Reuters: Regulatory News: UPDATE 1-ResCap exec bonus plan rejected by US judge

Reuters: Regulatory News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

UPDATE 1-ResCap exec bonus plan rejected by US judge Aug 28th 2012, 23:19 Tue Aug 28, 2012 7:19pm EDT * Judge says payout plan primarily to keep people in jobs * Execs not incentivized for payouts, judge says * SEC probing ResCap over underwriting, securities sales By Jonathan Stempel and Rick Rothacker Aug 28 (Reuters) - A federal bankruptcy judge on Tuesday rejected Residential Capital LLC's proposal to pay as much as $7 million of bonuses to 17 senior executives, saying the payout was primarily a reward for staying in their jobs. U.S. Bankruptcy Judge Martin Glenn said the "key employee incentive plan" proposed by the mortgage unit of Ally Financial Inc did not link the $4.1 million to $7 million payout closely enough to "challenging financial and operational goals". The Manhattan judge also found that 63 percent of the payout could vest upon the sale of major assets, which ResCap believes are worth nearly $4 billion. ResCap's plan "is primarily retentive in nature," and "appears to attempt an end-run" around federal bankruptcy laws, Glenn concluded. The judge gave ResCap permission to draft a new plan to address his objections, as well as objections previously voiced by the federal government. U.S. Trustee Tracy Hope Davis, whose office is a component of the Department of Justice, in a court filing said ResCap's proposed plan "sets a low performance bar" and "does not provide real incentives for the employees to improve their performance, work harder, and achieve results greater than in the past." Susan Fitzpatrick, a ResCap spokeswoman, had no immediate comment. The 17 people who would have been eligible for payouts did not include ResCap Chief Executive Thomas Marano. Glenn's decision reflects the closer scrutiny bankruptcy judges are giving to incentive payouts that critics say have little to do with maximizing the value of bankrupt companies. On Friday, U.S. Bankruptcy Judge Stuart Bernstein, a colleague of Glenn, rejected a $5.33 million bonus plan for eight senior executives at Hawker Beechcraft Inc, an aircraft maker owned by Goldman Sachs Group Inc's GS Capital Partners private equity fund and Canada's Onex Corp. Bernstein said that program looked more like a "disguised retention plan" that encouraged executives to stay put "regardless of the road" the company took. Earlier this month, Glenn approved a separate plan to award $10.8 million of incentive payments to 174 other ResCap employees, including people who work in finance, legal, origination, technology and other operations. ResCap filed for Chapter 11 bankruptcy protection on May 14 to address mortgage-related liabilities. U.S. taxpayers own roughly 74 percent of Ally, which was once part of General Motors Corp. Ally did not file for court protection. In a separate matter, the U.S. Securities and Exchange Commission said it is formally investigating ResCap for possible misconduct in loan originations and underwriting, and possible fraud in the sale of mortgage-backed securities. It disclosed that probe in a court filing seeking to force printing company R.R. Donnelley & Sons Co to turn over records it prepared for investment banks that underwrote those securities. Ally and ResCap declined to comment on that matter. The case is in re: Residential Capital LLC, U.S. Bankruptcy Court, Southern District of New York, No. 12-12020. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions