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WebMD hands out golden parachutes

A couple of former executives will receive sizable severance packages after resigning from the struggling online health company earlier this year.

A couple of former WebMD executives will receive sizable severance packages after resigning from the struggling online health company earlier this year.

Elmwood Park, N.J.-based WebMD will pay former President Marvin Rich $1 million a year in salary and bonus over the next three years, according to a regulatory document filed with the Securities and Exchange Commission on Wednesday. Meanwhile, Patricia Fili-Krushel, the company's former chief executive of consumer sales and services will receive $750,000 a year for the next three years, according to the filing.

Rich resigned last month, and Fili-Krushnel resigned in July.

Rich and Fili-Krushnel's payouts come amid ongoing struggles for WebMD. The online health provider posted a net loss of $1.9 billion, or $5.21 per share, for the first half of the year. Meanwhile, the company's stock has sunk from a high of more than $100 a share in March 1999 to $4.50 at the close of Wednesday's bell.

Despite the company's early rhetoric about revolutionizing health care, WebMD and other Internet start-ups such as have found difficulty trying to make inroads into the complex industry.

As part of its agreement with Rich, WebMD will pay the former president his $500,000 salary until September 2004 and will pay him a $500,000 bonus every year until 2003. In addition, all of Rich's 4.2 million stock options vested when he resigned.

Fili-Krushnel will receive half of her $1 million a year salary each year until May 2004. WebMD will also pay her $750,000, which represents half of the minimum annual bonus she was due to receive over that time period. Fili-Krushnel's 550,000 stock options vested when she resigned.

Executive compensation expert Graef "Bud" Crystal said the WebMD payouts were just another example of a dysfunctional system.

"The probability of you screwing up and walking away with nothing is so low that it would have to be written in scientific notation; it's far lower than 1 percent," Crystal said. "As it as turns out, you get big amounts of money if you're only so-so. You get big amounts of money if you screw up and get fired.

"I think it's sickening, but that's the way things work."

WebMD representatives did not return calls seeking comment.

The payouts for Rich and Fili-Krushel are only the latest high-priced separation packages for WebMD. The company paid former co-Chief Executive Jeffrey Arnold $4 million after he resigned last October. When Jack Dennison, WebMD's executive vice president and co-general counsel, resigned in January, the company agreed to continue paying him his base salary of $450,000 for the next year.

The payouts are the latest golden parachutes to be handed out by a struggling Internet company. Earlier this year, separation packages awarded to the former chief executives of and Webvan drew criticism from compensation experts and company shareholders.