Report: Midway bonuses draw flak from feds

Variety says Official Committee of Unsecured Creditors and the United States Trustee call bankruptcy milestone payouts "outrageous."

If there's one thing that Midway Games doesn't need right now, it's more problems. Unfortunately, that's apparently just what the publisher has gotten. Variety reports this week that the Official Committee of Unsecured Creditors (OCUC) and the United States Trustee (UST) have each taken exception with the publisher's proposed Key Employee Incentive Payments Plan (KEIP). The plan, which was uncovered at the beginning of March, stems from Midway's descent into Chapter 11 bankruptcy, after its creditors called in outstanding debts of $240 million in February.

As reported earlier this month, the plan proposes a payout of some $8 million in compensation to 29 Midway employees upon completion of three milestones. The first milestone--selling off the Wheelman publishing rights--has already come to pass, given that Ubisoft picked up the game in February. Midway confirmed for GameSpot that the KEIP bonus associated with this sale was valued at $497,500.

The second milestone calls for either a "submission by Midway of a plan of reorganization to continue as a going concern" or "execution of an asset-purchase agreement for the sale of Midway's Mortal Kombat franchise assets." The last marker can be achieved by "confirmation of a plan of reorganization or liquidation" or "closing of a sale of Midway's Mortal Kombat franchise assets." The two milestones will pay out collective bonuses of $1,292,500 and $1,965,000, respectively.

According to an objection filed by the OCUC with the federal bankruptcy court in Delaware on March 27, Midway had closed its Wheelman deal with Ubisoft before the KEIP plan was submitted. As such, Variety reports, the OCUC complained to the court: "The notion that a bonus program designed to reward employees for past accomplishments could be considered an 'incentive' is simply disingenuous."

In a separate objection also filed on March 27, the UST took issue with Midway's second and third milestone, reportedly saying that the company's primary responsibility right now is to make good on a reorganization plan, so it is a task hardly worth incentivizing. The UST also reportedly noted the lack of a timetable or other performance measurements associated with the milestone, saying, "The second and third milestones are based solely upon the occurrence of events without regard to when the events may take place, or to results obtained."

Variety also notes that the UST was none too thrilled over the compensation amount to be paid on completion of these milestones, calling the figure "outrageous."

"The Debtors seek authority to pay bonuses to a selected group of officers and managers which are four hundred percent greater than bonuses paid to the same group in 2008 when the debtors were not before the bankruptcy court," wrote the UST. "Given the current state of the general economy, coupled with historical data related to incentive bonuses paid by these debtors, the motion constitutes an outrageous request and is not justified by the facts and circumstances of the case."

The OCUC reportedly agreed with the UST's findings regarding the exorbitant bonus structure in its own complaint. "In a survey prepared by the committee's financial advisor, FTI Consulting, of compensation plans proposed in some 20 comparable bankruptcy cases in recent years, the proposed plan is, by far, the richest compensation plan that has been proposed, despite the unusually poor conditions of the current economy," the government office wrote.

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79 comments
ktseymour
ktseymour

Nice to see the Good'Ol'Boys network is still alive and kicking.The arrogance of the "Silver Spoon babies", to think that they are owed something because of stature in life is simply amazing!! These have to be the Dumbest people the world has to offer. This is outright theft by these scumbag CEO's.

sieg6529
sieg6529

Midway should just die already. They haven't been relevant since the 90s, really.

Meritocrat
Meritocrat

Why weren't stings attached to the bailout? If a bailout doesn't change how a company is ran, it is a waste of money. The same sum invested (as opposed to a grant) in lots of small gaming companies (The Behomoth say, who made Castle Crashers, or Introversion Software, who made Uplink) would create jobs in the games industry too; plus it would stimulate innovation.

Warlord_Irochi
Warlord_Irochi

Hope i'm completely wrong... but i smell this is the end. Onestly, i'm sorry :(((

Ilikemyname420
Ilikemyname420

I can sell the Mortal Kombat series for them....right on Ebay...just gimmie the million bucks!!!

nate1222
nate1222

@Dizzy1976 Ditto. There were people who've busted their asses working for Midway only to be punished for doing what they were told! Now these damn fat-cats are not only getting away with it - they're getting..... raises? Maybe Midway needs what AIG got; a good dissing from Obama!

