Incentive Pay for Execs at Global Crossing OKd
High-speed network operator Global Crossing Ltd. will pay some workers incentives to stay on, with nearly half a million dollars allotted to two executives who are defendants in suits related to the company’s collapse, a U.S. Bankruptcy Court judge ruled Monday.
Judge Robert Gerber, of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan, approved the plan to give 417 employees a total of $8.25 million to stay with Global Crossing while the company reorganizes under a Chapter 11 bankruptcy plan. Incentive awards are not uncommon in bankruptcy cases.
Gerber agreed with the attorneys representing Global Crossing that the individuals were critical to ensure the value of the company to attract buyers and pay creditors.
Bermuda-based Global Crossing, which became the fourth-largest insolvency case when it filed for protection from creditors, is expected to leave about $10 billion to $12 billion of claims in its wake.
Global Crossing faces an investigation by the Securities and Exchange Commission and continued scrutiny by congressional investigators who are probing questionable accounting practices.
Despite objections from lawyers representing the State Teachers Retirement System of Ohio and Public Employees Retirement System of Ohio, Gerber allowed Joseph Perrone, Global Crossing senior vice president of finance, and Dan Cohrs, the company’s chief financial officer, to receive the largest incentives.
“They were essentially in charge of the ship when it ran into the iceberg,” said Geoffrey Jarvis, attorney for the Ohio pension fund that lost about $116 million in its investment in Global Crossing. Perrone and Cohrs are named in a shareholder suit the Ohio pension fund filed.
Jarvis noted that Cohrs sold $7.6million in Global Crossing stock, $2.1 million in the last 14 months, and Perrone was chief audit partner for Arthur Andersen’s business with Global Crossing before the telecommunications company hired him in May 2000.
The plan awards Perrone an incentive of $225,000 and Cohrs $250,000. The average award will be about $20,000.
However, the judge agreed with attorney Michael Walsh of Weil Gotshal & Manges, which represents Global Crossing. Walsh said the men were “absolutely essential” to the company’s reorganization.
Perrone oversees all payments the company has made since it filed for bankruptcy protection on Jan. 28. Cohrs is involved in the restructuring and in negotiations with potential bidders.
The plan also includes $5 million in a discretionary fund if other employees are identified. The creditors committee, composed of unsecured creditors and banks, must approve the use of half the fund. The court agreed not to name the 417 others because of possible poaching by Global Crossing rivals.
