Bankruptcy Judge Martin Glenn yesterday rejected Residential Capital LLC's proposal to pay as much as $7 million worth of incentive bonuses to 17 senior executives, Reuters reported yesterday. Judge Glenn said that the "key employee incentive plan" proposed by Residential Capital, the mortgage unit of Ally Financial Inc, did not link the bonus payout of $4.1 million to $7 million closely enough to meeting the "challenging financial and operational goals" meant by an incentive plan. ResCap's plan "is primarily retentive in nature," and "appears to attempt an end-run" around federal bankruptcy laws, Judge Glenn concluded. The judge gave ResCap permission to draft a new plan to address his objections, as well as objections previously voiced by U.S. Trustee Tracy Hope Davis.
http://www.reuters.com/article/2012/08/29/ally-rescap-bonuses-idUSL2E8J…
In related news, the U.S. Securities and Exchange Commission is investigating Ally Financial mortgage unit Residential Capital for possible misconduct in its loan origination and underwriting practices, Reuters reported yesterday. The SEC disclosed in court documents that it had issued a formal order of investigation on Feb. 22 to probe possible fraud in the offer and sale of mortgage-backed securities by ResCap. The SEC disclosed the ResCap inquiry in a court request on Monday to force R.R. Donnelley & Sons to turn over certain due diligence records the company prepared for investment banks that underwrote the ResCap securitizations under investigation. The agency said that it needed the reports to determine whether ResCap made "material misrepresentations or omissions about the mortgage loan pools that backed the securitizations under investigation."
http://www.reuters.com/article/2012/08/28/allyfinancial-sec-idUSL2E8JS2…