Newspaper that railed against AIG bonuses paid bonuses just before declaring bankruptcy

posted at 3:21 pm on March 30, 2009 by Ed Morrissey

While the national media stoked populist outrage over retention bonuses paid by AIG to executives, at least one of the newspapers involved had a bonus scandal of its own. Philadelphia Media Holdings, which publishes the Inquirer and the Daily News, paid $650,000 in executive bonuses less than two months before declaring bankruptcy (via Romanesko):

Though the company teetered on the verge of bankruptcy at the time, this past December Philadelphia Media Holdings awarded bonuses to CEO Brian P. Tierney, vice president of finance Richard Thayer and Daily News publisher Mark Frisby. …

PMH filed for bankruptcy in February. Toll, of the homebuilding Toll Brothers company, confirmed that the PMH board knew the company¹s fiscal situation was dire. “The financial condition of the papers was obviously not good,” said Toll. “We knew what was going to happen sooner or later.”

So why give out $650,000 in bonuses? “We thought it was deserved,” he said. “But we can’t get into the details because we’re involved in bankruptcy proceedings.”

That’s certainly a more nuanced approach than the Inquirer took in its editorial about the AIG bonuses. It criticized Wall Street and AIG specifically for — wait for it — detaching bonus payments from performance:

Bonuses never should have been given to the people who helped to create the financial crisis. AIG’s financial- products unit devised the infamous “credit-default swaps” that helped to bring the company to the brink of collapse, necessitating the bailout.

In 2008, this arm of AIG lost $40.5 billion. But employees at the business unit are receiving $450 million in bonuses under a retention program begun a year ago. The latest installment of those bonuses was paid out to 418 employees Friday; an additional $230 million is to be paid later.

Apparently, when Wall Street lost its way, it also lost any sense that “bonuses” should reward superior performance.

Apparently, there was a lot of that going around, including at the very offices that produced this editorial.

For their shock, shock! at AIG bonuses while their executives grabbed their own just ahead of the bankruptcy court, Philadelphia Media Group and its two newspapers win the Captain Louis Renault award:

Update: A media source I respect points out that Tierney et al probably had no input with the editors who wrote the editorial.  That’s true.  I wonder, though, if the editors had found out about the bonuses (paid in February) before writing that particular editorial.  If not, will they vent their outrage over that situation?

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Question -

Since the bonuses were paid within the last 90 days before bankruptcy was declared, does that mean the courts could “clawback” the bonuses in question?

teke184 on March 30, 2009 at 3:25 PM

They were in the business of reporting, didn’t they realize that this kind of information might, one day, come out?

Oh wait, they probably didn’t care.

myrenovations on March 30, 2009 at 3:25 PM

eggsactly…

RalphyBoy on March 30, 2009 at 3:26 PM

I’m never — ever– surprised with the media lap dancers anymore.

blatantblue on March 30, 2009 at 3:27 PM

“So why give out $650,000 in bonuses? “We thought it was deserved,” he said. “But we can’t get into the details because we’re involved in bankruptcy proceedings.”

…….. I’m going to have to remember that line.

Seven Percent Solution on March 30, 2009 at 3:27 PM

Please stop… (not really, but my brain is exploding!) Don’t tell us about all the hypocracy anymore!!!!

So all that drummed up outrage was just provide cover up in the week they decided to print more money… Wow.

I think I need to watch Beck today just to feel like there is some saneity left in the world. And when you have to turn to Glen Beck for saneity… something is just not right!

petunia on March 30, 2009 at 3:28 PM

I suppose the distinction is that the newspaper bonuses weren’t paid with taxpayer money.

DarkKnight3565 on March 30, 2009 at 3:28 PM

It’s called looting what is left of the treasury before it is completely empty. Sort of like what Obama is doing now.

crosspatch on March 30, 2009 at 3:28 PM

It’s called looting what is left of the treasury before it is completely empty. Sort of like what Obama is doing now.

crosspatch on March 30, 2009 at 3:28 PM

Bingo

Vashta.Nerada on March 30, 2009 at 3:30 PM

“that’s different comrade”….

as I say it always is…

sven10077 on March 30, 2009 at 3:31 PM

These bonuses need to be treated as preferences and disgorged. These clowns paid themselves in contemplation of bankruptcy to avoid the 90 day preference rule, then filed on the 91st day.

