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SIFMA Severance Disclosed

WASHINGTON - Two executives walked away from the Securities Industry and Financial Markets Association last year with roughly $1 million or more in severance pay after the Bond Market Association and Securities Industry Association merged to form the group, according to a tax form SIFMA recently filed with the Internal Revenue Service.

Micah S. Green, who was co-chief executive officer of SIFMA, and Donald D. Kittell, the trade group's chief financial officer at the time, received $1.10 million and $991,666, respectively, on top of the compensation SIFMA reported for them for the fiscal year ending Oct. 31, 2007.

The severance pay is one of the noteworthy items from The Bond Buyer's ninth annual survey of the latest Form 990s that 22 municipal market-related nonprofit groups filed with the IRS in fiscal years 2006 and 2007.

These two years dramatically changed the structure of the market, with the separate mergers of the two largest securities groups and the top two self-regulatory organizations. Besides the formation of SIFMA, NASD Regulation and the regulatory arm of the New York Stock Exchange join forces to create the Financial Industry Regulatory Authority.

Also in the survey, Christopher A. Taylor, the former executive director and president of the Municipal Securities Rulemaking Board, received the highest level of compensation, at $2.44 million, along with $647,329 in benefits and deferred compensation for the fiscal year ending Sept. 30, 2007. But Taylor said last week that the figure is somewhat misleading because it includes his salary of $635,000, six of the 12 months of severance pay he received after leaving the group, and a $1.56 million supplemental executive retirement plan, or SERP, payment that covered many of the 32 years he spent at the board.

Taylor left the MSRB in July 2007 after the board did not renew his contract. He is currently working as a financial markets consultant.

Lynnette Hotchkiss, who replaced Taylor on June 18, 2007, received $249,418 of compensation. That figure includes a signing bonus and does not represent a quarter of her annual salary, a spokesperson said. Hotchkiss' annual salary is $550,000, according to the board.

The MSRB's 15 board members reported a whopping $746,525 in expenses and other allowances for travel. John Lawlor, the MSRB chairman, had the largest expenses, at $75,185, and seven of the other board members received $50,185 for expenses.

Also noteworthy from this year's survey, an executive from a state and local government group surpassed the $300,000 mark in compensation. Jeffery L. Esser, CEO of the Government Fiance Officers Association, received $307,545 in compensation for the group's fiscal year ending March 31, 2007.

Factoring in the severance and SERP payments, Green, Kittell, and Taylor joined six other executives from the nonprofit groups who made at least $1 million, not including benefits, deferred compensation, and expense accounts.

Green's severance payment of $1.10 million was on top of the $244,594 in compensation he received before he left SIFMA in April. He is currently a partner at Patton Boggs LLP here. Kittell received $876,385 in compensation on top of his $991,666 severance payment. He retired in June after 15 years with the SIA and SIFMA.

Among the other $1 million-plus earners, Mary Schapiro, the former president of regulatory policy and oversight at the NASD, received $1.73 million in compensation along with $233,236 in benefits and deferred compensation as well as $38,855 in expenses and other allowances.

Schapiro is currently the CEO of FINRA. Douglas Shulman, the prior vice chairman of NASD, earned $1.26 million in compensation and $95,120 in benefits and deferred compensation. Shulman left FINRA and became Internal Revenue Service Commissioner in March.

Paul S. Stevens, president of the Investment Company Institute, earned $1.22 million in addition to $263,370 in benefits and deferred compensation. Edward L. Yingling, president and CEO of the American Bankers Association, made $1.18 million in addition to $911,455 in benefits and deferred compensation.

Marc E. Lackritz, then-president and co-CEO of SIFMA, made $1.10 million plus $298,734 in benefits and deferred compensation. He retired from SIFMA in August 2007. Michael D. Jones, a former senior vice president and the chief accounting officer at NASD, made $1.06 million in compensation and $214,143 in benefits and deferred compensation. He retired from NASD.

