Pegasus Gold Corp. has asked a federal bankruptcy court to approve $5 million in bonuses and severance pay for top executives even as the company withholds tax payments in Montana because of its financial troubles.
In a court filing, Pegasus argued it is necessary to pay employees bonuses to ensure successful conclusion of the company’s Chapter 11 reorganization and to maintain effective company management.
Because of its bankruptcy filing, Pegasus must get court approval to spend any cash. A hearing on the bonus proposal is scheduled for April 10 in Reno, Nev.
Spokane-based Pegasus Gold Corp., which operates or is closing five mines in Montana, filed for bankruptcy protection on Jan. 16 to try and reorganize its finances.
John Pearson, vice president of public and investor relations for Pegasus, said the incentives are necessary, given that company executives face heavier workloads and additional pressure because of the bankruptcy filing.
“If people don’t see something that rewards them to stay, without some sort of protection, we could see … people leaving,” said Pearson. “We need to keep key executives in place …
“The amounts are reasonable and are consistent with market conditions for employment of executives under similar circumstances,” said Pearson, who stands to get a bonus of nearly $80,000 under the plan.
But critics said it is wrong to pay top officials bonuses when the company is laying off workers at home and is unable to pay its debts.
Glenna Obie, chairwoman of the Jefferson County Commission, where officials are awaiting property tax payments from Pegasus, called the proposal “unbelievable” and “sad.”
“What’s disappointing is to think these few executives are basically working to give themselves huge advances when we’re looking at Clancy Elementary not having a teacher because it can’t afford to pay her a $30,000 salary,” she said.
“It’s clear that Pegasus has always put the company ahead of the communities in Montana, their rhetoric notwithstanding,” said Jim Jensen, executive director of the Montana Environmental Information Center. “Otherwise, they’d be paying their taxes and supporting the schools rather than paying their fat cats bonuses.”
In the petition, filed earlier this month, the mining company proposed paying a total of at least $5.5 million, including at least $2.8 million in severance pay, $2.3 million in retention bonuses and $368,000 in performance bonuses to its four top executives and 22 other key managers and officers.
Werner Nennecker, Pegasus’ president and CEO, would receive a $490,000 retention bonus on top of his $350,000 annual salary.