Santander Consumer USA agreed to pay Thomas Dundon — who was the subprime lender’s former chief executive, chairman, and one of its founders — more than $700 million in an exit deal, according to a Securities and Exchange Commission filing.
The deal has been more than two years in the making, as Dundon departed Santander (SC) back in July 2015 during a time of heightened regulatory pressure.
Dundon was immediately succeeded by Jason Kulas, who has since departed the role to “pursue other opportunities,” ending his 10-year run with the company. In August, Kulas was immediately replaced by Scott Powell, CEO of Santander Holdings USA (SHUSA) the subsidiary of Spanish parent bank Banco Santander.
At the time of Dundon’s departure, it was announced that Dundon — who founded the company in 1995 — would continue as a member of the board and senior adviser. However, SC said it would also exercise a previously negotiated agreement to buy out all of Dundon’s shares in the Dallas-based company, representing about 9.7% of SCUSA’s common stock, worth an estimated $1 billion.
Now, Santander has agreed to a smaller exit deal with Dundon, who will receive $942 million for his stock and $66 million in severance — down $50 million as mentioned in the original deal, according to the filing released Friday evening. Dundon will repay a $290 million loan to SC, plus interest of approximately $4.5 million, which brings his net proceeds — before taxes — to $713 million.
While a Santander spokeswoman declined to comment on the reasons for the delay in finalizing Dundon’s payout terms, the SEC filing states the parties agreed to alter “certain portions of the economic arrangements set forth in the separation agreement” on Nov. 15. SC and Dundon “engaged in arms-length and good faith negotiations to reach a reasonable final settlement,” according to the filing.
“Santander is pleased to have concluded our long-planned transactions with former Santander Consumer USA CEO Tom Dundon,” the SC spokeswoman said. “This represents another step forward in Santander U.S.’s evolution.”
SC has not had an easy two years when it comes to regulatory compliance. In 2015, the company started getting hit with consent orders from the Federal Reserve for failure to pass a stress test. Later that year, the Department of Justice sent a consent order alleging the company violated the Servicemembers Civil Relief Act. Then, the Consumer Financial Protection Bureau notified the company of potential violations of the Equal Credit Opportunity Act.
In July 2015, just as the Federal Reserve Bank of Boston came down with its consent order, Dundon resigned.
However, Santander has “made major strides in the last year,” the spokeswoman said, which includes “passing the Federal Reserve’s capital stress test and the termination of the 2014 written agreement with the Federal Reserve.”
“As SC continues to resolve legacy issues and move forward under new CEO Scott Powell, the company will maintain its focus on operating at major financial institution standards, creating a stronger, more customer-centric business for the long-term,” the spokeswoman added.
