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of increase in equity over 1992 through 1998, petitioner paid Mr.
Wechsler $2.50. While that may be an appropriate fee for
wringing profits out of some dubious investment, it seems
unreasonable for producing a compound rate of return of only 10.4
percent over 7 years when, according to Mr. Matthews’s rebuttal
report, the average risk-free rate of return during each May of
1992 through 1998 was approximately 7 percent. Moreover, the
$37.992 million paid to Mr. Wechsler is substantially more than
even petitioner’s own adjusted common stock equity of $29.079
million and total adjusted (common and preferred) stock equity of
$30.147 million at the end of petitioner’s 1998 fiscal year. Mr.
Matthews has failed to convince us that, for the 10.4-percent
compound rate of return Mr. Wechsler produced for petitioner’s
1992 through 1998 fiscal years, an independent investor would
approve of paying him $36.497 million in total compensation.
ii. Mr. Dorf
Mr. Dorf, while recognizing that Mr. Wechsler’s compensation
in 1994 and 1998 was “higher than expected” (and, presumably,
therefore, more than reasonable), was of the opinion that the
average ($4,752,721) of the amounts of compensation paid Mr.
Wechsler for the 8 years in question was “justified and
reasonable”.15 Mr. Dorf based his conclusions on a number of
15 During the 8 years in question, the range of Mr.
Wechsler’s annual compensation was $6,097,000, from a low of
$1,390,000 (for 1997) to a high of $7,487,000 (for 1998). Mr.
(continued...)
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