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Bonuses During Bankruptcy Under Fire Again

Posted By admin || 11-Jul-2011

Bonuses During Blockbuster Bankruptcy Under Fire Again

The last executive employee of Blockbuster may lose his six-figure bonus if the Office of the U.S. Trustee has its way. The department has requested that the company's former treasurer, who has remained with the company through bankruptcy be prevented from receiving a six-figure bonus for his work on the bankruptcy case.

Bruce Lewis, the company's former treasurer, has been charged with winding down Blockbuster's bankruptcy estate after the sale of its assets to Charles Ergen's Dish Network Corp., which continues to operate Blockbuster stores.

Lewis is slated to receive a bonus for his work of $125,000 for every $10 million in repayment he returns to secured creditors.

Opponents of the bankruptcy bonus scheme say that that Lewis may have an incentive to direct money to secured creditors, money which should go to administrative debts such as tax bills, payments owed to suppliers for deliveries made within 20 days of the bankruptcy filing and attorneys' fees.  The Office of the U.S. Trustee has also questioned why Lewis should receive any money above and beyond his salary when Blockbuster has paid millions so that bankruptcy specialists could manage their estate.

The conclusion that the Office of the U.S. Trustee came to is that the bonus is only there to keep Lewis from leaving the company while it's in bankruptcy.  If this is true, this type of retention bonus is prohibited by the bankruptcy code. On the other hand, if the company can document how Lewis has added value beyond what his salary would demand, the bonus would be allowed in the bankruptcy case.

(source: Blogs.wjs.com )

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