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David Perdue stock arrangement draws scrutiny

U.S. Sen. David Perdue applauds President Donald Trump during his speech at the Black Voices for Trump Coalition Rollout in November in Atlanta. Curtis Compton/ccompton@ajc.com
U.S. Sen. David Perdue applauds President Donald Trump during his speech at the Black Voices for Trump Coalition Rollout in November in Atlanta. Curtis Compton/ccompton@ajc.com

U.S. Sen. David Perdue was allowed to hold onto shares of a Georgia startup even after resigning from its board, a deal that earned him millions of dollars when the company went public several years later.

The agreement Perdue had with the data marketing firm Cardlytics was first disclosed in an article by The Intercept, which reviewed Securities and Exchange Commission documents from shortly before he took office. The report says Perdue made more than $6 million as a result.

There is no wrongdoing or rule-breaking alleged in arrangements like this. The wealthy senator’s compensation from Cardlytics is just the latest detail in his vast portfolio of assets and investments to face scrutiny as he runs for re-election this year.

There is some debate, however, over whether the treatment of Perdue was unusual.

Perdue joined the Cardlytics board in November 2010, lending the new company his experience and knowledge from years as a Fortune 500 executive. His sole compensation was in shares of the firm that would become valuable only if it was taken from privately owned to public.

When Perdue won his Senate seat in November 2014, rules required him to resign from the board. Cardlytics submitted documents to the SEC that showed that Perdue was allowed to fully vest in 300,000 shares of the company although a small fraction, about 2%, had not matured at the time of his departure.

The Intercept also found that the agreement gave Perdue several years, until 2020 for some shares and 2022 for others, to cash in on the stock options. This was a crucial change because Cardlytics didn’t go public until 2018.

Employees who leave a company with stock options usually have a much shorter window — a matter of months — when they can cash in, one executive compensation consultant told The Atlanta Journal-Constitution.

A Cardlytics executive told The Intercept, a left-leaning online news organization, that the company allowed Perdue to retain his shares until its public debut because he had been instrumental in its success. The company noted that it had made similar agreements with other employees and that extensions like these are common practice.

“Senator Perdue was a very involved and valuable board member, particularly as a past CEO of a retail company,” Dani Cushion, Cardlytics’s chief marketing officer, told The Intercept. “In 2014, the board unanimously agreed to give Senator Perdue the grace period to make use of the options he had earned. This is not unique to Senator Perdue and in other circumstances with employees leaving Cardlytics, the board has also granted the same opportunity.”

Executive compensation expert Brian Foley, who reviewed the deal at The Intercept’s request, doesn’t agree that it is common.

“That struck me as unusual and very generous,” Foley, who has 45 years of experience, told the AJC. “I suspect that they would have not done that across the board.”

Technology firms often use stock option plans as a way to recruit and retain employees. The vesting of those options and when employees can exercise their option to sell their shares are crucial components to any agreement.

Foley was also critical of a deal U.S. Sen. Kelly Loeffler reached with Intercontinental Exchange, the company she worked for and that was founded by her husband. The New York Times reported earlier this month that the company, known as ICE, allowed her to cash in on stock options even though she resigned months before the original vestment date. The change made Loeffler about $9 million richer, the Times said.

“It was something that the typical employee would not get, and likewise with Senator Perdue,” Foley said.

Atlanta-based Cardlytics became Perdue's biggest financial holding, according to disclosures filed earlier this year.

And he has held onto his shares of the company even after selling off most of his other stocks. Both Perdue and Loeffler announced recently that they will no longer trade in individual companies' stocks after transactions made on their behalf during the coronavirus pandemic were criticized.

However, neither divested fully. Loeffler and her husband still own millions of dollars in ICE stocks. Perdue said he would hold onto his stocks in Cardlytics and two other companies that he also served as a board member: Alliant Energy and Graphic Packing.

Perdue’s team said the value of his Cardlytics shares is currently $3.3 million.

Read more: U.S. Sen. David Perdue says his advisers won’t trade individual stocks

Also: Kelly Loeffler faces new controversy about her pre-Senate payout