Dynegy founder and former chief executive officer Chuck Watson and his chief operating officer — Steve Bergstrom — will receive a combined $32 million in severance payments under a settlement of their severance claims with the company. Mr. Watson will receive approximately $22 million plus interest and legal fees, which is about a quarter less than what he originally demanded from the company. Mr. Bergstrom will receive $10.4 million plus interest and legal fees, which is the full amount that he demanded.
Mr. Watson had been a sterling Houston business success story for the past 15 years until that shine was somewhat dulled by his involvement of Dynegy in a last ditch effort to keep Enron out of bankruptcy in 2001. For years, Mr. Watson led Dynegy successfully as it mirrored many of Enron’s business moves, particularly its involvement in online energy trading.
As Enron spiraled toward bankruptcy in late 2001, Mr. Watson had Dynegy set to take over Enron, but the deal broke down when Dynegy discovered the extent of Enron’s contingent liabilities in connection with its off-balance sheet partnerships. Enron’s subsequent demise almost caused Dynegy to collapse as well, as traders and investors shunned the company over fears that it would become the next Enron. Dynegy’s troubles – a regulatory probe, a share price collapse, a credit downgrade and disappearing trading partners – bore a striking resemblance to the start of Enron’s downfall. However, Dynegy is better capitalized than Enron, as Chevron owns over a quarter of the company’s stock.
Still reeling from the impact of Enron’s demise into insolvency, the Dynegy board pressured Mr. Watson to resign in May, 2002. Mr. Bergstrom inherited the president’s position until he left the company in October 2002 when Dynegy decided to exit the energy trading business for which Mr. Bergstrom had been primarily responsible. The energy trading industry had largely melted down by that time in the wake or Enron’s collapse.
Both Mr. Watson and Mr. Bergstrom objected to the severance packages that Dynegy had offered them upon their resignations from the company and, in early 2003, both demanded arbitration of the disputes. The settlements announced today are the culmination of those proceedings.
As a footnote, the sad case of Jamie Olis involved a deal at Dynegy.