§2277a–10b Authority to regulate golden parachute and indemnification payments

Summary

A federal Farm Credit corporation can stop or limit big exit payments and payments that cover legal costs for people tied to a troubled Farm Credit System institution. Golden parachute payment — money (or a promise of money) paid because someone’s job ends, when the payment is made after the institution is insolvent, after a conservator or receiver is named, after the institution gets a composite CAMEL rating of 4 or 5, or after the Corporation says the institution is troubled. It also covers payments made earlier if they were planned because one of those events was expected. It does not cover payments from a tax‑qualified section 401 retirement plan, certain permitted executive retirement or deferred comp plans, or payments for death or disability. Indemnification payment — money to pay or repay legal costs or liabilities for a person tied to the institution when an administrative or civil action by the Farm Credit Administration leads to a final order that fines the person or removes/prohibits them from running the institution. Institution‑related party — short description: directors, officers, employees, agents, shareholders (not other Farm Credit institutions), consultants and others who help run the institution, and contractors who knowingly or recklessly cause serious harm. Liability or legal expense — legal fees, settlements, judgments, and related costs. Payment — any transfer of money or assets or setting money aside to make a future payment. The Corporation can make rules about when it will limit or ban these payments. The rules must list factors to consider, such as reasonable belief of fraud, breach of duty, insider abuse, serious law violations, responsibility for insolvency, the person’s managerial role, how long they worked there, and whether the pay matches services earned. Institutions may not prepay salaries or legal costs to hide assets or prefer one creditor over others when insolvency is expected or has occurred. Institutions may still buy commercial insurance or fidelity bonds that do not cover the types of legal or liability payments described, and the law does not reduce the Farm Credit Administration’s other powers.