Proposed RG Steel management bonuses draw heat (UPDATED)
Wednesday, 18 July 2012 12:04

RG Steel filed for bankruptcy on May 31.
photo by Roland Dorsey


Trustee objects to bonuses for top executives; judge rules Point pollution suit can go forward

UPDATED BELOW:  Judge OKs bonus proposal

by Nicole Rodman

On Friday, July 6, the U.S. Trustee Program, a federal agency responsible for overseeing bankruptcy cases, filed court documents objecting to RG Steel’s proposed plan to pay $20 million in bonuses to top RG executives.
    RG Steel, owner of the steel mill at Sparrows Point, among others, filed for bankruptcy on May 31, putting nearly 2,000 local workers out of work.
    The company, which purchased the Sparrows Point mill last March, owes around $1 billion to thousands of creditors.
    Filed by U.S. trustee Roberta A. DeAngelis, the motion contests the bonuses, noting that they do “nothing to create an incentive for higher levels of individual employee performance.”
    According to DeAngelis, the $20 million in bonuses would go to 10 high-level RG employees after the company’s first lien debt is paid off.
    For its part, RG Steel  defended the bonuses, stating that the company management is “committed to seeing the sale and Chapter 11 [bankruptcy] process through, but deserves a reasonable and appropriate incentive to continue to perform at the highest levels.”
    DeAngelis rejected RG’s argument, noting that the bonuses are unneccesary because the steelmaker is “focused almost entirely on ... liquidating rather than on steelmaking.”
    As DeAngelis explained in her court filing, the purpose of the bonuses appears to be “more to induce certain ‘key’ employees to remain in the Debtor’s employ until a sale takes place than it is for the purpose of preserving the value of the estate or increasing the sale price of the Debtor’s assets.”
    In its court filing, RG Steel also requested that the names of those employees slated to receive bonuses be kept confidential.
    In court papers, DeAnglelis argued against this notion, requesting that U.S. Bankruptcy Court Judge Kevin J. Carey unseal the names of those RG employees slated for bonuses.
    For his part, U.S. Representative C.A. Dutch Ruppersberger called the proposed bonuses “absolutely outrageous.”
    In a statement released last Tuesday, July 10, Ruppersberger noted that the steelmaker’s bonus proposal also “fails to specify the performance requirements the executives would have to meet to get their bonus.”
    Ruppersberger also protested the sealing of the names of those receiving the bonuses.
    “RG Steel is trying to hide who will receive the bonuses, their job descriptions and what they earn already,” he explained in his statement.
    Despite his anger at the proposed bonuses, Ruppersberger remains optimistic that a deal can be reached to sell the whole plant.
    “I remain hopeful that efforts to sell the plant will be successful,”
he noted. “I will continue to closely monitor the situation so that all affected workers receive the answers and assistance they deserve.”
    In other developments in RG’s bankruptcy case, on July 10, U.S. Bankruptcy Judge Kevin Carey ruled that two area environmental groups, the Chesapeake Bay Foundation (CBF) and Baltimore Harbor Waterkeeper, will be allowed to continue with their appeal to determine to what extent RG Steel is responsible for pollution in area waterways.
    Lawyers for RG Steel had argued that the company’s bankruptcy filing should freeze all pending litigation, an argument that the judge did not accept.
    “We are happy that Judge Carey recognized that our appeal will not interfere with the bankruptcy because the appeal will proceed on a separate track,” CBF attorney Christine Tramontana noted in a press release on Monday, adding, “The extent of the contamination in the waterways that residents share with the Sparrows Point plant must be fully investigated.”
    CBF and Waterkeeper are also currently involved in a lawsuit against RG Steel for hazardous waste violations.
    The RG Steel mill at Sparrows Point will be auctioned off either this month or next, depending on whether a “stalking horse” bidder is found to open the auction.
    Neither United Steelworkers Local 9477 president Joseph Rosel nor RG Steel spokeswoman Bette Kovach responded to requests for comment by press time.

UPDATE: During a hearing in U.S. Bankruptcy Court in Wilmington, Del., on July 18, Judge Kevin J. Carey approved the proposed $20 million in bonuses after RG Steel slightly altered its original proposal.
    In apparent response to objections raised by the U.S. Trustee Program, the Committee of Unsecured Creditors and U.S. Representative C.A. Dutch Ruppersberger (2nd District), RG modified its original proposal to make the bonuses contingent on the sale or liquidation of the steel mills at prices approved by the company’s secured lenders.
    Those likely to receive bonuses (exact amounts remain confidential) include RG Steel chief executive officer John Goodwin and Sparrows Point general manager Glen Mikaloff.
    For more information, see next week’s issue of The Eagle.