Judge rejects bankruptcy bonus of $2.9M for top Molycorp execs

Molycorp Inc. lost a bid to pay as much as $2.9 million in bonuses to seven top managers when a judge rejected the plan, saying it would simply keep them on the job with no motivation to help reorganize the bankrupt mining company.

Bankruptcy judges give closer scrutiny to bonus programs for top executives than so-called retention plans for lower-level employees. However, it is unusual for a judge to reject the request for executive incentive programs.

Greenwood Village-based Molycorp tried to convince Judge Christopher Sontchi the managers were required to meet high standards to collect the bonuses. The requirements included monitoring the partial shutdown of a mine at Mountain Pass, Calif., sticking closely to a budget and conserving the rare-earth metals producer’s dwindling cash.

Molycorp attorney Lisa Laukitis said the company had made the standards for winning a bonus harder after consulting with creditors. None of the creditors in the case endorsed the programs.

A committee of unsecured creditors and the U.S. Trustee, an arm of the U.S. Justice Department that monitors corporate bankruptcies, argued that Molycorp’s managers were being rewarded for staying on the job because the standards were so easy to meet.

Sontchi said not enough of the standards gave managers a real incentive to help reorganize or sell Molycorp while in bankruptcy.