By Bob Rust, Oslo

published: 30 April 2004

Crowley playing 'Peter pay Paul'

California-based, third-generation shipowner Thomas Crowley Jr has borrowed money to pay $7.5m back to his company, Crowley Maritime, to avoid violating the US Sarbanes-Oxley corporate-governance law.

The privately owned US-flag containership, tanker and tug owner revealed the payment last week in a filing to the US Securities and Exchange Commission (SEC). The Oakland-based company is set to pay the interest on the financing Crowley arranged for the payback.

Largely as a result of the Sarbanes-Oxley issue, Crowley's compensation in 2003 dropped to some $2.5m from $5.2m the previous year.

Under a long-running, «split-dollar» life-insurance agreement with Crowley, the company's chairman, president and chief executive, Crowley Maritime has been paying his life-insurance premiums, which he or his survivors were to repay after cashing in on the policy. However, the Sarbanes-Oxley Act of 2002 makes it illegal for issuers of securities in the US to make personal loans or extend other credit to their directors and executives. The company says in the SEC filing that the law «might be construed as treating annual premium payments made after 30 July 2002...as new extensions of credit that would be prohibited». It has therefore discontinued these but they may be resumed in future. The company points out that the law does not specifically address such insurance arrangements.

According to the SEC filing, Crowley paid no interest on the paid-back premiums and the family-controlled company will be bearing the after-tax cost of the interest on the financing that he had to arrange to make the $7.5m payment.

The 37-year-old Crowley controls the majority of common stock and 99.9% of preferred stock in Crowley Maritime. In its annual report, the company explains that the split-dollar insurance agreement is intended to prevent «an unrelated third party gaining a highly influential and potentially detrimental position with respect to the business and management of the company» once family members are faced with paying estate taxes on their equity in Crowley Maritime and other assets.