Pfizer CEO's Jet-gate?
The debate rages on over at Cafe Pharma and the thread about the Pfizer CEO's jet which may soon turn into a full blown Jet-gate.
Last few posts argue that I'm the one pasting my URL and quotes from my posts. Pfizer's Anonymous Defenders of Mr. Kindler's Jet Privileges don't seem to fathom that perhaps other Pfizer employees may agree with me and are doing this. As for me, I'm just sitting back and enjoying the show.
And now to the interesting part.
Someone on Cafe Pharma, who claims to know the content of Jeff Kindler's CEO employment contract, claims that the Pfizer SEC filing saying that "Mr. Kindler and his spouse and dependent children will be required to use aircraft provided by the Company for air travel for security reasons." IS NOT TRUE.
And of course, in the name of balance I need to inform you of this. Because if Pfizer's SEC filing is FALSE, then all my posts on this topic should be disregarded. Then, there is no party jet; at least not without Mr. Kindler as part of the party, so to speak.
The person who knows so much writes, "Yes, I am aware what the 8K says. However, I assure you, according to Jeff Kindler's actual contract (not the 8K) his family is NOT required to travel on corporate aircraft."
So if true, there is no "party jet." If true, there may be something much worse: False filing with the SEC.
Now, why would anyone do that? (We don't know if anyone did this, we just give the Anonymous Defenders of Mr. Kindler's Jet Privileges on Cafe Pharma the benefit of the doubt.)
And this is how the Anonymous Defender of Mr. Kindler's Jet Privileges continues, "Perhaps Pfizer "lied" on their 8-K, but I doubt it. It doesn't really help the company to portray an executive perk as more generous than it actually is. I don't know why the language in the 8-K is written this way -- perhaps it's a lousy translation of the components of Kindler's compensation and perks."
Now then, is that really true?
Is it true that it doesn't help the company to portray an executive perk as more generous than it actually is?
It may be. But it may help the CEO and his kids. There could be a MOTIVE behind this alleged fraud . . .
Here's the deal, you see.
Maybe Pfizer doesn't want to have teenagers going willy-nilly on their $30 million jets. Maybe they will rarely if ever use the jet. Or just occasionally, with daddy.
So why put in such language?
Because, and hang in with me here, the language on http://www.jetsales.com/mesinger/aag/personaluseflights.html is stilted but explains things:
"The amount of income imputed to an employee for personal flights may be reduced if the employer requires the employee to travel on an employer-provided aircraft for all flights, both business and personal, and if a bona fide business-related security justification for such requirement exists. This special valuation . . . will not exceed 200% regardless of the weight of the aircraft. The remainder of the calculation remains unchanged."
Normally for a Gulfstream, the factor is 400%, so this rule cuts the tax burden in half for the CEO and his children, anytime they fly. IF there is a security concern and there is official documentation on this, including the SEC filing.
But there's more going on. The IRS doesn't just accept these arrangements at face value: "Even if an actual basis for concern exists, the general rule established by the Treasury Regulations provides that the IRS will consider it to be a bona fide security concern only if the employer establishes an overall security program acceptable to the IRS with respect to the employee. Such a program must provide security to the employee on a 24 hour-a-day basis, including security at the employee's residence and workplace, and while traveling, whether for business or personal reasons. In addition, the program must include the use of a bodyguard-chauffeur who is trained in evasive driving techniques, an automobile specially equipped for security, and guards, metal detectors, alarms, or similar methods of controlling access to the employee's workplace and residence. An overall security program will be deemed to exist if it is established pursuant to an independent security study (discussed below)."
So, if Pfizer told the IRS or the SEC that sometimes it is OK for the kids to go on regular flights from Newark, and sometimes there is a big security concern that necessitates trips to Bermudas on a private jet, then maybe the IRS wouldn't agree to give them a 50% discount on taxes for the free party jet. And then, the kids would have to pay $1800 tax instead of $900 tax to fly round trip to Paris.
Solution? File an 8-K saying the whole family has a security concern. Only in real life there isn't so much of a concern, so there won't be any jets anytime for the kids, just sometimes. The rest of the time they have to fly like the rest of us.
I don't know if that is what is going on here. But someone claims Pfizer has made a false filing with the SEC. Someone who got real scared when he discovered the doo-doo he put the company in.
Perhaps, we'll find out the truth when the Pfizer CEO's little Jet-gate blows up in the mainstream press.
Party Jet or false SEC filing, which one is it?
Shareholders have a right to know.
And you heard it here first.