Creditors Balk at $1.7-Million Baldwin Pay Hike : Real estate: Co-owners of the bankrupt company want to raise each of their salaries from $130,000 to $970,000 a year.

Baldwin Co.’s plan to boost the annual pay of co-owners Alfred and James Baldwin by almost $1.7 million while the company is in bankruptcy came under fire Friday from the Orange County home-building company’s court-approved creditors committee.

In a formal objection filed in U.S. Bankruptcy Court in Santa Barbara, the committee asked Judge Robin Riblet to halt the proposed pay hikes unless the company can show that they are in line with the pay received by top executives in similar building companies.

The company’s proposal “raises serious doubts about the debtors’ compliance with their fiduciary duties” to creditors, the objection says.

The raises, which would increase each brother’s salary to $970,000 a year from $130,000, were approved by the company just before the Baldwins filed a Chapter 11 bankruptcy reorganization petition for their company on July 18.

Baldwin Co. is the collective name for two operating units, Baldwin Builders Inc. and Baldwin Building Contractors, which have extensive operations in Orange, Los Angeles, Ventura and San Diego counties.

In all, the company has asked the U.S. Trustee’s office to approve nearly $5 million in annual compensation for about 25 officers and executives. The compensation package last year totaled about $3 million, said the creditors committee’s Los Angeles-based attorney, David C.L. Frauman. Most of the increase would go to the Baldwins.

The brothers could not be reached for comment Friday, but a company spokeswoman said that the proposed new salaries are competitive with the pay drawn by executives of other privately owned companies of similar size and profitability.

Before the bankruptcy, the brothers took what the spokeswoman termed “nominal salaries” but drew weekly advances against company profits, according to testimony in bankruptcy court. They drew an average of $100,000 a week for most of 1994--a year in which the company made an $18-million profit.

But the bankruptcy filing ended the Baldwins’ ability to draw the advances and prompted them to seek the salary increase, the spokeswoman said.

Bankruptcy rules require the company to seek approval of the U.S. Trustees office for its so-called insider, or executive, compensation plan. Attorney Brian Fittipaldi of the Trustee’s office said Friday that he has been reviewing the plans and hopes to make a recommendation before the Aug. 18 hearing on the company’s request for final court approval of a $70-million credit line arrangement with General Electric Capital Corp.

Frauman had argued against parts of the financing arrangement during a July 28 hearing and said Friday that the creditors committee still is considering filing a formal objection to the financing plan before the Aug. 18 hearing.

The company filed bankruptcy after General Electric Capital cut off its $60-million credit line and pulled $15 million in cash from various Baldwin Co. bank accounts, causing $3 million worth of company checks to bounce.

General Electric agreed a week later to restore the credit line after the Baldwins placed their company into bankruptcy and its spending fell under the jurisdiction of the court.

While the company has been profitable, GE claimed that the value of land that it used to secure its credit line has fallen below acceptable levels. The credit company also has been harshly critical of the Baldwin brothers’ lavish personal lifestyles, claiming they are using money that would be better spent on the company.