By Casey Sullivan
Sept 28 (Reuters) - The U.S. Trustee in the bankruptcy case
of Dewey & LeBoeuf objected on Thursday to the payment of a
bonus to an estate employee who helped wind down the failed law
firm after it folded in May.
Hope Davis, who represents the U.S. Justice Department in
the bankruptcy, objected to the $165,000 bonus Dewey's chief
restructuring officer Joff Mitchell proposed to pay the estate's
director of finance Frank Canellas earlier this month.
In early September, Mitchell had proposed bonuses for
Canellas, director of billing Lourdes Rodriguez and collections
manager Lisa Sucoff, saying that if U.S. Bankruptcy Judge Martin
Glenn didn't sign off on the payments, the three would likely
find employment elsewhere, "leaving (Dewey) without essential
services during this and other important periods in the case."
Davis didn't object to Rodriguez or Sucoff's payments of
$50,000 and $5,000 respectively, but she said it was
inappropriate to pay Canellas the proposed $165,000 because he
was an "insider" at Dewey and part of its senior management
team. Citing a section of bankruptcy code, Davis said no bonuses
can be given to an insider unless he has a job offer from
another business as evidence the payment is essential to retain
Davis said Canellas had not yet shown in court filings a
"bona fide" job offer.
Davis also said that if the bonus was approved, Canellas'
compensation for 2012 would exceed his firm earnings in 2011,
when Dewey was a fully functional firm. Canellas made $615,000
at Dewey in 2011, while the bonus would bring his compensation
at $665,000 this year. She said the bonus was outside the
ordinary course of business for Dewey's wind-down operations,
for which the payment was offered.
Hope's objection comes after lawyers sparred in U.S.
Bankruptcy court in Manhattan last week before Judge Glenn,
fighting over whether Glenn should approve a $71.5 million
settlement between former Dewey partners and the estate, or
appoint an examiner to further investigate the deal's fairness.
A central issue of that debate was the impartiality of
Mitchell, the restructuring officer, and other leaders who
crafted the settlement. Some former Dewey partners felt the deal
favored senior Dewey managers who worked closely with the
settlement's architects before Dewey filed for bankruptcy.
The $71.5 million settlement proposal is pending approval
before Judge Glenn.
Mitchell said Dewey's estate had no comment other than what
was stated in the motion that proposed the bonus. Canellas,
Rodriguez and Sucoff declined comment through Mitchell. U.S
Trustee Hope Davis did not respond immediately to a request for
The case is In re Dewey & LeBoeuf, U.S. Bankruptcy Court,
Southern District of New York, No. 12-12321.
For Dewey: Al Togut and Lara Sheikh of Togut Segal & Segal.
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