In contrast, Securities and Exchange chairman Christopher Cox will earn only $158,000 in 2008, according to an SEC spokesperson. The salary difference between the industry executives and Cox are even greater than they appear because all of the Form 990s filed by the nonprofit groups are from previous fiscal years.

As with previous surveys, this one also shows a sizeable gap between the salaries of industry group executives and the heads of state and local government groups.

Don Borut, the executive director for the National League of Cities, had the second-highest salary among state and local group executives, at $294,554, in addition to $41,205 in benefits and deferred compensation for the fiscal year ending Sept. 30, 2007. Borut's salary the previous year was $283,853.

Larry E. Naake, executive director of the National Association of Counties, made $281,127 in compensation plus $31,174 in benefits and deferred compensation in the fiscal year ending Dec. 31, 2006.

And Raymond Scheppach, executive director and CEO of the National Governors Association, received $260,035 in compensation as well as $37,983 in benefits and deferred compensation from his group and its Center for Best Practices.

Among other muni groups, Barbara J. Thompson, executive director of the National Council of State Housing Agencies, had the highest salary. She made $545,317 and $45,000 in benefits and deferred compensation for the fiscal year ending June 30, 2007.

Elizabeth Wagner, former director of governmental affairs for the National Association of Bond Lawyers, earned $217,396 and $16,305 in benefits and deferred compensation for the fiscal year ending Dec. 31, 2007. Wagner joined the IRS earlier this month as counsel to the commissioner of the large and mid-size business division.

Kenneth J. Luurs, the executive director of NABL, received a salary of $189,355 and $14,202 in benefits and deferred compensation.

At least three groups have contracts with management companies. The Council of Infrastructure Financing Authorities paid Navigant Consulting $305,280. The firm's Rick Farrell is executive director of CIFA. The National Association of Local Housing Finance Agencies, where John Murphy is executive director, paid Smith Bucklin Corp. $189,546. The payment covers a portion of Murphy's compensation, benefits, office space, and furnishing attributable to NALHFA. The Association of Financial Guaranty Insurers Inc. paid Mackin & Co. $193,873, of which 90% went to management and 10% went to lobbying, and paid an additional $41,630 for administrative expenses. Bob Mackin is executive director of AFGI.

Thomas Kuhn, president of the Edison Electric Institute, received $858,241 in addition to $1.41 million in benefits and deferred compensation for the 2006 calendar year, much less than the $2.14 million and $1.17 million in benefits and deferred compensation he earned the previous year. But Kuhn's 2005 compensation reflected a portion of his deferred compensation plan and change in accounting rules from 2004 to 2005 that allowed some deferred compensation to be included in the compensation category, according to an EEI human resources official.

His fiscal 2006 compensation, which is in addition to $1.41 million in benefits and deferred compensation, is more in line with his 2005 compensation when he made $734,071. EEI, which represents investor-owned utilities, is not a financial markets group, but is included in the survey as a contrast to the American Public Power Association, a muni market group.

In contrast, Alan H. Richardson, the former president and CEO of the APPA, made $507,028 in addition to $15,560 in benefits and deferred compensation. He earned $490,342 in fiscal 2005, which included $156,167 in a SERP payment that was paid and taxed in 2005. Richardson retired in December after 30 years with the group, and was replaced by Mark Crisson.

Other executives of the 22 groups who left or took new positions with successor organizations include Elisse B. Walter, a former executive vice president with NASD Regulation who became a commissioner of the Securities and Exchange Commission in July. Stephen Luparello, a NASD Regulations EVP, is now FINRA's SEVP of regulatory operations. Tim Ryan, a former vice president of investment banking at JPMorgan Chase & Co., became CEO of SIFMA in January, replacing Lackritz.

When comparing the salary levels of individuals among the 22 groups, one should note that most of the groups have different fiscal years. Nine of the groups' fiscal years were for the 2006 calendar year. Three of the groups' fiscal years were for the 2007 calendar year. Ten of the groups had fiscal years ending during some month in 2007, ranging between March and November.

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