US Trustee Criticizes Blockbuster Bonuses5 Jul, 2011 By: Erik Gruenwedel
Justice Dept. representative decries planned $125,000 bonus to lone Blockbuster Inc. executive Bruce Lewis, among other payouts
A U.S. Trustee overseeing the resolution of Blockbuster Inc.’s 2010 bankruptcy filed a motion criticizing efforts by the legal shell of the former movie rental chain to award an “un-quantified” bonus payment to a senior executive.
U.S. Trustee Tracy Hope Davis, who works for a unit of the Department of Justice in charge of overseeing equitable dissolutions of publically held companies, July 1 filed a motion with U.S. Bankruptcy Court in New York asking the judge to deny potential bonus payments to Bruce Lewis, principal executive officer and lone employee of Blockbuster Inc.
Blockbuster Inc. in April sold its assets and brand to Dish Network Corp., which now operates Blockbuster LLC and is headed by Michael Kelly.
Specifically, the motion claims Lewis could be entitled to bonus payments of $125,000 for every $10 million that is paid to secured creditors by July 31. Secured creditors are owed about $50 million in claims and receive preferential payment ahead of non-secured lenders, according to the filing.
Hope said efforts by Blockbuster Inc. to avoid abiding by legal requirements outlining bonus payments should in itself void any bonuses to Lewis.
“Where the funds will come from to pay these bonus payments is not disclosed,” Davis wrote in the motion, adding that the bonus motion does not contain any incentives or metrics that are designed to increase performance goals to creditors other than the secured creditors.
Blockbuster Inc. ended May with about $100 million in cash and cash equivalents, included restricted cash, according to its most recent filing.
A hearing on the motion is slated July 19.
U.S. Bankruptcy Court Judge Burton Lifland last month dismissed a prior motion by Davis that sought to suspend additional payments to Blockbuster’s lawyers.