Bankrupt Philly refinery’s request to pay secret executive bonuses raises objections

Philadelphia Energy Solutions, which paid $4.6 million in bonuses to executives following a devastating June fire that led to its closure and bankruptcy, wants to pay out a new round of retention awards. But this time it wants to keep the recipients and the bonuses a secret.

PES Holdings LLC asked U.S. Bankruptcy Judge Kevin Gross in Delaware to approve a key employee retention plan, though it wants to keep details of the awards confidential to reduce the “negative impact on employee morale” and also the chances that competitors could use the information to recruit and poach personnel.

The company, whose 335,000-barrel-per-day South Philadelphia facility was the largest refining complex on the East Coast before it closed, filed the request Friday with Bankruptcy Court. PES laid off most of the company’s 1,100 employees while it works through the Chapter 11 bankruptcy process and looks for a buyer.

“It’s infuriating,” said Ryan O’Callaghan, a spokesman for Steelworkers Local 10-1, which represents refinery workers. “It’s more of the same thievery from PES management. The refinery could be running now. Executives should not profit from their own failures.”

O’Callaghan said the Steelworkers received a 60-day layoff notice on Tuesday for 17 of the remaining 83 unionized workers who remained at the refinery as “caretakers” after most of the workforce was let go on Aug. 25. He said the workers are assigned to work on the alkylation unit that was destroyed in the fire; clean-up of residual toxic hydrofluoric acid used in alkylation unit is nearly completed.

Representatives of the refinery did not respond to requests for comment.

The refinery took a lot of heat last month after it disclosed it had paid out about $4.6 million in retention bonuses — before its bankruptcy filing — to eight key executives after the devastating June fire that closed the giant complex along the Schuylkill. The bonuses included a $1.5 million award to CEO Mark Smith.

Experts say companies undergoing bankruptcy sometimes pay retention bonuses to keep key employees in place, because it is difficult to find replacement help for a company with a cloudy future.

The refinery, known in the document as the “debtors,” said it wanted to keep the details of the bonus plan confidential to protect the privacy of the employees receiving the payments. The information would be disclosed only to the court, the U.S. trustee, lawyers representing debtor-in-possession lenders, and counsel to the committee of unsecured creditors.

“The debtors believe that public disclosure of such information could have a negative impact on employee morale,” the company stated. In addition, PES fears its competitors “could use the information to the debtors’ detriment by, among other things, recruiting debtors’ personnel and poaching key employees.”

The company argued that the information is “without question competitively sensitive, and its disclosure has potential to cause 'commercial injury’ to the debtors.”

The committee of unsecured creditors on Tuesday filed objections to the refinery’s motion, saying there was “no legitimate basis” for shielding all the information from the public.

“The debtors’ business is currently non-operational and subject to a sale of all of their assets,” the committee’s filing said. “In short, there is no ‘commercial information’ ... left to protect at this point.”

The committee’s law firm, Brown Rudnick and Elliott Greenleaf, withdrew the objection without explanation on Wednesday.

The committee’s seven members include the Steelworkers union.

The court is scheduled to consider the refiner’s request, among others, at an Oct. 18 hearing in Wilmington.

Editor’s note: This story was updated Oct. 2 at 11:30 a.m. to include information about the filing of objections to the refinery’s motion. It was further updated on Oct. 3 at 3:11 p.m. to include information about the withdrawal of objections.