” Fidelity Investments, despite its struggles in a historic stock-market decline, will pay out $217 million to ‘a number of senior executives’ who retired in January,” writes John Hechinger in today’s Wall Street Journal.

“The big payout demonstrates the often-rich rewards that can come with long service time at closely held Fidelity, the nation’s largest mutual-fund company. Fidelity will make the payments as part of the company’s stock-based compensation plan.”

“Several hundred top executives and money managers have the chance to buy stock in Fidelity during their careers, which the company then buys back when they leave the firm. In the case of the departing executives, Fidelity said they are expected to receive their windfall in cash this year, except for about $75 million in promissory notes and other debt.”

“Boston-based Fidelity Investments, also known as FMR Corp. and controlled by the Johnson family and Chairman Edward C. Johnson III, closely guards its compensation practices. But it disclosed the payments in a confidential offering document circulated recently to institutional investors, as it raised $400 million Monday in an offering of 10-year notes to refinance its debt at lower interest rates.”

“The filing doesn’t say which executives, or how many, will receive the $217 million. But some of the executives who retired in January included Vice Chairman James C. Curvey, a former president and chief operating officer who retired after 20 years and remains a director and confidant of the Johnsons; Rod Rhoda, president of the company’s life-insurance unit; Jim Messenger, president of brokerage technology; and Fred Henning, head of corporate services. Fidelity officials declined to comment, citing restrictions because of the bond offering.”

“Fidelity raised money through Rule 144A of the federal securities laws, which allows companies to sell unregistered securities to select institutional investors without broad disclosure. In an interview Monday, Stephen P. Jonas, Fidelity’s chief administrative officer, said the company was refinancing its debt to take advantage of lower interest rates. Fidelity did the same kind of offering — placing $1 billion in long-term bonds — in 1999, when rates were higher.”

“The offering document gives other glimpses of rich stock-based compensation, which it said amounted to $410.4 million in 2002, up from $302.8 million in 2001. Fidelity said it issued a stock dividend on Jan. 30 to an unspecified number of employees that resulted in an $871 million charge to retained earnings.”

“Fidelity also said that a Latin American telecom start-up, MetroRed, in which Fidelity has a controlling interest, remains under investigation by the U.S. Department of Justice for violations of the Foreign Corrupt Practices Act, as well as a related Brazilian investigation. Fidelity, which had already disclosed the investigation, said it was cooperating.”

“Also Monday, in a broadly distributed report, as well as in the offering, Fidelity reported that its 2002 net income dropped 39% to $808.2 million.”

“Fidelity blamed the drop on the bear market, a decline in trading at its big brokerage unit and ‘negligible’ net sales of its funds. Fidelity said the blow would have been even sharper without cost-cutting efforts, such as layoffs. In an atmosphere the company termed ‘at best challenging, and often downright difficult,’ revenue fell 9% to $8.94 billion from $9.81 billion.