El Paso's ( EP) annual report -- and executive loans -- just got a little fatter.

A month after publishing its original 10-K, El Paso quietly tacked on an extra chapter last week. The supplement talks almost exclusively about El Paso leaders and their perks. But while much of the information is familiar, at least one new section is not.

In a brief paragraph halfway through the report, El Paso reveals generous company loans to ousted CEO William Wise and two remaining top executives. In 2001, Wise and Brent Austin -- El Paso's current president and operating chief -- jumped at the opportunity to shift money from a supplemental benefits plan to an "alternative benefits program" that looks snazzier than it sounds. A year later, grocery executive Byron Allumbaugh -- a longtime El Paso director now headed off the board -- signed up for the program as well.

By participating, all three El Paso leaders have collected seven-figure loans from the company that require no interest or principal payments until the men -- and even their wives -- die. Wise snagged the biggest check by far. He traded in $5 million owed to him under the old supplemental benefits plan for a $9 million company loan under the alternative plan. As required by the new program, he used the loan to purchase a life insurance policy that -- considering its price tag -- must be substantial. A family trust will collect on the policy after Wise dies. But nobody is required to pay the company back until both Wise and his wife are deceased.

"The loan with accrued interest will be repaid, on an after-tax basis, with proceeds of the policy after the participant's or his spouse's death, whichever is later," the filing states.

The Hook

Since both husband and wife must die before any payment comes due, it seems unclear who would be on the hook to finally repay the company loan. But a source familiar with the plan described the program as a "next-generation" benefit that pays out to survivors only after both Wise and his wife die -- and after the company has collected its repayment first.


Wise Guys
El Paso finds lower levels


"It's cost-neutral for the company and tax-advantaged for the executive," the source said. "About 100 of the Fortune 500 companies had policies like this."

But a fresh ban on executive loans has put an end to such programs, the source added.

Besides Wise, only a handful of El Paso leaders apparently took part in the plan. Austin swapped $600,000 owed to him under the old benefits plan for a $1.08 million company loan to buy his own life insurance policy under the program. Allumbaugh, who will not be seeking re-election to El Paso's board during a heated contest scheduled for this summer, gave up $1.82 million from his non-employee director compensation account to secure a $3.28 million company loan for a life insurance policy as well.

Only one other person -- former general counsel Britton White -- is listed as participating in the program. But he is mentioned only in a past proxy statement that does not include loan amounts.

Enhancement

Until now, El Paso has disclosed no information about the size of any of the loans extended to the program participants. The plan, formerly known as the "estate enhancement program," has come as a total surprise to even some people who closely monitor the company. It only further infuriates critics who've complained about El Paso's generous perks for executives.

Before 2002, when El Paso's stock plunged 84% to record lows, Wise ranked as one of the most richly compensated CEOs in the country. His total compensation fell 70%, with the elimination of his bonus, during his final year at the helm. But he still managed to pick up a seven-figure salary -- up $100,000 to $1.4 million -- and is set to receive nearly $7 million more in severance pay.

El Paso critics, who've watched rank-and-file employees lose their jobs and their retirement, are screaming at the disparity.

"These excesses are ridiculous," said one. "Outside of Enron, this has got to be the best pirating job I've ever seen."

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