Dewey & LeBoeuf’s bankruptcy estate wants to make good on promises it says were made to three employees from the once-thriving firm’s finance department who have stayed on to help wind down Dewey’s operations.
In a filing made last week, Dewey’s chief restructuring officer Joff Mitchell argues that director of finance Frank Canellas, director of billing Lourdes Rodriguez, and collections manager Lisa Sucoff all deserve bonuses to be drawn from the Chapter 11 estate’s coffers. Mitchell says in court papers that the three, as well as other nonattorney staff, routinely received bonuses when the firm was aliveoften in amounts that were more than half of what each earned in annual base salary.
The latest proposed bonuses$165,000 to Canellas, $50,000 to Rodriguez, and $5,000 to Sucoffrepresent “the balance of certain bonuses promised during the prepetition period.” If U.S. Bankruptcy Judge Martin Glenn, who is overseeing the Dewey case, does not sign off on the payments, “it is expected that the Eligible Wind-Down Employees will find new employment or pursue other opportunities, leaving the Debtor without essential services during this and other important periods in the case.” Without the three employees on the team, Mitchell himself “will have great difficulty in performing his job,” according to one of several filings related to the bonuses.
Mitchell and Dewey’s lead bankruptcy counsel Al Togut did not immediately return requests for comment Monday.
In late July, Glenn approved a plan that would pay what was at the time the 48 employees working on winding down Dewey’s operations as much as $450,000 in bonuses from the budget of the defunct firm’s estate. Another $250,000 in contingency-based bonuses could be paid to employees working on collections, with the money coming from fees earned by collections agent On-Site Associates.
Mitchell noted in the filings that while the official committee of unsecured creditors and the estate’s secured lenders have voiced support for the new bonuses, the U.S. Trustee’s office, which oversees the bankruptcy process, plans to object to the bonuses on the grounds that they are not “ordinary course of business” and that some of the proposed recipients are considered “insiders.” As of Monday, the trustee’s office had not yet filed an objection to the proposed bonuses.
The filings exert considerable effort to prove that Canellas, Rodriguez, and Sucoff are not “insiders,” describing their roles within the firm both during its existence and as a bankrupt entity. Each of the three reported to the firm’s former chief financial officer, Joel Sanders, now with Florida firm Greenspoon Marder, and, in the wake of the bankruptcy filing, to the dissolution committee. As such, all three “had and currently have no meaningful decision-making authority,” one filing states.
A declaration submitted by Mitchell in conjunction with the motion details each employee’s history with Dewey, including how much each earned over the years. Canellas, for instance, started at Dewey predecessor firm LeBoeuf, Lamb, Greene & MacRae as an accounting intern in 2000, earning $11 an hour. He slowly advanced through the ranks, becoming director of finance in 2007. From 2008 to 2010, he earned $235,000 in base salary annually and up to $210,000 in bonuses each year. By 2012, he was receiving $400,000 in salary and got a partial bonus of $100,000 before the firm filed for bankruptcy protection in May.
In a footnote to one filing, Dewey’s advisers explains that in December 2009, Canellas signed a severance agreement with the firm that guaranteed he would be paid $435,000 if the firm either dissolved or terminated him for a reason other than cause. That agreement, backed by a letter of credit issued by Citibank, expired in December 2011 and Canellas agreed not to renew it in exchange for advanced salary payments.
Sucoff earned what equated to an annual salary of $70,000 a year from 2010 to 2012, with a bonus of $10,000 in 2011. So far this year, she has earned $50,407 in bonuses, which includes $25,407 paid in August allocated from the earlier court-approved bonus plan.
Rodriguez, who started working in the finance department at LeBoeuf Lamb in 1992 at a salary of $17,000, saw her annual salary rise to $125,000 in 2008. She earned between $47,250 and $100,500 in bonuses from 2008 until 2011, and a partial bonus of $50,407 in 2012, also partially from the bonus pool.
The filings stress the importance of each employee’s work. Canellas has been instrumental, Mitchell wrote, in helping with the proposed partner contribution plan set to be discussed at a court hearing scheduled for Thursday. (That settlement is expected to bring in $72 million from roughly 460 former Dewey partners.) Among Canellas’s settlement-related duties: answering thousands of questions from former partners; explaining information related to the firm’s ledger that helped Dewey’s advisers come up with a proposed settlement amount for each partner; and directly presenting the plan to his former colleagues. He has also helped analyze potential unfinished business claims, which have not yet been brought against partners for work taken with them to their new homes.
Rodriguez, meanwhile, has created invoices for $54 million in work-in-progress and is working to invoice $46 million more. Sucoff has helped collect accounts receivable, and is responsible for some of the more than $50 million collected so far.
The estate proposes dividing the bonuses for each of the three into four equal installments to be paid in October and November. A hearing to discuss the proposal is scheduled for October 4, with objections due by next Thursday.
