Bankers Trust New York Corp. paid former chief executive Charles Sanford $2 million after he retired in April, in exchange for an agreement not to criticize the company, it disclosed.
Mr. Sanford left amid problems in Bankers Trust's derivatives trading business; corporate clients such as Gibson Greetings Inc. and Procter & Gamble Co. said the bank company misled them about their investments.
The need to connect a severance payment to a promise of silence baffled some experts.
"I have to believe that no CEO of any leading money-center bank would leave the organization and start throwing dirt at that organization," said Tony Lord, an executive recruiter at Ward Howell International Inc. "I can't see Charlie Sanford doing that any more than anyone else. I wouldn't have thought it necessary to put a clause like that in the agreement."
But Mr. Lord said the amount of the payment was "not that outrageous relative to some of the packages being given to people at First Interstate and Chase Manhattan at senior levels" after mergers involving those bank companies.
Bankers Trust disclosed the payment in a Securities and Exchange Commission filing, which also included details of a severance package given Timothy Yates. Mr. Yates, who left his post as chief financial officer after Mr. Sanford's announcement, got $330,303.
Both former executives agreed not to "publicly or privately disparage" Bankers Trust, and the company agreed not to disparage Mr. Yates and Mr. Sanford, the filing said.
According to the filing, the agreements would not be violated if the former executives testified in court or cooperated with any government investigation about the company. Mr. Sanford's agreement calls for him to return the $2 million if he violates the agreement within a year.
Mr. Yates' agreement also calls for him not to raid Bankers Trust's ranks for employees on behalf of any competitor in the year ending next April.
So far, neither man has violated his agreement, Bankers Trust spokesman Alan Hanson said. Both Mr. Sanford, 60, and Mr. Yates, 49 when he quit, said they would "voluntarily cooperate" with an independent counsel's investigation of the company's derivatives business.
Bankers Trust agreed to pay Mr. Yates $500 an hour for time spent helping the independent counsel, while Mr. Sanford would get $2,500 a day and pro-rated payments for partial days.
Mr. Hanson didn't know whether Mr. Sanford or Mr. Yates had devoted any time to the investigation. Independent counsel Benjamin Civiletti led a group that delivered a report at the end of June on Bankers Trust's derivatives business.
The report said poor management and weak controls had led to the problems in the derivatives unit.
It said the problems weren't due to any "institutional effort by BT" to cheat its customers. In addition to his cash payment, which was deferred until the end of May, Mr. Sanford got options for 75,000 shares of Bankers Trust stock.
Daniel Dunaief contributed to this article.
