Millions in executive bonuses paid just before bankruptcy filings

Posted by freedomforall 10 months, 3 weeks ago to Business
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Bankruptcy law bars retention payments to senior executives. In the past 15 years, retention bonuses have been largely supplanted in bankruptcy cases by key-employee incentive plans that tie bankruptcy bonuses to earnings targets or to postbankruptcy goals.

Jared Ellias, a law professor at the University of California, Hastings School of Law, said that while the law prevents companies in bankruptcy from paying such bonuses, companies are still able to do so right before they file.

"The window is wide open," Mr. Ellias said. "It's regulatory evasion, you know there's a regulation, so you do it another way."

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  • Posted by CaptainKirk 10 months, 3 weeks ago
    We have dealt with bankruptcy before.
    And the judges will clawback money paid EITHER ahead of schedule (eg annual bonus paid in June).

    Because we had just had 3 invoices paid (big ones), then the paying company filed bankruptcy, we were contacted and had to PAY BACK 2 of the invoices, because we were ahead of other vendors. Then we got a PERCENTAGE paid back on those 2 invoices when they "settled" it.

    I would be surprised if they could not do this for bonuses paid before bankruptcy. Because of "Fraud on Creditors" which prevents someone (like a husband) from going out and SINKING 100% of his cash into a personal item within the 6 months before he files for divorce. The courts will declare that as not allowed. (Now, if he can trick his wife into GIFTING him, women get away with REALLY expensive jewelry purchases, new cars, etc. THEN Filing)
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  • Posted by $ blarman 10 months, 3 weeks ago
    This strikes me as outright fraud for which there is precedent to "pierce the corporate veil" and not only prosecute those involved but hold them personally liable for damages. That means garnishing of wages, personal liability, forfeiture of assets - especially those deemed to be fraudulently gained.
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