Sorry, but if the BK court there is doing their job, these guys will return the money to avoid fraud charges.

billypaintbrush on March 30, 2009 at 3:31 PM

Question -

Since the bonuses were paid within the last 90 days before bankruptcy was declared, does that mean the courts could “clawback” the bonuses in question?

teke184 on March 30, 2009 at 3:25 PM

Possibly. One looks forward to the Inky’s rationalization for letting the men keep the bonuses. (“Not as much as AIG’s!”)

Wethal on March 30, 2009 at 3:32 PM

No surprise. The game is rigged. Everybody who is high up enough gets an A

MB4 on March 30, 2009 at 3:33 PM

So why give out $650,000 in bonuses? “We thought it was deserved,” he said. “But we can’t get into the details because we’re involved in bankruptcy proceedings.”

It’s like one of those schools that is heavy into self-esteem where everyone in class gets an A and all the sports teams get a Gold Star.

MB4 on March 30, 2009 at 3:37 PM

Philadelphia Media Group and its two newspapers win the Captain Louis Renault award:

I LOVE the Captain Louis Renault Award!

Best award since the Darwin awards.

Geministorm on March 30, 2009 at 3:39 PM

Sounds like their in-house counsel never heard of a fraudulent transfer.

SWLiP on March 30, 2009 at 3:42 PM

I know how this game works, since I used to be one who wrote the executive bonus plans designed to please the board and befuddle the stockholder.

*haha

The game is…..steal as much as legally allowed.

Stockholders don’t have a chance in this game.

Time for middle-class America to bow out of Wall St.

Instead, we need regional investment companies, where you can actually go out and see what you’re investing in, decide if you like the company, determine whether the guy running it is a charlatan or a real stand-up person….and then, take your risk.

AnninCA on March 30, 2009 at 3:46 PM

If the money was 2 months, they will be treated as a preferred creditor and have to pay back.

seven on March 30, 2009 at 3:47 PM

Well I do have to point out that there IS a fundamental difference between the two events.

AIG was using taxpayer money to pay out the bonuses.

PI was using PRIVATE shareholder money to pay out the bonuses.

All that said, I still think the AIG people deserved their bonuses. They held up their end of the contract.

Dr. Dog on March 30, 2009 at 3:57 PM

That’s one …

DannoJyd on March 30, 2009 at 4:05 PM

Time for middle-class America to bow out of Wall St.

Instead, we need regional investment companies, where you can actually go out and see what you’re investing in, decide if you like the company, determine whether the guy running it is a charlatan or a real stand-up person….and then, take your risk.

AnninCA on March 30, 2009 at 3:46 PM

I see what you’re driving at, but I don’t think dissolving national and global enterprises is the key to increasing economic prosperity. Economics is, at its heart and when practiced correctly, all about increasing efficiency. It would take me days to make a shoe from scratch, and I probably wouldn’t do a very good job of it, but thanks to economic tools such as currency and economy of scale, I can run down to the store and buy a pair of shoes for the equivalent of two or three hours worth of wages. In essence, the economy allows me to provide myself with a pair of shoes using only a few hours of labor. It’s an awesomely powerful multiplier for my productivity, even more so when the example is applied to advanced technology I could not possibly construct myself, such as a television set or a microwave oven.

The same principle applies to production and investment on a large scale. My locally-run family shoe factory could not possibly produce shoes as cheaply and efficiently as the massive factories run by major shoe manufacturers (leaving aside the “sweat shop” factor and foreign labor, which is another discussion entirely.) If you remove national and global shipping of raw materials as well, the productivity of my local shoe plant declines even further, and of course forcing them to sell their products to a strictly local or regional market puts a pretty firm ceiling on their maximum income and profits.

Investment growth is likewise enhanced by giving investors national and global options. As you pointed out, these large-scale investments have been doing a lot of damage to their stockholders lately. It seems to me that most of these problems are due to bad performance at the highest levels – in most industries, the working stiffs and little guys are pretty good at their jobs, and the really cosmic screw-ups are being made by upper management. That’s why these nationalization programs are so crazy – they’re just adding a new layer of upper management: the government, which is even more out of touch with the industry, less responsive, and less accountable than the old management was.

