Judge delays final ruling on trustee’s success fee
A bankruptcy judge delayed making a final decision yesterday on whether to reduce the $8 million success fee sought by Hawaiian Airlines' former trustee, Joshua Gotbaum.
After hearing arguments, U.S. Bankruptcy Judge Robert Faris said he would take under advisement his own tentative ruling to lower the fee to $250,000, leaving open the possibility that he could increase Gotbaum's final compensation.
Faris said he would issue a written final ruling but did not indicate when it would be available or which way he was leaning. The judge said his respect and admiration hadn't changed for the job that Gotbaum performed and that he still considered $8 million too much.
He said his main reason for issuing the tentative written decision a day before yesterday's hearing was that he was "dismayed to the extent (the court filings on the matter) had gotten personal."
"The real question is what is the right amount?" Faris asked after listening to two hours of testimony in which Gotbaum's attorney, Bruce Bennett, and U.S. Trustee Steve Katzman urged Faris to increase the fee.
Bennett argued that the comparable salaries for chief executives that Faris used in calculating the $250,000 payment was flawed because he didn't take into account the options, stock and bonuses that CEOs can receive.
Katzman said Faris' estimate of Gotbaum's cumulative hourly pay, $336, shortchanged Gotbaum because Faris did not account for the trustee's expenses. Gotbaum's actual pay would be $281 an hour, Katzman said.
In opposition, attorneys for Hawaiian Airlines' parent company and the carrier's labor unions said Gotbaum shouldn't receive anything extra, but that they could live with a $250,000 payment.
Gotbaum, who was in court, said afterward he wouldn't comment until Faris had issued his final order.
Katzman, who hired Gotbaum, said on a videoconference from San Diego that he told Gotbaum he would be fair with him at the end of the case if Gotbaum accepted lower interim compensation than Gotbaum had been seeking. Initially, Gotbaum and Hawaiian's creditors agreed to $70,000 a month but at Katzman's request, Gotbaum accepted $50,000 a month because of the uncertainty how the case would unfold.
"The result he achieved was far more favorable than any of us envisioned it could be," Katzman said.
Katzman has said Gotbaum should get a bonus no higher than $1.15 million -- equal to the amount Gotbaum made in salary during his nearly two years on the job. Counting salary and expenses, Gotbaum's final compensation would be just under $2.6 million. Yesterday, Katzman also proposed alternative arrangements in which Gotbaum would receive either $2.3 million or $1.9 million. Faris' tentative ruling would have given the trustee nearly $1.7 million.
Separately, two failed financial backers of Hawaiian Airlines have been found guilty by a jury in New York, following the arrest earlier this year of Paul Boghosian for attempting to bribe an FBI undercover officer. Boghosian and his financial partner, William Spencer, were both found guilty last week of conspiracy to commit bankruptcy fraud. Boghosian also was convicted of commercial bribery. They will be sentenced on Jan. 13 and face a maximum prison term of five years for each count.