published: 30 April 2004
Crowley playing 'Peter
third-generation shipowner Thomas Crowley Jr has borrowed money to pay $7.5m
back to his company, Crowley Maritime, to avoid violating the US
Sarbanes-Oxley corporate-governance law.
The privately owned US-flag containership, tanker and tug owner revealed the
payment last week in a filing to the US Securities and Exchange Commission
(SEC). The Oakland-based company is set to pay the interest on the financing
Crowley arranged for the payback.
Largely as a result of the Sarbanes-Oxley issue, Crowley's compensation in
2003 dropped to some $2.5m from $5.2m the previous year.
Under a long-running, «split-dollar» life-insurance agreement with Crowley,
the company's chairman, president and chief executive, Crowley Maritime has
been paying his life-insurance premiums, which he or his survivors were to
repay after cashing in on the policy. However, the Sarbanes-Oxley Act of
2002 makes it illegal for issuers of securities in the US to make personal
loans or extend other credit to their directors and executives. The company
says in the SEC filing that the law «might be construed as treating annual
premium payments made after 30 July 2002...as new extensions of credit that
would be prohibited». It has therefore discontinued these but they may be
resumed in future. The company points out that the law does not specifically
address such insurance arrangements.
According to the SEC filing, Crowley paid no interest on the paid-back
premiums and the family-controlled company will be bearing the after-tax
cost of the interest on the financing that he had to arrange to make the
The 37-year-old Crowley controls the majority of common stock and 99.9% of
preferred stock in Crowley Maritime. In its annual report, the company
explains that the split-dollar insurance agreement is intended to prevent
«an unrelated third party gaining a highly influential and potentially
detrimental position with respect to the business and management of the
company» once family members are faced with paying estate taxes on their
equity in Crowley Maritime and other assets.