$4 MILLION MAN A lawsuit brought by the state and Sikh religious leaders challenges salaries at food company Golden Temple BY SHERRI BURI MCDONALD The Register-Guard Appeared in print: Thursday, May 12, 2011, page A1 Top executives at the Sikh-controlled Eugene food company Golden Temple drew excessive compensation in recent years — the CEO topped $4 million last year — while the company slashed its donations to Sikh religious and educational nonprofit groups, according to records disclosed in an ongoing lawsuit against the Sikh business leaders by state officials and Sikh religious leaders. The rapidly rising paychecks came after a group of Golden Temple executives largely gained control of the company through a reorganization in 2007, the filings allege. The state is seeking to recover from the CEO — former Eugene resident Kartar Singh Khalsa — and other top executives any unjust gains and to put Golden Temple in control of an outside receiver. Oregon Attorney General John Kroger and religious leaders of the Sikh community founded by Yogi Bhajan sued Unto Infinity — the four-person board that oversees Golden Temple — and also the six Golden Temple executives in Golden Temple Management, an Oregon company. Kroger and the Sikh religious leaders allege that Unto Infinity, an Oregon nonprofit board, breached its duty to safeguard Golden Temple’s assets for the Sikh religious community, and that the Golden Temple executives enjoyed excessive pay at the expense of the overall Sikh community. Attorneys for Unto Infinity and Golden Temple Management declined to comment on specifics in the court filings and said more facts would be presented at trial. The lawsuits were merged in December and the case is set for trial in Multnomah County Circuit Court in Portland on May 23. Kartar Khalsa is the only defendant who is both a member of the Unto Infinity board and of Golden Temple Management. He now lives in Portland, but for years was a Eugene resident, and in 2007 and 2008 held the high-profile volunteer post of board chairman of the Eugene Area Chamber of Commerce. As CEO of Golden Temple, Kartar Khalsa estimated that last year he had a base salary of $900,000 plus an expected payout of more than $3.2 million from the sale of Golden Temple’s cereal division to an Illinois bakery company, he testified in a deposition recently excerpted in court filings. John McGrory, the Sikh ministers’ attorney, claims in court documents that Kartar Khalsa’s share from the cereal unit sale in 2010 was even greater, perhaps as much as $10 million to $20 million. Many of the claims Kroger and the Sikh ministers make in their lawsuits stem from a 2007 restructuring of Golden Temple, which, after certain payments, transferred 90 percent of Golden Temple’s profits from KIIT Co., a Nevada for-profit corporation controlled by Unto Infinity, to the six Golden Temple managers, according to court documents. The biggest profits for the Golden Temple executives flowed from the sale of the company’s cereal business, according to the filings. Kartar Khalsa and other Golden Temple executives also received hefty raises in recent years. Kartar Khalsa’s base salary alone rose 84 percent from 2007 to 2010. It is unclear from the filings who authorized those raises. Their attorneys declined to answer that question. Attorney Kenneth Davis, who represents Golden Temple Management, said Unto Infinity board members Siri Karm Kaur Khalsa and Sopurkh Kaur Khalsa approved the 2007 restructuring of Golden Temple. The board’s two other members, Kartar Khalsa and Peraim Kaur Khalsa, who are domestic partners, recused themselves from that vote, Davis said. The corporate restructuring and big raises came three years after the death of Yogi Bhajan, who had brought his own brand of Sikhism to the United States in the late 1960s and attracted thousands of students. Those students built and donated to the Sikh Dharma religious community several successful businesses, including Golden Temple in Eugene and Akal Security, a security services firm in Espanola, N.M. Golden Temple’s restructuring and the raises came as charitable contributions from these for-profit businesses to the Sikh community’s nonprofit educational and religious organizations plunged, McGrory, the Sikh religious leaders’ attorney, said in court documents. In the league of larger firms CEO Kartar Khalsa testified that his annual income jumped from $1.3 million in 2007 to more than $2.7 million in 2009, according to excerpts from a March deposition recently filed with the court. He testified that his estimated 2010 compensation exceeded $4 million, including his $900,000 base salary and his share of the profits from the May 2010 cereal business sale. That is extremely high annual compensation for a business the size of Golden Temple, according to analysts. Joe Meissner, president of Executive Capital Partners, a Portland business that matches seasoned CEOs with private equity groups, said the base salary for the CEO of a company with revenue of $125 million typically would be $200,000 to $300,000. Kartar Khalsa’s annual compensation in recent years is more in the league of much larger, publicly traded companies, according to a report by Equilar, an executive compensation data firm. Median total compensation last year was $2.2 