X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A New York bankruptcy judge approved a $140 million management bonus retention plan for Enron Corp. April 16 to help stem the weekly flood of executives leaving the Houston energy giant. Judge Arthur Gonzalez in U.S. Bankruptcy Court for the Southern District of New York in Manhattan approved the one-year bonus program for 1,711 managers. He rejected, however, Enron’s proposal to release executives due $27 million to $28 million in pre-petition bonuses from potential fraudulent conveyance or preference claims. Enron argued during a six-hour hearing Tuesday afternoon that the plan was needed to reverse the flow of key executives bailing out at the rate of 35 to 40 a week. Executives claim the company has had an 87 percent to 88 percent attrition rate among its management ranks in the four months it has been in Chapter 11. “The release of the preference claims was a hotly contested issue by all the objecting parties, and we’re satisfied that the debtor will now have to come back with a separate motion if it wants to pursue that release,” said Neal Jacobson, New York counsel for the Securities and Exchange Commission. “We’re also satisfied that Gonzalez ruled that the debtor will have to await the examiner’s investigation before it would be able to get the release of those preference claims for company insiders [or directors].” Andrew Entwistle, the lawyer of a Florida state pension fund which lost $334 million on Enron stock, called the ruling a “victory that assures us that none of the bad actors would take anything under this plan either directly or indirectly.” Entwistle, of Entwistle & Cappucci in New York, said “the plan keeps key employees but no one who engaged in any wrongdoing will now be retained under the plan.” The Key Employee Retention Plan, or KERP, was designed to provide bonuses and severance pay for the 1,711 key managers for one year starting Feb. 28. It faced major objections from the SEC, the Florida pension plan and creditors Wiser Oil and Dunhill Group because of Enron’s initial reluctance to disclose where the money was going. “We will now get complete disclosure on who gets what and only those employees who stay for the full year will be entitled to the bonus,” Entwistle said. Enron faced heated criticism from creditors after it paid out $105 million in management bonuses just days before its Dec. 2 Chapter 11 filing. The company was seeking to protect one-quarter of those payouts to 227 managers under the proposed new bonus plan. The first 90-day bonus program runs through Feb. 28 and the new, one-year KERP is scheduled to begin Feb. 28. Employees who agree to the plan and then voluntarily leave the company would have to return their bonus at the rate of 125 percent. �Copyright 2002, The Deal, LLC. All Rights Reserved.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.