19 April 2010

Ex-DM&E Chief:  Railroad Owes Him $4 Million More

Sioux Falls South Dakota USA - The Sioux Falls man who lost his job as a railroad boss to a corporate merger is locked in a bitter dispute over his severance package.
 
A lawsuit filed by the Dakota, Minnesota & Eastern Railroad against former CEO Kevin Schieffer puts a sour ending on a business relationship that turned around a failing company and almost produced the largest railroad expansion in 100 years.
 
Schieffer left the Dakota, Minnesota & Eastern Railroad in October 2008 after Canada Pacific bought the company for more than $1.5 billion. He wanted to lay track into Wyoming to haul coal east from the Powder River Basin. Instead, Schieffer is at least the second employee to contest his compensation after the takeover by the Canadian company was completed in September.
 
"We're in a dispute over what he should be paid for in that severance package," said Steve Sanford, Schieffer's lawyer. "They've chosen to make this a very vitriolic thing, which has been their pattern."
 
Former DM&E employee Steven Scharnweber took the company to federal court in March 2009 over its refusal to pay bonuses he was to receive before his firing.
 
Schieffer's employment contract required DM&E to pay a severance package if he were dismissed without cause.
 
Because Schieffer lost his job to the merger, the company paid him almost $1.4 million in January 2009. The company paid another $1.6 million in taxes on the payout, bringing the total severance payment to almost $3 million.
 
In December, Schieffer was paid an additional $514,000 from an escrow fund set up in 2007.
 
The payments didn't match the terms of Schieffer's contract, Sanford said. In late March, the former CEO demanded an arbitration hearing. He claims the company miscalculated his severance package by about $4 million by failing to pay bonuses and wrongfully withholding wages.
 
The arbitration claims the company maliciously withheld compensation. Sanford said it's a result of Schieffer's demand that Canadian Pacific honor promises he'd made to pay western South Dakota ranchers for cooperation with the DM&E on the Powder River expansion project. That came after the Calgary-based company's purchase of the DM&E gained the final approval of the Surface Transportation Board.
 
"He stuck his neck out for them and he lost his job over it," Sanford said.
 
The company disputes this claim. Last week, the DM&E filed a lawsuit in federal court against Schieffer in an attempt to halt the negotiations and force the dispute into federal court. The lawsuit claims Schieffer was "insubordinate" and that his severance package demands are unreasonable.
 
A third-party arbitrator shouldn't sort out the compensation package, the company claims, because the contract falls under the purview of the federal Employment Retirement Income Security Act, not state law.
 
"DM&E's federal rights would be violated and congressional intent would be frustrated if Schieffer's claims were considered under state law, rather than ERISA," the lawsuit said.
 
Lawyers for the DM&E did not return repeated calls for comment. The parties are scheduled to return to court later this month.
 
John Hult.