million for CEOs of S&P 600 firms, Equilar reported. The companies in the study had median revenue last year of $5.9 billion — 47 times greater than Golden Temple’s $125 million annual revenue before it sold its cereal division to Hearthside. The price Hearthside paid is sealed in the court record, making it unavailable to the public. It is estimated to exceed $40 million, based on other figures in the court record. The court has required that the proceeds be held in escrow until the lawsuit is resolved, so that money has not actually been distributed to members of Golden Temple Management. In its lawsuit, the state asks for damages against the four Unto Infinity board members of $17 million — the difference between the cereal division’s fair market value when it was sold to Hearthside, and the amount KIIT Co. actually received. KIIT Co., which owned Golden Temple prior to the 2007 restructuring, was to receive at least $23 million — Golden Temple’s appraised value in 2007 — if Golden Temple were sold, according to the documents outlining the restructuring. The state also asks that the Unto Infinity members be removed and a receiver be appointed, and that the six Golden Temple managers return their interest in the company and repay any income and benefits derived from it. Davis, the attorney for Golden Temple Management, including Kartar Khalsa, said “we believe (the state’s) claim to be ill-founded, and it will be shown to be so at trial.” Unto Infinity’s attorney, Nathan Christensen said, “We’re looking forward to defending our case at trial.” Big bump after yogi died Last year, Kartar Khalsa and the five other managers in the Golden Temple Management ownership group received a payout from the company totaling at least $5 million, Golden Temple CFO Karam Singh Khalsa testified in a deposition. That was on top of their regular corporate salaries and bonuses, state attorney Daniel Rosenhouse said in court papers. The $5 million was separate from the cereal business sale proceeds that are being held in escrow. The six members of Golden Temple Management are CEO Kartar Khalsa, CFO Karam Khalsa, operations director Ajeet Singh Khalsa, research and development director Guru Hari Singh Khalsa, sales manager Gurudhan Singh Khalsa and marketing manager Robert Ziehl. They still run the Yogi Tea operations of Golden Temple, which has 50 employees in Springfield and 100 employees in Europe. The salary of operations manager Ajeet Khalsa almost tripled between 2001 and 2006. It rose from $71,650 in 2001 to $204,000 in 2006, state attorney Susan Miller said at an April 22 hearing. The biggest bump occurred after the yogi died in 2004. Sales manager Gurudhan Khalsa’s salary started at $66,000 and rose to $202,000 in 2006, she said. CFO Karam Khalsa’s salary was $47,000 when he started in 1995 and was $228,000 in 2006, Miller said. Karam Khalsa testified in depositions that his 2009 salary was $197,000, plus a bonus of more than $200,000. Three of the yogi’s longtime personal assistants, Peraim Khalsa, Siri Karm Khalsa and Sopurkh Khalsa, who sit on the Unto Infinity board with Kartar Khalsa, generally saw their six-figure incomes rise, but by a smaller percentage than the Golden Temple executives, court records show. Peraim Khalsa received salary and bonus of $161,396 in 2007, $192,827 in 2008 and $185,568 in 2009, according to court documents submitted by McGrory, the religious leaders’ attorney. Siri Karm Khalsa received $197,100 in 2007, $209,200 in 2008 and $220,144 in 2009, McGrory said. Sopurkh Khalsa received $204,345 in 2007, $205,250 in 2008 and $200,598 in 2009, McGrory said. All three of them received a bonus of $15,000 in 2007 from Akal Security for their services as Akal board members, McGrory said. Akal is the Sikh community’s New Mexico company that provides security for courts and military bases nationwide. The bonuses were made just a couple of months after Siri Karm Khalsa and Sopurkh Khalsa approved the 2007 restructuring of Golden Temple, he said. Akal also provided the three women with leased cars, Siri Karm Khalsa testified in a deposition. The Akal board approved a plan to award cash bonuses to the three so they could purchase their cars, she said. At the same time these three Unto Infinity board members were receiving six-figure salaries and giving themselves bonuses, they also had determined that Golden Temple and Akal couldn’t provide sufficient funding to the Sikh community’s nonprofits, and they were concerned that a multimillion dollar claim against Akal by the U.S. Justice Department might force Akal out of business, McGrory said in court documents. Donations from Akal and Golden Temple to the Sikh community nonprofits dropped 85 percent, from $1.2 million in 2006 to $174,931 in 2007, McGrory said. “As directors of (Unto Infinity) and Akal, defendants Sopurkh, Siri Karm and Peraim had a fiduciary duty to ensure that the nonprofits were getting sufficient funding,” McGrory said. “Instead of fulfilling this duty, they took income from the trust assets for themselves through salaries, bonuses and cars.” The excessive compensation continued through 2008 and 2009, McGrory said in court documents. All three received a $17,500 bonus in 2008 and a $50,000 bonus in 2009 from Akal for their service as board members, he said.