Category Archives: money money money money

bankruptcy Catch-22

In re BearingPoint Bankruptcy;

First off, IANAL, but my analysis seems to jive with the judge’s actions (and inactions) and what has been argued by legal teams on both sides.

Ex-BearingPoint employees seem to be asking…

“Why can’t the judge just instruct the PTO to be paid out?”

In the Bankruptcy law, Section 507,  it specifies the priority of claims.  ‘Fourth-tier’ claims are “allowed unsecured claims” which include “wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual”.  Our accrued Personal Time Off (PTO) would fit this description.  The code specifies a limit of $10,950 and anything above and beyond ($11K+) is considered an unsecured claim, and it gets lumped in with all the general creditors. That is both codified law (Section 507) and tested/demonstrated in precedent (referenced in the objections by the Creditors in #688 “Order to Vacate” — see a list of references at the end).

So for those of us owed under $10K, the good news is that we are in line to get it.  The bad news is it’s not considered an “administrative expense” (expense to keep the business going thru bankruptcy), and so it is to be paid out once the firm liquidates (Chapter 7 Bankruptcy).

“Why can’t the judge instruct that PTO under $11,000 be paid out immediately/ASAP?”

The reason is that only administrative expenses can be paid out right now (§ 503).  503(b)(1)(A) specifies “wages, salaries, and commissions for services”, but makes no mention of vacation or severance, as was specfically indicated in section 507.

The reason that PTO payout is not an admin expense seems to be a kind of catch-22; it’s obviously important to the ongoing operations to keep employees on-board; but once the employee is terminated (which would trigger the PTO payout) the PTO payout doesn’t provide any benefit to the company (or the creditors) — after all, the ex-employee is no longer contributing anything to the company. The promise of the PTO payout is a benefit, but the actual payout isn’t — see the distinction there? And while the judge controls the $$, he doesn’t control the actions/promises of executives, so there is no real remedy that the judge can offer.  If he allows the payout to , it denies the creditors their rightful claim to the money in liquidation.

So, we have to wait for liquidation (Chapter 7).

“How is this fair?  I earned that vacation time…”

I couldn’t agree with you more.  It’s not fair.

The lesson to be learned here — and this is a lesson for all employees everywhere — is that if you ‘bank’ vacation time, you have to consider that vacation time is at some risk.  One letter to the judge, by someone who I followed on the corporate wiki and respect and who I don’t mean to criticize, stated (emphasis mine):

The Debtors* [sic] entered into a risk-based investment with BearingPoint and stand to lose those investments.  The BearingPoint PS Group employees took no risk. We worked hard, earned the PTO… and now we just want what we were promised.

* I’m pretty sure he meant Creditors, those who extended loans or bonds to BearingPoint.

Well… that’s like saying I took no risk driving to work today:  I drove within the speed limit, I stopped completely at every stop sign, I wore my seatbelt, I have airbags… so it’s riskless, right?  We all know that just getting in your car in the morning includes an assumption of risk, and signing on to work for any firm or organization has to include a similar assumption of risk.  Continuing to stay on with BearingPoint through the past few years was an implicit acceptance of an increasing amount of risk…  and I know, I did the exact same thing, underestimating the risk involved each step of the way.

“How is this fair?  Those executive are getting bonuses for selling off the pieces and we get nothing!”

Yeah, this one is tough to swallow, but it makes sense if you look at the bankruptcy framework.

Those bonuses are related to selling off pieces of the company and bringing in cash, cash that will go to creditors.  That sounds like it would fit “commissions for services” per 503(b)(1)(A).  And ultimately that cash goes to the creditors, and the PTO payout is fourth-tier priority on that money — so we should get it before the Committee of Unsecured Creditors.

An optimistic (kool-aid flavored?) spin would be this:  “we needed the execs to sell off the pieces so there will be any money left when we go to liquidation; if we didn’t throw them a bone to make that happen, we would have virtually zero-chance* at getting up to paid for our PTO… (the up-to-$10K part)”

[* there I go again, thinking we have a greater-than-zero-chance at this moment in time…  mmmm, kool-aid.]

