Newspaper article The Journal (Newcastle, England)

Leader Tells of Horror over Airport Bonus; Court Hears of 'Fraught Debate' on What to Do about Pay-Outs

Newspaper article The Journal (Newcastle, England)

Leader Tells of Horror over Airport Bonus; Court Hears of 'Fraught Debate' on What to Do about Pay-Outs

Article excerpt

Byline: Patrick Joseph

ACOUNCIL leader from the North East has told how he was "horrified" when he learned the size of multi-million pound bonuses being paid to airport chiefs as part of a re-financing deal.

South Tyneside Council leader Iain Malcolm told London's High Court yesterday that he had no idea former Newcastle Airport chief executive John Parkin and finance director Lars Friis would be due bonuses totalling pounds 8.5m when they arranged a new pounds 377m mortgage for the airport.

Coun Malcolm was giving evidence at a continuing court case in which the airport is suing law firm Eversheds over the advice it gave at the time of the deal.

Recalling the re-financing, he said the deal was first mentioned casually by Mr Parkin at a board meeting in 2005 and he did not learn the scale of bonuses to be paid to Mr Parkin and Mr Friis until more than a year later.

Initially Mr Parkin was paid pounds 6m and Mr Friis pounds 2.5m, but the pay-outs were reduced later in an out-of-court settlement.

Under questioning from Eversheds' barrister, Ben Patten QC, Coun Malcolm said: "From what I can recall from 2005, I know that John Parkin had mentioned there was a possibility we could re-finance the debt which the airport had, to get more favourable terms from the bank. But it wasn't a huge discussion.

"He simply mentioned it at the board meeting as an option for the business plan."

No mention was made of bonuses or incentive payments for Mr Parkin and Mr Friis, said Coun Malcolm, and he only learned of the full scale of the bonus pay-outs in late 2006.

"There was simply a general comment that there might be potential to re-finance the debt in the future," said Mr Malcolm in relation to the 2005 meeting.

"There was a discussion that the market was favourable, so let's go and see if we can get better terms from the banks".

He had always assumed the remuneration committee had the final say and ultimate discretion "about whether to award bonuses and how much they would be". …

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