Doctor Zero on March 30, 2009 at 4:08 PM

ahahahahaha. It’s like the Night of the Living Dead…they’re EVERYwhere.

scalleywag on March 30, 2009 at 4:10 PM

These bonuses are actually stolen from the company’s creditors. I don’t know what US bankruptcy law says, but in Canada (and I’m sure there are similarities) the bankruptcy court can declare these as unjust preferences or even frauds. the time limits to look back can be six months in some cases and up to two years in others.

A key issue is whether, when the preference is made, it was with the knowledge that the company was insolvent. These words:

“The financial condition of the papers was obviously not good,” said Toll. “We knew what was going to happen sooner or later.”

are therefore quite relevant.

Blaise on March 30, 2009 at 4:25 PM

It’s ‘different’ when newspapers do it. The Dem’s like to call it “nuance”. That’s French for “it’s only okay when we do it”.

GarandFan on March 30, 2009 at 4:27 PM

Will the recipients be taxed at 90% on THEIR bonuses? Media hypocrisy has come to such a state that the only print medium I now trust is “The Onion”.

oldleprechaun on March 30, 2009 at 4:30 PM

Let me point out just two items. In 1935, you ran guns to Ethiopia. In 1936, you fought in Spain on the Loyalist side.

And I was well paid for it on both occasions.

The winning side would have paid you much better.

My favorite lines from Casablanca. You learn so much about the politics behind this film from them. Rick, despite his claims to neutrality, took sides with the underdog in the past. The greatest propaganda film that Hollywood ever made, easily rivaling Nevsky or Triumph of the Will.

KillerKane on March 30, 2009 at 4:32 PM

Everytime I think I may actually miss print newspapers one day, this kind of drivel surfaces and I realize that I will celebrate their respective closures.

Just like left-wing radio – there is no market for it.

I can’t wait to see a picture of Ann Coulter (whom I am not particularly fond of, but who has been a 1-person NYT truth squad) standing in front of the deadbolted NYT building.

molonlabe28 on March 30, 2009 at 4:37 PM

I was against the bonuses before I was for them.

jgapinoy on March 30, 2009 at 4:39 PM

I understand the hypocritical nature of this; however,playing the advocate, I have to state the following:

Did Philadelphia Media Holdings take money from the U.S. Government (i.e. did they take tax payer money) to keep them afloat? Did PMH help “to create the financial crisis?” If not, they can do whatever they want regardless of what they said (although I am convinced that this was said because AIG took money from the government in the first place). What is nuanced is whether they were against the bonuses because:

1. AIG Accepted money from the government and/or AIG contributed to the financial crisis
2. No company should pay bonuses during a time of poor performance.

Either way, I believe that Executives know how to run companies better than I do. That being said, while I am conflicted ethically with the fact that bonuses were being paid at AIG, paying bonuses during poor performance or losses can be completely acceptable logically and economically.

TightAggressive on March 30, 2009 at 5:45 PM

“Round up the usual suspects…”

warbaby on March 30, 2009 at 6:43 PM

Surprise…surprise. Dishonesty in journalism? Who would even consider the thought?

volsense on March 30, 2009 at 7:01 PM

Leftists hypocrisy? But then socialism has always meant, “What is mine is mine, what is yours we share.”

darktood on March 30, 2009 at 7:06 PM

I wonder, though, if the editors had found out about the bonuses (paid in February) before writing that particular editorial. If not, will they vent their outrage over that situation?

The world will never know….

BobMbx on March 30, 2009 at 10:45 PM

Point of fact: Brian Tierney, the CEO and one of the principals in this version of Bonusgate, has a long and generally positive history with conservative/Republican causes, even though he (lamentably) decided to keep his personal politics out of the newspapers.
Point of fact 2: The Stinquirer has a long history of pseudo-liberal populism (translation: mouthpiece for the DNC).
Point of fact 3: The fact that the Daily News even still exists is thanks to Tierney and his cohorts. Another buyer when Knight-Ridder gave up the newsprint ghost would have shuttered the DN in a minute, thereby depriving me and other sportsnuts like me of the best damn sports section in the region… and one of the top 5 in the country.

either orr on March 30, 2009 at 11:35 PM