Judge Backs Raise for Lawyer at Bankrupt Cedar Falls Brokerage
WATERLOO, Iowa - A judge has granted a pay raise of $20,000 for the attorney representing bankrupt Cedar Falls-based Peregrine Financial Group Inc., over the objections of creditors, according to an attorney representing creditors.
Stephen Bobo, an attorney for the nonprofit Commodity Customer Coalition Inc., which had objected to the raise, said Judge Carol Doyle approved the increase Wednesday in U.S. Bankruptcy Court for the Northern District of Illinois.
The raise, going to PFG’s general counsel Rebecca Wing, will up her salary to $400,000, according to the Associated Press.
Ira Bodenstein, the court-appointed Chapter 7 trustee for PFG, had sought the raise for Wing, who, as general counsel for PFG, had expertise that could help expedite liquidation of PFG’s assets.
Bodenstein, who, in the wake of PFG’s bankruptcy filing July 10, had been granted authority to retain some PFG employees to help wind down its operations through Sept. 13, had filed a motion Aug. 30 requesting an extension until Nov. 12. In the same filing, he asked the court to grant him authorization to “modestly increase the salary of the Debtor’s former general counsel.”
The Commodity Customer Coalition and Vitaloon Inc., a PFG customer that says it has account balances totaling $180,000 with the defunct firm, had filed objections to the pay raise.
“Vitaloon and the CCC do not object to the continued operation of the Debtor’s business or the payment of related payroll and benefits to the employees involved,” the groups said in their court filing. “However, Vitaloon and the CCC are puzzled by the proposal to increase the salary of the Debtor’s general counsel and therefore object to it.”
Bobo said Bodenstein had told him he would be filing a motion detailing an initial distribution of funds to customers.
Bobo said Bodenstein did not disclose what would be in his proposal.
“He was fairly guarded in that regard,” Bobo said.
PFG owes money to around 24,000 accounts, according to some estimates. Bobo said that’s a pretty good guess. “There may be some who have more than one; whatever it is, it’s a lot,” Bobo said.
A meeting of PFG creditors is scheduled for 10 a.m. Monday in the federal courthouse in Chicago.
In their objection, Vitaloon and the Coalition said they did not disagree with Bodenstein’s assertions about Wing’s value to the process.
But the groups said the increase is a pay raise and not “in the form of a bonus or other incentive compensation that will ensure that she is motivated to stay employed by the Debtor for as long as the Trustee needs her services.” They contended “she appears free to depart from the debtor’s employee at any time a better opportunity presents itself.”
The two groups also objected to the pay raise because PFG customer accounts remain frozen in the bankruptcy process and customers have not received any money. The filing claims several trading advisory businesses “have recently been forced to close” because their funds were frozen.
Investigators say the company is missing more than $200 million in customer funds that it claimed to have, and former CEO Russ Wasendorf Sr. has been charged with lying to regulators. He remains in custody in Linn County Jail.
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