Millions in executive bonuses paid just before bankruptcy filings
Posted by freedomforall 3 years, 10 months ago to Business
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."
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."
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)
CBJ, you should post this article as a separate topic!
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