Court Documents List Bonuses Paid by Smith
Financially beleaguered Smith International, which lost more than $221 million in the last three years and earlier this month filed for bankruptcy protection, paid 12 of its corporate officers a total of $250,600 in bonuses for 1985, according to documents filed with the office of the U.S. Trustee.
Former employees of Irvine-based Smith, one of the world’s largest oil service companies, said that in addition, bonuses were paid to an unspecified number of the company’s divisional managers in mid-February, just a few weeks before Smith filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The bonuses were awarded at the same time the company was initiating massive worldwide employee layoffs to cut costs.
Smith disclosed the amount of bonuses paid to 12 of its officers in documents it turned over to the U.S. trustee on March 7, simultaneously with filing its bankruptcy petition, according to Peter Pearl, an attorney in the U.S. trustee’s office that is overseeing Smith’s attempted financial reorganization.
In those documents, Smith requested that its 13 top corporate executives keep their full salaries while the company remains in bankruptcy. Smith did not request any additional bonuses for those executives, Pearl said.
No Bonus for Chairman
Pearl said Smith International Chairman Jerry Neely, who receives a base pay of $405,000 annually, did not receive a bonus for 1985.
But 12 other corporate officers did. Smith International President Fred Barnes, who receives base pay of $255,000 annually, got a $75,000 bonus.
Vice President Dale Boyer received a bonus of $30,000; Chief Financial Officer Loren Carroll, $27,000; Vice President James Hauke, $15,000; Treasurer Robert Gubrud, $16,000; Controller Laurence Colegate, $15,000; Assistant Treasurer Kenneth Van Haren, $10,700; General Counsel Ronald Randall, $9,100; Assistant Treasurer Charles Boucher, $5,800; Assistant Treasurer Klemens Afting, $5,400; Associate Counsel Vivian Cline, $2,500.
One of the larger bonuses--$39,100--went to Robert Vargo, Smith’s general patent attorney. Smith has been embroiled in a 14-year patent-infringement dispute with Hughes Tool Co. of Houston that recently resulted in an order from a U.S. District Court judge awarding Hughes a $204.6-million judgment. It was to escape financial destruction from the award that Smith sought protection in bankruptcy.
Smith International officials were not available to comment Wednesday on the 1985 bonuses.
In addition, about 80 management-level employees received bonuses at Smith Tool, according to a former administrator with Smith Tool, Smith International’s key, Irvine-based division that manufactures oil-drilling bits. It was not clear if other division executives also received bonuses.
More Losses Expected
As previously reported, Smith posted a net loss of $58.3 million during the nine months ended Sept. 30, compared with net income of $7.5 million the year before. The company’s fourth quarter financial results haven’t been reported as yet but are expected to show a continued loss, reflecting the worsening problems shared by the oil industry worldwide.
Nonetheless, the former Smith Tool administrator, who received a bonus before he lost his job in last month’s layoffs, said he “really wasn’t surprised” by the corporation’s decision to distribute bonuses. He said the bonuses traditionally are based on individual merit and the performance of various divisions. At Smith Tool, he said, the bonuses were more meager than they had been in his memory.