Seriously, this makes me sick, but it seems to be legal and legit.

“But I’m mad as hell; what can we do?”

Unfortunately, I don’t think sending letters to the judge is going to change anything.  There is the bankruptcy code, and legal precedent, and beyond that the judge doesn’t have the latitude to do what many ex-employees are asking.

There have been claims, in letters and in the objections by Deloitte, that failure of the judge to act will set a precedent and that in the future employees might be denied these kinds of payouts.  The truth is, at least from what I can see, our case is proceeding according to existing precedent — I can see no reason why BearingPoint management should have assumed that PTO would be considered an adminsitrative expense.

It seems that BearingPoint bankruptcy lawyers should have known this was the probable outcome.  They had to know pretty early on that there were some people with way more than $10K in PTO — this should have raised a flag for them.

If (and this is a big if) it can be proven that management (Harbach) was told by the lawyers that this was the probable outcome, and he continued to state to employees that he thought PTO would be paid out on termination, knowing full well that our continued service would mean higher value for the assets and therefore a bonus for himself — is this enough to add up to Fraud?  Not just a fraud, like we all know it’s a fraud, but real criminal Fraud?

If the lawyers missed it, maybe we can get back some of the legal fees for their negligence.  Or is that just getting desperate?

“What does fourth-tier priority unsecured mean?”

Paraphrasing Section 507, the priorities are:

  1. Spouse and Child Support (I guess the same code applies to personal bankruptcy as to corporate bankruptcy).
  2. Administrative Expenses allowed under section 503(b).
  3. Unsecured claims allowed under section 502 (f) — this gets a little convoluted.
  4. Allowed unsecured claims for wages, salaries, commissions, and vacation.
  5. Allowed unsecured claims for contributions to an employee benefit plan.
  6. Allowed unsecured claims of persons engaged in the production or raising of grain, or engaged as a United States fisherman.  (Seriously.  Crazy specific get worked into these laws, no?)
  7. Allowed unsecured claims of individuals of money in connection with the purchase, lease, or rental of property, or the purchase of services.
  8. Allowed unsecured claims of governmental units.
  9. Allowed unsecured claims based upon any commitment by the debtor to a Federal depository institutions regulatory agency.
  10. Allowed claims for death or personal injury resulting from the operation of a motor vehicle or vessel if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug, or another substance.

After all that, then I think the creditors get to fight over the scraps.

—————–

alright, that’s it for now.  if there is any good news, it’s that liquidation may happen by the end of this week, so at least we’ll have some closure.

Links

SaveMyPTO.com was a blog set up to rally employees.  There are only really three posts, and the comments have fallen victim to spam.  Still, there is some useful content in the early comments:

BearingPointInfo.com has the case docket and all the petitions, objections, and letters to the judge:

  • First Day Motion to pay Employees Wages, Salaries, and Benefits (#9)
  • Motion of Order to Vacate Severance and PTO (#688)

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Filed under cathartic, debunking, if you aren't outraged you aren't paying attention, law, money money money money, property rights, shenanigans

AT&T: Hands Off My Earned Leave!

You heard me Ma Bell.  You too Mellon Bank

BACKGROUND

This is going to be brief, but here’s the gist of it:

  • the company I worked for went into Bankruptcy
  • from the beginning we were assured that wages and accrued Paid Time Off (PTO) would be paid
    • THIS WAS CRITICAL because if 15,000 people started using up the PTO they had accrued, the entire company would have fallen apart before it could have been pieced-out and sold-off
    • it was also policy to pay out PTO if you left the company; there was no “use it or lose it”
  • now the Committee of Unsecured Creditors has objected to the PTO payout, calling them “golden handshakes” and bonuses
  • … nothing could be further from the truth — those who accrued the most hours are those who worked the hardest for the company, and for the creditors during this bancruptcy period — people who put off vacations and time off to BILL HOURS to clients which is the sole source of revenue for the company.  It’s painfully ironic that those who worked hardest are positioned to lose the most…
  • for the record, I wasn’t one of those working the hardest — I used 101% of my annual PTO last calendar year; and I still had over 90 hours in the bank when I left…

Many of my colleagues are writing to the judge to explain their position and situation — that’s all well and good, but there seems to be a very real chance that the judge could find legal reasons to support the objection.  Changing that one man’s mind seems like a slim chance to me…

It’s getting a little late in the process, but it just occurred to me that maybe we can find support in the employees of the Committee members, or in their customers.  Do you want to work for, or give your consumer dollars to, a company that demonstrates such disrespect forhard working employees and their families?  Especially in the middle of a recession?

