Microsoft Forgives $15 Million Loan Made to Former President Belluzzo
Monday September 9, 12:29 am ET
Microsoft Corp. (NasdaqNM:MSFT - News) said it has forgiven a previously undisclosed, $15 million loan to former President and Chief Operating Officer Rick Belluzzo, who recently joined data-storage outfit Quantum Corp., Monday's Wall Street Journal reported.
Microsoft made the loan to Mr. Belluzzo 2 1/2 years ago, shortly after he joined Microsoft, and disclosed it in its annual report filed Friday with the Securities and Exchange Commission. Such personal loans to company executives have come under fire recently amid accounting and corporate-governance scandals, some of which involve the use of company funds for executives' personal benefit.
In the SEC filing, Microsoft, based in Redmond, Wash., characterized the $15 million as an advance given to Mr. Belluzzo against the value of stock options he was given in 1999 and 2000. The loan represented the "minimum benefit" Mr. Belluzzo would receive by exercising those options at a later date, Microsoft said. The options allowed Mr. Belluzzo to buy 3.5 million Microsoft shares.
At today's depressed stock prices, however, all of those options are worthless now. So Microsoft said it would cancel the options and, in turn, forgive the loan and its interest. A Microsoft spokeswoman noted that the original loan agreement with Mr. Belluzzo did include some provisions that would allow forgiving the loan, under certain circumstances. The spokeswoman added that Microsoft thinks the loan was "appropriate and necessary," noting that "Mr. Belluzzo's compensation package was developed at a time when the market for senior executives was hyper-competitive."
But Mr. Belluzzo won't keep the whole $15 million: The money will be taxed as ordinary income, Microsoft said, and Mr. Belluzzo will refund all applicable taxes to Microsoft. Microsoft also disclosed that it will pay Mr. Belluzzo an additional bonus of $350,000 for his work at the company in fiscal 2002, which ended in June. Mr. Belluzzo was on Microsoft's payroll until late August. When he joined the company in late 1999, he also received a $4.2 million signing bonus.
Mr. Belluzzo, now chief executive of Milpitas, Calif.-based Quantum, couldn't be reached for comment. He announced plans to leave Microsoft in April. Mr. Belluzzo had clashed with Microsoft CEO Steve Ballmer over management style and other issues. Mr. Ballmer also imposed a staff reorganization that essentially eliminated Mr. Belluzzo's job.
Wall Street Journal Staff Reporter Rebecca Buckman contributed to this report. |
