Icahn’s CVR Files Suit Over ‘Eye-Popping’ Delek CEO Pay

Bookmark

Carl Icahn’s CVR Energy Inc. has filed a lawsuit against Delek US Holdings Inc. seeking documents it believes will detail how the refineries’ Chief Executive Officer Ezra Uzi Yemin received an estimated $81 million in total compensation over the past eight years, some of which wasn’t disclosed in proxy statements.

CVR Energy alleges in the suit, which was filed in Delaware Thursday, that Yemin received the “eye-popping” compensation from both Delek and its publicly-traded logistic’s subsidiary, Delek Logistics Partners.

Roughly $53 million came in the form of compensation between 2013 and 2020 as chairman, president and CEO of Delek, CVR Energy said. The remainder is derived from a 5% interest in the general partner of the logistics subsidiary that he was given for unknown reasons and was bought back last year for $21.4 million. That portion wasn’t disclosed in proxy statements, the suit said.

“Yemin is a poster boy for all that is wrong with corporate governance in America,” the lawsuit states.

A representative for Delek wasn’t immediately available for comment.

CVR Energy compares Yemin in the suit to British-Armenian businessman Calouste Gulbenkian, who was dubbed “Mr. Five Percent” in the first half of the 20th century for the percentage of interest he received for himself in other people’s Middle Eastern oilfields. It alleges that Delek dropped significant assets into the logistics arm at what appears to be “excessively low multiples” that padded the payments to Yemin.

“As Delek’s very own Mr. 5%, Yemin received a direct cash reward for any value transferred by Delek to Logistics. It was a direct -- but highly lucrative -- conflict of interest for Mr. Yemen,” CVR Energy said in the suit.

Proxy Contest

Icahn’s CVR Energy is in the midst of a proxy contest at Delek, in which it is seeking three seats on the company’s board. CVR Energy, which owns nearly a 15% stake in Delek, reiterated it isn’t seeking control of the refiner but believes that a truly independent board that takes back control of Delek from “Yemin’s current ‘iron fist’ style of rule” could greatly enhance value at the company.

Delek has said it believes the proxy fight isn’t in the best interest of shareholders, in part because CVR Energy’s demands would benefit CVR Energy and and not Delek or its investors. It noted in a March statement its five-year total shareholder returns were 92%, compared with 28% for the average of its peers, including CVR Energy, over the same period.

CVR Energy contends in the suit that the compensation Yemin received from the logistics arm was never disclosed and that the documents it is seeking are needed in order to determine the full extent of what he was awarded. CVR Energy said it reserves the right to bring appropriate litigation based on the documents “for any fiduciary breaches or other wrongdoing that it might uncover.”

Two previous attempts to obtain the pay records were rejected by the company, according to the suit.

“Delek’s shareholders will benefit tremendously even if they gain access to these documents after the annual meeting because such disclosure would deter Yemin and his cronies on the board from awarding similar undisclosed gifts in the future,” the suit states.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.