Smurfit-Stone Container Corp. pays $50.4M in bonuses; still owes Missoula County $1.8M in taxes

2010-02-09T06:45:00Z Smurfit-Stone Container Corp. pays $50.4M in bonuses; still owes Missoula County $1.8M in taxesBy KEILA SZPALLER of the Missoulian missoulian.com
February 09, 2010 6:45 am  • 

Smurfit-Stone Container Corp. doled out roughly $50.4 million in bonus pay last year, including $8.1 million to executives, according to a U.S. Securities and Exchange Commission filing.

"The company has already eliminated at least five positions in upper management in Atlanta and St. Louis so they probably have a few bucks to spend," said Bob Johnson, president of United Steelworkers Local 885. "It's just the way it is."

In bankruptcy proceedings, the corporation just shuttered its Frenchtown linerboard plant but its decisions continue to have a big impact on the Missoula area. Smurfit owes roughly $1.18 million in taxes to Missoula County. And at least 35 people who used to work on the maintenance crew at the paper mill are headed out of town and out of state for other jobs, according to Johnson.

"The sad side of this is if somebody decides to reopen this (plant) they better do it quickly before this work force moves on," he said.

According to the SEC filing signed Jan. 28, Smurfit chief executive officer Patrick Moore pulled in more than $1.5 million in bonus pay in 2009. President and chief operating officer Steve Klinger took in nearly $1.1 million the same year.

The top bonuses went to them, although it wasn't clear how the company awarded the amounts. Noting standard procedures, Smurfit corporate spokesman Mike Mullin declined to comment on whether the bonuses were paid out in cash or stock options or some combination.

"We never do talk about compensation," Mullin said.

***

The company also owes Missoula County some $1.18 million in property taxes. Missoula County deputy treasurer Scott Seitz said the corporation contacted the county on Jan. 28 about paying the bill. He said as of Monday, the county had not received payment.

The back taxes owed aren't likely to be in jeopardy, though, according to a bankruptcy lawyer. Harold Dye, of Dye and Moe in Missoula, said a property tax claimant is among the first in line for payout.

"I can't see any way that wouldn't happen, at least if someone is minding the store," Dye said. "I think the county will eventually be paid."

He said the county is considered a pre-petitioned creditor, meaning it generally would not be paid until a plan is confirmed.

According to the most recent "operating results" posted on the corporation's Web site, restructuring and plan confirmation are around the corner: "Smurfit-Stone currently expects to emerge from the restructuring proceedings in both the United States and Canada early in the second quarter of 2010. The next step of the emergence process is the solicitation of acceptance of the POR (plan or reorganization) by the creditors of the Company, which is expected to be completed by the end of March."

Dye said presumably the state is in a good position as well. A Montana Department of Revenue official said he would know Tuesday what financial information he could release related to how much money Smurfit owes the state.

***

Dye also commented on the executive bonuses. In any bankruptcy proceeding, administrative expenses are the first to be paid, he said. Those are ordinary business expenses and include salaries.

In some cases, the court also approves retention bonuses. That money is supposed to keep talented people in place during the bankruptcy. Dye said the rationale is practical but in reality there's a problem with how the provision is used.

"In my opinion, it's abused a lot," Dye said. "And it's particularly abused in places like Delaware."

That's where Smurfit-Stone went to court. Dye said many organizations incorporate in Delaware because of its notoriously lax corporate standards. He pointed to W.R. Grace as an example.

"They tend to file bankruptcy there because frankly the reputation is that the whole system - the judges, the U.S. Trustee's Office - is a lot more debtor friendly," Dye said.

He also said the workload there - the high volume of cases for judges - probably contributes to the reputation as well.

In Missoula, reactions to way the judge has handled Smurfit-Stone so far have been largely positive. In a hearing a couple weeks ago, the judge told the corporation to be forthcoming with information sought by potential buyers for the Frenchtown mill.

***

In the meantime, many of the more than 400 employees who used to work at the plant are forging ahead in other directions, Johnson said.

"For a lot of folks, this has been a huge, thought-provoking transition," Johnson said. "They never really considered what they would do if this ever happened."

The union workers got compensation packages that were pre-approved when the company originally filed its bankruptcy, he said. Some people close to retirement were hoping to leave with full benefits, but that didn't happen.

"They made it clear there was not going to be any improvements," Johnson said.

Paper mills are among the most complex manufacturing facilities in the world, and he said the craftspeople who worked there are in high demand. Many from maintenance already have moved and plan to take their families as soon as they can.

If the sale and revival of the plant is going to happen - for whatever use - Johnson said he hopes it does before former crews pull up roots.

"If this takes too long a process, then these people aren't coming back," Johnson said. "But they may come back if they still have their home and their families."

Reporter Keila Szpaller can be reached at 523-5262, keila.szpaller@missoulian.com or on MissoulaRedTape.com.

 

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