CPA and KTK demand reclamation of almost 3 million guilders

June 30, 2011 1:41 PM

The companies Curaçao Ports Authorities (CPA) and Kompania di Tou Kòrsou (KTK) went to the Court in First Instance to re-claim the ‘surplus amount paid for pension premiums’ of the two former directors Augustin Diaz and Richard Lopez Ramirez.

The petition states that CPA paid 1,414,805 guilders for the pension insurances of Diaz and 1,387,775 guilders for Lopez Ramirez. According to the calculations from Terry Hernandez of Hernandez & Associates – with the assistance from Keesen Actuaries –, who had investigated this at the request of CPA, the total amount for Diaz should have been 428,971 guilders and 437,734 guilders for Lopez Ramirez.

A summary shows how the increase of pension premiums was calculated: “Diaz and Lopez Ramirez requested the Board of Directors (RvC) per letter of August 14th2011 to drastically increase the pension premium. The RvC approved this two days later,” according to the petition. Before the judge, CPA subsequently disputes whether the decision of the RvC is legal because it contravenes the statutes and the law. “The General Meeting of Shareholders (AvA) is the authorized organ and not the RvC to take decisions regarding the salary of a director,” according to the argumentation.
It is stated that the pension premium is a part of the employee’s salary. “Diaz and Lopez Ramirez should repay CPA the mentioned amounts because the decision was taken against the statutes of CPA, the decision misses the legal/contractual basis to pay a higher premium contrary to the employment agreement and that the reasons underlying the decision are invalid,” lawyer Berti Braam stated in his explanation. He concludes that the former directors had unjustly enriched themselves ‘at the expense of CPA’.

Golden handshake
Apart from the surplus amount paid on pension insurance, the ‘golden handshake’ with the departure of both men is considered unjust. “Several days before ending their relation with CPA, Diaz and Lopez Ramirez awarded themselves a golden handshake of 42,009 and 54,341 guilders. Now that such a substantial compensation is considered as salary, the AvA was only authorized organ to take a decision on granting such compensation or not. A possible decision from the RvC on granting such compensation is therefore invalid because it contravenes the statutes,” according to the pleading. Therefore, these golden handshakes will also be re-claimed. The Court is requested to rule that Diaz and Lopez Ramirez repay the amounts of 1,027,834 and 1,004,328 gulden, increased with the legal interest as per June 6th. CPA also re-claims the costs for the procedure, legal charges and the bailiffs’ costs.

Amounts are being re-claimed also on behalf of subsidiary KTK. In the explanation before the judge, a memo of May 15th2003 is quoted in which the then chairman of the board of CPA wrote: “The reward of the functions of general director and director of CPA were determined in 1996 and not adjusted or indexed since then, while this was the case with other members of the ‘extended management’. The salaries of both directors were therefore frozen for several years.” The chairman of the board had subsequently suggested determining the salary of the general director at 19,500 guilders and that of the director at 18,500 guilders with the understanding that KTK, of which CPA is the only shareholder, pay the increase. The chairman of the board suggested RvC consider granting both directors the same amount ‘because this regarded a typical model of a collegiate management’. That same chairman of the board also suggested indexing the reward of the directors in proportion to the other personnel and to award the implementation of a net fourteenth month as ‘merit increase’.

The pleading subsequently elaborates on this memo and attempts to negate the decision process. Stating for instance, that ‘contrary to the letter of the relevant chairman of the board’, the salaries were adjusted and indexed since 1996. By way of illustration, a summary is given: in October 2001, the salaries of the employees were indexed with 4 percent, whereby the former directors received this indexation in the form of a lump sum. Subsequently, an indexation of 4.5 percent per October 2004 was awarded to the former directors in the form of a lump sum. Beginning 2006, Diaz and Lopez Ramirez received an indexation of 2.04 percent in accordance with the indexation for civil servants. Mid 2007, the salaries of both directors were indexed with 1.86 percent in accordance with that of the civil servants. As of November 2008, the salaries were indexed by means of a lump sum and subsequently adjusted with 3.88 percent in January 2009.

The pleading argues that the salaries ‘were mostly certainly market conform’. “There was no reason to increase the salary for Diaz with 4000 guilders and 3000 guilders for Lopez Ramirez. The reasons mentioned in the memo cannot be considered other than fallacies that persist factually or legally. For that matter, the memo does not mention anything about holidays, vacation bonus or holiday pay.” One continues by pointing out, that there was no basis for the decision (from the RvC or AvA) regarding the holidays, vacation bonus or the holiday pay apportioned by the directors. “If their activities for CPA increased to such an extent, the salary enjoyed at CPA should have been increased and taxed. Not only was the RvC of CPA not the authorized organ to grant such salary increase but it should never have done so to the account of KTK,” according to Braam’s explanation.
It is also mentioned that the former directors wrongfully enjoyed double fringe benefits (from CPA and KTK), such as holidays, vacation pay and Christmas bonus. “For that matter, as director of KTK, CPA already received an annual management fee of 500,000, which KTK paid CPA in monthly terms. If there had been a reason to charge KTK a higher fee then one should of increased the management fee,” according to the petition. The following amounts are being re-claimed for subsidiary KTK: from Diaz an amount of 437,784 guilders and from Lopez Ramirez 326,848 guilders, both increased with the legal interest.

29 June 2011