In the revolving door derby, apparently a House Majority leader is worth less to Wall Street than a former SEC enforcement director or a US Department of Justice criminal prosecution chief.
Eric Cantor joining Moelis & Co
Former U.S. House Majority Leader Eric Cantor, credited with being a strong advocate for Wall Street interests, is joining Wall Street investment bank Moelis & Co (NYSE:MC) where an SEC filing shows he will receive $3.5 million after earning $193,400 last year as a Congressman.
Eric Cantor’s primary election loss to little-known economics professor, Republican David Brat, who in part campaigned against Cantor’s Wall Street ties, was said to have shocked Wall Street and DC elites. Cantor resigned two months ago and beltway insiders had expected him to land at a major Wall Street firm.
“In his new role, Mr. Cantor will provide strategic counsel to the Firm’s corporate and institutional clients on key issues. He will play a leading role in client development and advise clients on strategic matters,” a press release from Moelis & Co (NYSE:MC) announcing the hire said.
“Ignore the PR spin and the attempt to put lipstick on the pig,” said Dennis Kelleher, CEO of Better Markets, a Washington DC financial reform advocacy group. “Wall Street is after what it is always buying: access, influence and unfair advantages.”
Eric Cantor’s compensation evaluation
In evaluating Eric Cantor’s compensation, Wall Street apparently rewards former prosecutors to a greater degree than mere Congressman. Former SEC Enforcement Director Robert Khuzami was reported to have netted $5 million after leaving government service. The controversial Lanny Breuer, former director of the criminal division at DoJ and credited with following an official policy not to investigate Wall Street criminal behavior, was reported to receive nearly $4 million after leaving government service.
“Wall Street goes with the sure bet and the well-worn path. It simply doesn’t pay millions of dollars to former high ranking public officials for anything new or different, which, after all, might not work and, oh by the way, these former public officials have utterly no experience or skills to deliver on,” Kelleher said in an email statement to ValueWalk.
Eric Cantor, for his part, said in a statement he “wanted to joint a firm with great entrepreneurial spirit that focused on clients.” That focus on client and their needs can take many forms with such beltway connections. But Cantor’s press release didn’t address such issues, instead sounding entrepreneurial. “The new model of independent banks offering conflict free advice in a smaller more intimate environment, was a place where I new my skills could help clients succeed.”
Eric Cantor and Ken Moelis saw a potential business opportunity
Eric Cantor and Ken Moelis, CEO of the investment bank that hired Cantor, suddenly realized a potential business opportunity existed while having a Los Angeles brunch meeting with their wives earlier this spring, according to a Wall Street Journal report. Talks were said to have intensified in July. Cantor officially stepped down from office August 18 and made his intentions known to quit Congress August 1, meaning such talks took place while he was still in office.
Eric Cantor will follow in his wife’s footsteps as Diana worked at Goldman Sachs Group Inc (NYSE:GS) and serves on several regional corporate boards. One board that might come in handy for Eric Cantor’s business development tasks is Diana’s involvement on the board at the Virginia Retirement System.
“I’ve got a lot to learn” Eric Cantor told the Wall Street Journal. “I’m very focused on my next step.”
There’s not much to learn, Eric. Pull out the Rolodex and get to work.
Below is an excerpt SEC filing fro Moelis regarding the hire
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(d) Effective September 3, 2014, the Board of Directors (the “Board”) of Moelis & Company (the “Company”) will increase its size from six to seven directors and elect Eric Cantor as a director of the Company.
Mr. Cantor will also serve as Vice Chairman and Managing Director of Moelis & Company Group LP (“Group LP”) pursuant to an employment agreement. Either Group LP or Mr. Cantor may terminate the agreement at any time with or without cause.
Group LP has agreed to pay Mr. Cantor an annual base salary of $400,000. Group LP has also agreed to pay Mr. Cantor an initial cash amount of $400,000 and grant Mr. Cantor $1,000,000 in initial restricted stock units (“RSUs”), based on the average closing price of the Company’s common stock on the five trading days prior to his start date. The initial RSUs will generally vest in equal installments on each of the third, fourth and fifth anniversaries of his start date.
For calendar year 2015, Group LP has agreed to pay Mr. Cantor minimum incentive compensation of $1,200,000 in cash and $400,000 in incentive RSUs, payable in equal quarterly installments. The incentive RSUs will generally have the same vesting schedule as incentive RSUs granted to Group LP’s other Managing Directors.
Unvested initial RSUs and unvested incentive RSUs will be forfeited if Group LP terminates Mr. Cantor for cause or if Mr. Cantor terminates his employment other than (i) for good reason or (ii) after the second anniversary of the grant date, to take a full-time elected or appointed position in federal government, state government, or a national political party.
Mr. Cantor has agreed to repay all or a portion of his 2014 initial cash payment and 2015 and 2016 cash incentive compensation if (a) prior to the end of the seventh calendar quarter following the payment thereof, Group LP terminates Mr. Cantor for cause or if Mr. Cantor terminates his employment other than (i) for good reason or (ii) after the second anniversary of the payment date, to take a full-time elected or appointed position in federal government, state government, or a national political party and (b) he engages in certain competitive activities within 12 months of such termination.
Upon a voluntary termination of his employment other than for good reason, Mr. Cantor has agreed not to compete with Group LP for 90 days following such termination of his employment. In addition, Mr. Cantor has agreed not to solicit Group LP’s employees, independent contractors, consultants, service providers or suppliers for one year following termination of his employment for any reason. The employment agreement also includes restrictions relating to confidentiality and non-disparagement.
Moelis & Company Partner Holdings LP has agreed to take action to elect Mr. Cantor to the Company’s Board of Directors and not allow his removal until the Company’s 2015 annual meeting of stockholders, when all directors will be up for re-election, subject to continued employment with Group LP during this period.
Mr. Cantor will also be eligible to participate in Group LP’s employee benefit plans and arrangements, and will be reimbursed for the reasonable cost of a New York City apartment for his first 12 months and a hotel equivalent rate thereafter. In addition, Mr. Cantor and the Company have entered into an indemnification agreement substantially in the form attached as Exhibit 10.1 to Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-194306) filed by the Company with the Securities and Exchange Commission on March 24, 2014.