ResCap Under Fire Again Over Incentive Plan

by San Antonio Attorney

Once again, Residential Capital LLC is under attacked by the bankruptcy watchdog of the Department of Justice over a proposal to pay the top executives of the unprofitable mortgage company up to $3.3 million in incentives.

Based on court documents filed by the U.S. Trustee, there is insufficient information provided by ResCap to show that providing bonuses were performance-linked incentives, as required by bankruptcy laws.

This is the second time the Trustee’s office has bombarded ResCap over planned bonuses, and demonstrates the Trustee’s latest move to put stop compensations for insiders of businesses in Chapter 11 bankruptcies.

ResCap filed for Chapter 11 bankruptcy last year to deal with mortgage-related debts. In November, it received approval for the sale plan of its operations to Walter Investment Management Corp and Ocwen Financial Corp for $3 billion.

The company filed a compensation plan for 17 insiders in July, but the Trustee objected and the plan was rejected by U.S. Bankruptcy Judge Martin Glenn. A revised version of the incentive plan was approved in October after performance metrics were raised.

The Trustee also filed an objection to a $33.4 million incentive payment plan to 3,000 employees of ResCap, but Glenn approved that proposal.

The latest incentive plan of ResCap would offer up to $2.7 million to 6 insiders in accordance with performance metrics such as ensuring that ResCap sticks to its wind-down spending plan and getting certain recoveries.

The U.S. Trustee said in its filing on Wednesday that the plan falls short of sufficient details to show that the conditions of the bonuses are not very easy to accomplish and that the incentives are essential for the estate’s maintenance.

ResCap’s attorney did not respond to a request for comment. The matter is scheduled for a hearing on April 11.

 

–          Most bankruptcy objections are easy to work out. The important thing is to maintain an open communication with your San Antonio Attorney.

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