Fontainebleau judge denies request for $1 million in bonuses

By Steve Green

Tuesday, Dec. 15, 2009 | 12:48 p.m.

The Fontainebleau Las Vegas casino-resort bankruptcy judge has denied a request that some $1 million in bonuses be paid to Fontainebleau employees who continue working for the company through February.

With investor Carl Icahn bidding for the uncompleted resort during an auction next month, Fontainebleau and its attorneys have said the remaining two dozen workers are unsure if they will have jobs after the auction because Icahn has not indicated if he would immediately resume construction or mothball the project until the economy improves.

Fontainebleau proposed offering bonuses so workers would remain focused on selling the resort and stabilizing the building structure – as opposed to looking for other jobs.

But Judge A. Jay Cristol in Miami on Monday signed an order denying the bonuses, saying lenders and construction lien holders shouldn’t be obligated to pay for them.

Creditors are owed more than $2 billion in the case and it’s likely they’ll take huge losses given uncertainties over whether anyone will offer more than Icahn’s $156.2 million bid in cash and financing.

"While the remaining employees may well be deserving of such incentive bonuses, the standard (under bankruptcy law) is not only whether the debtors have exercised their sound business judgment, as the debtors argue, but whether the … payments serve the interests of creditors and the debtor’s estate," the judge wrote.

"The court does not believe the payments do serve the interests of the creditors in this case," Cristol wrote.

The bonus plan was opposed by the U.S. bankruptcy trustee in Miami, as well as lenders and construction lien holders.

Cristol’s order said the payments also are not essential or necessary to the survival or reorganization of Fontainebleau.

"The debtors’ business is not going to survive. It will be sold, we hope, on Jan. 21."

Cristol said the bonuses would be fine – as long as they are paid for by Icahn or another successful bidder for the resort.

And the judge said he would consider restoring the pay of employees who have taken pay reductions of 10 percent to 30 percent – but only if Fontainebleau sells for more than the $105 million in cash now on the table.