February 17, 2004 in Business, City

Executives at Met draw paychecks

Thirteen will earn $1.7 million total this year as firm enters bankruptcy
By The Spokesman-Review
 
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Background and the latest updates

Metropolitan Mortgage & Securities Inc. executives seek continued salaries and payments as the company wrestles with bankruptcy.

Former Spokane city councilman and mayoral candidate Steve Corker, who sits on Metroplitan’s board and heads its Western United Life Assurance Co. subsidiary, will be paid $252,000 this year, according to bankruptcy papers filed recently.

So will Irv Marcus, who took over as Metropolitan’s chief executive officer and board chairman last month.

In all, Metropolitan intends to pay 13 insiders about $1.7 million this year.

That doesn’t include compensation some executives get for board meetings. For instance, C. Paul Sandifur Jr., who paid himself $769,000 last year as Metroplitan’s CEO, will be paid $500 for every board meeting he attends.

Attorneys representing investors are outraged.

“I find it highly offensive that the very people who drove this company into bankruptcy now want to stick around and get paid,” attorney Bob Dunn said. He is among several law firms representing investors who are pursuing a class-action claim against Metropolitan in hopes of recovering at least a portion of their investment.

“If they are so concerned about the people who have been (cheated) out of their life savings, then they shouldn’t collect a nickel until they figure out first what’s wrong.”

Spokane bankruptcy lawyer John Munding, who is working with Dunn, said he will file an objection today to Metropolitan’s executive pay plan.

“Paying regular employees is one thing,” Munding said. “That’s a lot different than asking for compensation for all those parties that were responsible for the financial demise of the company.”

Metropolitan officials were unavailable for comment Monday. But it is common in bankruptcy cases for companies to keep paying employees and executives.

Often, many bankruptcy cases also include rich retention packages to keep important executives with the firm. No such golden parachutes have been sought by Metropolitan executives.

Metropolitan filed for bankruptcy on Feb. 4. Executives said the company’s new cash-intensive focus on commercial lending outpaced its ability to raise money.

The Securities & Exchange Commission balked at Metropolitan’s attempt to raise more than $100 million by issuing new rounds of preferred stocks and unsecured bonds called debentures.

Without that money, the company couldn’t pay dividends and interest on old debts, or make more investments, according to chief financial officer William Smith, who will be paid $200,000 next year.

The company plans to file a reorganization plan that would give ownership of the firm to debenture holders. That includes thousands of investors, many of them living in the Northwest.

Smith has said the company plans to file a plan within four months. But it needs approval from courts, regulators and creditors.

The company faces other problems.

In January, Metropolitan’s independent auditor quit, concluding that executives had made material misstatements about the company’s financial condition.

Now the SEC and the Washington Attorney General’s office want Spokane federal bankruptcy Judge Patricia Williams to appoint independent investigators to determine if Metropolitan executives committed fraud.

Other officials that the company wants to keep paying include corporate attorney Lynn Ann Ciani at $175,000, bankruptcy documents state. Erik Skaggs, Metropolitan’s vice president of market development, will get $175,000.

Skaggs, the point man on Metropolitan’s local political agenda, has been deployed to military duty. He is a member of Washington Army National Guard’s special operations unit.

Controller Robert Ness will get $150,000, while chief investment adviser Weiling Zhu gets $100,000.

Other salaries: George Hanrahan, vice president of information systems, gets $98,000; corporate secretary Reuel Swanson will get $90,000; Summit secretary Greg Strate, $84,000; assistant treasurer Linda Bruce, $73,116; assistant vice president and spokeswoman Mary Keller, $60,000; and venture funds manager Philip Sandifur, $20,000.


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