Disagreements between Global Brokerage and US Trustee over Kenneth Grossman’s bonus remain
If Kenneth Grossman remains employed with Global Brokerage on May 31, 2018, he is entitled to be paid $1 million of deferred compensation, under Global Brokerage’s bankruptcy plan.
After a set of objections, including ones by United States Trustee William K. Harrington had been filed against the Chapter 11 bankruptcy plan of Global Brokerage Inc (OTCMKTS:GLBR), formerly known as FXCM Inc, the company has sought to respond to the objections. In a number of documents filed on Monday, January 15, 2018, Global Brokerage’s counsel aims to rebuff the objections, with the response particularly stark with regard to US Trustee’s objections to the proposed plan.
One of the points of disagreement that remains is the compensation to be awarded to Global Brokerage’s CEO Kenneth Grossman who is currently the single officer on the Debtor’s payroll.
Let’s recall that in May 2017, Global Brokerage agreed to pay Mr. Grossman an annual salary of $600,000 and deferred compensation of $1 million. The latter is a “Completion Bonus” payable as a lump sum on July 31, 2018.
According to the Trustee, the Court should not approve the assumption of the contract of Kenneth Grossman without Global Brokerage establishing compliance with requirements set forth in the Bankruptcy Code (Section 503(c)). The Trustee emphasizes that the Congress enacted section 503(c) as part of amendments to the Bankruptcy Code to “eradicate the notion that executives were entitled to bonuses simply for staying with the Company through the bankruptcy process”.
The Trustee insists that Global Brokerage must show that the Completion Bonus is a “pay for value” plan that offers incentives based on performance rather than a “pay to stay” plan.
Global Brokerage, however, argues that it is entitled to assume Mr Grossman’s employment agreement. According to the company, the assumption of Kenneth Grossman’s employment contract does not violate section 503(c) of the Bankruptcy Code.
The company notes that it entered into the employment agreement with Mr Grossman in May 2017, before Global Brokerage started negotiating a potential restructuring with its key constituencies, including the Consenting Noteholders. Global Brokerage was back then in search of a new Chief Executive Officer because its previous Chief Executive Officer Drew Niv had resigned in the early part of 2017.
Global Brokerage’s counsel stresses that Mr Grossman’s deferred compensation is in no way tied to the bankruptcy case or the success thereof. Given these facts, according to the Debtor, the Grossman employment agreement is not “a key employee incentive plan” or a “de facto insider retention plan” as the US Trustee suggests.
The confirmation hearing for Global Brokerage’s Chapter 11 bankruptcy plan is scheduled for January 17, 2018.