Guardian as a result of a Freedom of Information Act request that UK Financial Investments, the body that looks after the bailed-out banks, attempted to block.

After UKFI's then chief executive, Robin Budenberg, and then chairman, David Cooksey, repeatedly refused to answer questions on the size of the LTIP, a Freedom of Information Act request eventually provoked a response. Details of the LTIP, based on a three-year performance period, are disclosed on page 10 of Northern Rock's 2010 report and were reported by the Guardian in December 2011. The report stated that as there were no awards under the scheme in 2010, the bank would make awards in 2011 covering 2010 and 2011, which would vest in March 2013 and March 2014 respectively, "or upon successful exit from temporary public ownership if earlier".

It now appears that those awards have been made, although UKFI initially refused to answer questions about Northern Rock and its bonus plans. UKFI had argued that it was not allowed to provide details of the LTIP, on the basis that the company was transferred into private ownership under Virgin Money in January.

But following a lengthy FoI process, UKFI finally conceded that it was responsible for answering the request.

After being asked what the LTIP meant in financial terms for each of the executive directors of Northern Rock after the company was sold, and why that money was not being returned to taxpayers, UKFI admitted that payments of up to £270,000 had been awarded. There was only one executive director of Northern Rock before the takeover: McConville.

UKFI said: "Following an assessment, the board of Northern Rock decided to make payments to this director of between £155,000 to £160,000 under the 2010 LTIP (vesting in 2013) and between £110,000 to £115,000 under the 2011 LTIP (vesting in 2014). We have disclosed these payments in bands of £5,000 in line with Pubic [sic] Sector Salary disclosures."

UKFI eventually named the director whom had benefited from the Ltip as McConville. But UKFI did not answer as to why this money was not repaid to the public purse, instead of being paid to one of Northern Rock's former directors.

Chris Leslie, the shadow Treasury minister, said: "At a time when bank executive bonuses, especially in state-owned banks, are in the spotlight, it is worrying that directors could be profiting from a firesale of this taxpayer asset, a transaction that saw a significant loss for the taxpayer. This must surely form part of the value-for-money investigation currently being conducted by the National Audit Office."

The NAO declined to comment pending the conclusion of its value-for-money study into the Northern Rock sale and UKFI's role.

Northern Rock was sold to Virgin Money in January this year for £747m and UKFI argued in February that it was the best value it could get against alternative exit routes – such as an immediate share sale through an initial public offering, a remutualisation, a run off or flotation next year.

The part of Northern Rock sold off was the part that had been spun out of the Newcastle-based lender that was nationalised in February 2008 and cleaned up for sale. The taxpayer continues to subsidise the "bad" bank – Northern Rock Asset Management – which UKFI expects to repay £47bn in the coming 10 to 15 years.