WASHINGTON-Former Cellular Telecommunications & Internet Association President Thomas Wheeler’s employment contract was altered to pave way for a $500,000 bonus he received from the $37 million sale of the trade group’s billing subsidiary last year, a move that did not go before the full board of directors.
Instead, according to CTIA, Wheeler’s half-million-dollar bonus -which bumped up his salary to $2,060,058 in 2002-had only the approval of the chairman of the association’s board of directors. Wheeler, who stepped down from CTIA last November, was succeeded by former Rep. Steve Largent (R-Okla.). Wheeler remains associated with CTIA in a consulting capacity.
“In March of 2002, as the association began to consider the sale of its Cibernet subsidiary, CTIA entered into an agreement that provided an incentive award to Tom Wheeler based on the association’s ultimate success selling Cibernet. The incentive took the form of an addendum to Wheeler’s employment contract,” said Travis Larson, a CTIA spokesman.
Larson continued, “In April of 2003, upon the successful sale of Cibernet, CTIA’s chairman approved granting the incentive award to Tom Wheeler according to the terms of the agreement negotiated more than a year before. The bonus was considered an appropriate recognition of Wheeler’s contribution to growing Cibernet into an asset whose successful sale in a difficult financial climate yielded CTIA millions of dollars.”
In March 2002, when the sale of Cibernet sale was contemplated, Rick Ekstrand, president of Rural Cellular Corp., was chairman of CTIA. In April 2003, when the asset was sold and Wheeler’s bonus approved, Tim Donahue, president of Nextel Communications Inc., chaired CTIA’s board and approved the sale.
A former Cibernet employee, based overseas and who requested anonymity, questioned the bonus given Wheeler and possibly other Cibernet executives, some of whom are no longer with the Bethesda, Md.-based wireless billing company. The ex-Cibernet employee, who was critical of some Cibernet business practices and acknowledged having a run-in with management, claimed at least three others received hefty bonuses.
Asked whether other Cibernet-sale bonuses were awarded, Parry Snow, vice president of global marketing, replied, “I really can’t say. I’m not privy to that.”
The former Cibernet employee also charged the sale price was far below the original asking price of $175 million.
Cibernet was sold to a group of local, high-profile high-tech entrepreneurs, including a former business partner of Wheeler’s at Maryland-based Aether Systems Inc. Mark Ein, like Wheeler an early Aether investor, initiated talks with CTIA that led to the Cibernet transaction.
Last year, CTIA said Wheeler helped negotiate a deal that fetched “top dollar” for Cibernet.
Cibernet’s Snow declined to confirm or deny whether Cibernet’s sale price was significantly less than the initial asking price.
In addition to the bonus issue, the Cibernet sale has begun to shed light on the financial health of The Wireless Foundation, a nonprofit group affiliated with CTIA that oversees philanthropic programs such as Donate-a-Phone, Call to Protect, ClassLink, the VITA Wireless Samaritan Awards and the Amy Fund.
CTIA last week said the foundation received $13 million from the Cibernet sale. In addition, CTIA said the foundation partly owns the property on which CTIA’s new headquarters are located in Washington, D.C.
“The board created the endowment to place the foundation on a solid financial footing and free it to do good deeds without the pressure of raising funds in a tough economic climate,” said Larson. Larson said the foundation is totally dependent on the sale of donated phones.
Larson explained how the land deal came to be. “The foundation subsequently invested some of its reserves to purchase an interest in the land (which was separate from the building) in our complex in order to provide a predictable return on its investment. The CTIA board’s decision to fund the foundation, and the foundation’s decision to purchase the land, were two entirely separate decisions, separated in time. In other words, the building purchase was not contemplated when the CTIA board voted to fund the foundation.”
As a result, according to Larson, the foundation can now earn sufficient return on its investment in the land to cover its base operating costs.
In addition to netting $500,000 from the Cibernet sale, according to CTIA’s 2002 tax return, Wheeler received $42,000 for foundation-related work.
