US online brokerage E*Trade has agreed to pay former chief executive Mitchell Caplan - who quit in November following heavy mortgage-related losses at the company - a severance package worth nearly $11 million.
The New York-based firm says Caplan will get a $10.9 million golden handshake under his employment contract from September 2004. The total is two times the sum of Caplan's base salary and bonus during 2006, as well as two years of medical, life and disability insurance coverage.
Caplan joined E*Trade in 2000 after the firm's acquisition of Telebank and Telebanc Financial Corporation. He was named president and COO in 2002 and became chief executive in January 2003.
Caplan is reported to have been responsible for attempts to diversify E*Trade's sources of revenue by venturing into mortgage-lending. But the firm got its fingers badly burned by the US mortgage market crisis last year and in November investors pulled $6 billion out of E*Trade after a Citigroup analyst downgraded the e-broker to 'sell' and warned of a potential bankruptcy risk due to mortgage-related losses.
Caplan quit as CEO on 29 November 2007 at the same time as the online brokerage received a $2.55 billion cash injection from hedge-fund manager Citadel Investment Group to fortify its balance sheet.
In a statement E*Trade says Caplan has also resigned from its board of directors, effective 31 December.
"Caplan's resignation from the board effectively severs all ties with the company," says the broker.
E*Trade says it expects to name a new CEO within the next 60 days. New chairman Donald Layton is leading the search and says that former COO R Jarrett Lilien, who took over as acting CEO following Caplan's resignation, will be considered for the post along with external candidates.