Bloomberg reports that a bankruptcy judge ruled against former top employees of failed subprime lender New Century Financial in Irvine, and they must share their savings with other creditors as a judge prepares to sign a formal confirmation order on July 14.
The affected employees — high-earning managers and sales leaders, but not top executives — were the last to object to the bankruptcy settlement, saying $43 million in a deferred compensation fund was in trust for them alone, reports Bloomberg. U.S. Bankruptcy Judge Kevin Carey disagreed. He used the so-called cramdown process to confirm the plan, after all other creditor classes approved it.
Previous media reports said the deferred compensation plan operated like a retirement fund but without the special protections of a 401(k).
Creditors will get a range of pennies on the dollar. Bill Rochelle of Bloomberg writes: “The plan provides that creditors of the operating company whose claims total between $790 million and $1.6 billion should see somewhere between 3.5 percent and 23.6 percent. Unsecured creditors of the holding company could expect between 1.9 percent and 14.3 percent on their claims ranging between $340 million and $520 million.”
As previously reported, stockholders get nothing. At its peak, New Century was worth about $3 billion on Wall Street and made some $60 billion in loans in a year.
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- And the credit crunch rolls on
- Do we need a bailout now?
- Sen. Schumer raises concerns over IndyMac’s solvency
- REITs? Forget it.
Finally some good news! Those slimeball mortgage “sales leaders” and “top managers” don’t deserve squat.
They slimed their own company out of business with their shady financial practices and don’t deserve one penny of their “deferred compensation fund”. The nerve of them! And how typical of someone from the early 21st century mortgage industry to try and grab that money that belongs legally to their creditors.
Thank God this country has a system of checks and balances and a strong rule of law that allows a Banktrupcy Judge to step in and assure that the ethical and correct course of action takes place here.
They got what they deserved as “sales leaders” of Countrywide.
“Countrywide” was meant to be “New Century”. Freudian slip! HA!
A year from now this story will likely have “Countrywide” in the headline.
Many of the people with money in the deferred compplan had nothing to do with New Century’s failure. It was sold to them as a 401(k) for managers and I’m sure most of them didn’t realize the money wasn’t protected in the event of a bankruptcy. (Not that they expected a bankruptcy.) It was money deducted from their paychecks as a tax-sheltered vehicle for retirement. The ruling doesn’t really seem fair to me, but I guess the judge is following the law.
Troy - your jealousy and misplaced anger reveals your naivette toward business in general and the financial world in particular. Isn’t it time for you to refill the slurrpy machine?
As an former employee of new century unless you worked there you need to understand most employees were under the impression this was a solid company. You work hard do your job and expect to have some form of retirement for all of your hard work. nobody likes to be lied to
I worked for this company it was the hardest and most rewarding job I ever had. Most employee’s don’t have inside info regarding the financial situation about the company they work for. If we did, we would not have participated in that plan. You believe in your company when they reward you for all your hard work. Pointing fingers gets you nowhere. Everyone has their own opinion at the end of the day, nobody wins here.
PS. Troy go back to the slurrpy machine
I suggest you get your attorney’s to read and interpret these rulings for you before you write articles like this as you are incorrect in your reporting.
The judge did decide to “cram down” the liquidation plan BUT the deferred compensation money is to be held outside of the liquidiation plan pending the outcome of the class action suit. This is clearly spelled out in his decision, although that would require you to read the entire opinion from the Judge, not just the first paragraph.
The money is still frozen, per the court, and the case is still to be ajudicated.
Please correct your article.
Troy-
I whole heartedly agree with you. I dont think you belong at a slurpee machine either.