Disputed payment to go to executive
   
Panel says Dynegy owes $10.4 million
   
By L.M. SIXEL
Copyright 2004 Houston Chronicle

Dynegy must pay $10.4 million to former president and Chief Executive Steve Bergstrom, a trio of arbitrators has ruled.

Bergstrom, who left the company in October 2002 as Dynegy was shutting down its energy trading operations and settling fraud charges with the Securities and Exchange Commission, claimed he was due $10.4 million under his employment contract.

"I think Mr. Bergstrom was completely vindicated by the result," his lawyer, Dennis Herlong, said.

But Dynegy spokesman David Byford said, "Our position is that we respectfully disagree with the arbitrators' ruling in this matter, but we will abide with the ruling."

Dynegy, which mounted a vigorous defense, already set aside money it considered "reasonable and appropriate" in case the ruling went against the company, according to the company's most recent 10-K filing to the SEC.

The company has also refused to pay the severance claims of two other key executives, and arbitrators are scheduled to hear those arguments in June. Former Chairman and Chief Executive Officer Chuck Watson says he is owed $28.7 million, while Rob Doty, former chief financial officer, is seeking $3.4 million.

In the Bergstrom case, Dynegy officials said he didn't meet the terms of a severance agreement he signed after CEO Bruce Williamson, who had just taken over the post, asked him to leave the company, Herlong said.

At the time, Dynegy was near bankruptcy, and Bergstrom agreed in mid-October 2002 to take a $2.9 million payment.

The agreement also called for Bergstrom to receive an additional $10.4 million three months later if an audit of the company's past financial statements led to a material restatement of earnings that would have affected Bergstrom's 2001 bonus.

While the audit indeed resulted in a significant restatement of the company's earnings, Herlong said the arbitrators believed it wouldn't have impacted Bergstrom's bonus.

The old management's intention was to pay Bergstrom the $10.4 million if Dynegy didn't go into bankruptcy, Herlong said.

But the new management just did not want to pay him, and that triggered the arbitration, he said.