CALL TO ACTION

  1. If you work for AT&T, tell management that you are aware of this situation and you think it’s a shame.  Feel free to email your corporate lawyers at James.Grudus@att.com (full address below).Mellon employees and customers:  same thing, and Mellon’s lawyer is at david.m.kerr@bnymellon.com

  2. If you agree that this is wrong and want to spread the word:
    LINK TO THIS POST; blog about it, email the link, etc.
    TWEET it — I don’t get fully get twitter, but have at it.
    Visit SaveMyPTO.com for more viewpoints and updates
    If you are a lawyer or legal buff, the case dockets are at BearingPointInfo.com

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Filed under angry, cathartic, corporate rebellion, cuz I'm on a roll, damn lies, debunking, desperate, if you aren't outraged you aren't paying attention, money money money money, property rights, rant, sad

innocence lost

When my daughter J was a newborn, I remember a conversation with my wife about what it meant to have a daughter. I told her that even though our infant daughter was a perfect, tiny little angel up to that point it was bittersweet because “daughters will break their father’s hearts.”  I wasn’t entirely sure what I meant at the time, but I knew it to be true.  my wife asked her father about my comment, and he agreed, and even recalled one of the times when it was particularly true for him in their relationship.

anyhow, so I was singing one of my favourite new songs to J yesterday:

Oh no, no, I never go to work.
Oh no, no, I never go to work.
Oh no, no, I never go to work.
Oh no, no, I never go to work.

On Mondays, I never go to work.
On Tuesdays, I stay at home.
On Wednesdays, I never feel inclined.
Work is the last thing on my mind.

On Thursdays, it’s a holiday!
And Fridays I detest.
Oh it’s much too late on a Saturday,
And Sunday is the day of rest.

I modified the lyrics a little bit to make the song an apology for leaving her, because I had to go to work.  something like, 

It’s Monday — so I gotta go to work,
I don’t want to — but I’ve got to make some money,
On Tuesday — I’ll probably go to work,
Cuz really — I’m just a mindless wage-slave…

something like that.  

“honey, I’d love to stay home with you — no NO, I never want to go to work!” I say.

my daughter responds with all earnestness, virtually pushing me out the door with her hug: “oh daddy, that’s just a song.

so somehow along the line, in her two and a half brief years, my daughter has learned that working 40 hours a week Monday to Friday is the norm, and “playing trumpet everyday” is only appropriate in songs.  I guess I thought that it would take a few years of public-schooling before she built a box around her creativity and energy and resigned herself to working for a living… and I can’t help but feel like a failure as a father.

maybe it’s not too late to turn her ship around.

once again ladies and gentlemen — They Might Be Giants: [zip forward to 0:30]

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Filed under damn lies, fear of the day, I believe the children are our future, money money money money, music, reasons to homeschool

Freecycle cronicles

11. WANTED: Bumbo baby sitter
12. OFFER: Ferret cage

close enough in my book.

for those of you who are unaware: Freecycle.  a place where you can get a bag of 2T (toddler) clothes for $0, and sort through what you might want to use and what ought to be thrown away (or Freecycled to another…)

good stuff.  unfortunately treadmills and ellipticals rarely come available…

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Filed under economics, money money money money

it’s all about perspective

remember two days ago, when everyone was wetting their pants they were so happy with the bailout plan and it was finally saving the stock market, yadda yadda yadda?  the markets rallied to the biggest single day point gain ever:

it doesn’t look all that impressive in retrospect, does it?

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Filed under money money money money