WASHINGTON — The White House sought Tuesday to lay to rest questions about the tenure of John Snow, President Bush’s new Treasury Secretary pick, at the helm of railroad giant CSX Corp.
The Associated Press reports that Bush named Snow, chairman and chief executive of CSX since 1991, to succeed Treasury Secretary Paul O’Neill as part of a shake-up of several top members of his economic team amid a sputtering recovery.
In response to a reporter’s question during a daily briefing, Bush spokesman Ari Fleischer appeared unfamiliar with CSX’s failure to pay taxes during Snow’s leadership of the company. Fleischer, however, signaled Bush’s support for his nominee.
“The president is very confident that all the investigation that is relevant on this issue has been looked at thoroughly and fully, and that the Senate will take a look at all this as well, and that his nominee will be confirmed as all these issues are looked at,” Fleischer said.
Later, the spokesman issued an e-mail addendum which said that CSX had not paid taxes in 1998 and 2001 because of tax losses from declining operating income, increased debt from its joint purchase of government freight line Conrail and large capital expenditures the transaction required.
Snow, who served in several Ford administration posts and holds advanced degrees in economics and law, has been praised for his communication skills. But he has drawn mixed reviews for his work building CSX into the largest railroad company in the Eastern United States.
Snow has been a director of the Richmond, Va.-based transportation and railroad conglomerate since 1988 and has been chairman and chief executive since 1991.
Like other railroad operators, CSX has struggled financially in recent years as companies have worked to digest past acquisitions and shippers have switched to more efficient competitors, especially trucking firms.
Industry observers blame much of CSX’s woes on its acquisition — in partnership with Norfolk Southern Corp. — of Conrail. The companies divided Conrail’s Northeastern freight routes in a purchase that closed in June 1999, and observers widely agreed that the $10.3 billion price tag was too high.
Fleischer also addressed personal loans by CSX to Snow, in which Snow borrowed from the company to buy CSX stock but saw his debts forgiven when the shares sank in value.
The company disputed published reports that the total Snow borrowed reached more than $24 million. Without providing an exact figure, CSX spokesman Adam Hollingsworth said that figure was too high “by a multiple factor.”
Though legal at the time, the practice would be prohibited by a sweeping corporate reform law passed earlier this year to address a series of scandals in business boardrooms.
Fleischer said Bush was aware of — and OK with — the arrangement. “Anything that was a common practice that was lawful is not, in the president’s judgment, a disqualification,” Fleischer said.
Hollingsworth said the board terminated the program by forgiving the loans but requiring the stock to be given back, aiming to “relieve the employees of the burden” of the price drop.
“The program did not result in employees owning stock and having the loans forgiven to purchase that stock,” Hollingsworth said.
Separately, Snow said Tuesday night he will forgo cash compensation, consulting fees, future salary, bonuses, restricted stock and options — all of it payable to him under the terms of an employment contract in the event of his departure from CSX. The compensation is worth millions of dollars.