Dizzy1976
Dizzy1976

Just crazy.....NONE of those ppl should get any bonuses for selling off a failed venture. Seriously....all that money should be going to all of the people who are getting laid off due to poor management. Seems like the people that actually do all the hard labor get shafted by losing their jobs and receiving some sort of half-assed compensation package that lasts what maybe a month or two and the execs get rich by giving themselves bonuses for failing. Whats wrong with this picture.

07pops07
07pops07

too bad its not....hits play on ipod..another bites the dust and another bites the dust

brob37
brob37

is this an april fools joke....? serious question

psx_warrior
psx_warrior

I appreciate the one person that thumbsed up my last comment. The rest of you need to wake up.

phase4illini
phase4illini

Just like to add that I HATE the fact that Congress, after passing some of the largest spending legislation in the history of the World, doesn't see fit to look into its own bonus practices. http://online.wsj.com/article/SB123854799133476409.html Not to mention the fact that pay increases for Congress are automatic, and must be voted against, not for.

kaziechameleon
kaziechameleon

the concept of legal bonuses are usually to circumvent a official raise in salary, similar to AIG. AIG hired many new people and legally promised bonuses to resolve their financial situation. after the storm had passed the would reside at a normal salary level. I don't think this is the case with midway.

wars45
wars45

the prob with midway is they dint move with the times.

phase4illini
phase4illini

For God's sakes. Government, stay the hell out of the business sector. These bonuses, like AIGs and just about every other corporation, are almost always legally established. By "taking and interest," aka trying to strike down these bonuses, the government opens this and other corporations up to serious and severe legal repercussions that will end up costing EVERYONE more in the end. akiwak, don't go blaming the top brass for all the cash they gave themselves. Like any publicly traded corp a lot of these decisions still lay at the hands of shareholders, who in this case, were both too stupid and too greedy to do the right things.

Addict187
Addict187

all of you would have takein the money and not looked back once while driveing to the bank. and let the company go bankruped evryone laid off .like most of us care about what happens to pepeole we don't know.

joelgargan
joelgargan

@zintarr You're awesome. Sounds like you know the source material A LOT better than me. From looking at this article, it does sound a lot more like theft than greed.

ImUndertheBed
ImUndertheBed

i just wanna know whats gonna happen with the mortal kombat franchise. if capcom were smart theyd put an offer in. it would be a license to print money.

akiwak
akiwak

Goes to show why Midway is going out of business. The execs would always plan more ways of giving themselves more money as oppose to actually putting out good games. Shame on you top brass at Midway, SHAME ON YOU!

jeffezy
jeffezy

So what happens to NBA JAM and MORTAL KOMBAT????

yboucher
yboucher

FOUL PLAY !! FOUL PLAY, FOUL PLAY!! It's written ALL OVER what's been going on with Midway for the last 2 years !!

king_chapeton15
king_chapeton15

sony should buy out midway to make an exclusive deals then the good games would come out with good ratings

X-RS
X-RS

would was the bonus itagaki requested from tecmo agian? a lot less :(

WestSideAzn
WestSideAzn

What would happen if EA were to buy out Midway? That would actually be a sad day.

TriangleHard
TriangleHard

One news I wish it was April Fool's joke....

Tyraan
Tyraan

@vassago_ I don't know if your report of Game Stop's profits are accurate or not but you do realize that they sell more than just used games right? Multiple console games, new and used, PC games, consoles, accessories etc. I highly doubt those profit numbers are accurate in the first place let alone for used sales only. Someone would have to have a lot of time on their hands to determine what was a used sale.

psx_warrior
psx_warrior

The government is giving and giving aig, and continuing to give aig money. Glen Beck said that money is being funneled through them to foreign banks. They are sending money to God knows who, and bailing them out, and they are whinning about Midway? They have no right. Shoot, they print the money out of nothing, dangit!!! And they throw it to God knows who outside the country, and when GM and Chrysler humbly crawl, begging for a few billion, Obama spits in their face and says you haven't done enough to restructure and change. What's wrong with this picture? This is insanity. I hate to say this guys, but I believe that our economy is fixin to implode, and the government knows it. That's why they are preparing the camps and what I believe to be martial law coming. Got on a rant their, but I say this to mean that they shouldn't lower the boom on Midway for something they do everyday, but in the end, none of us are gonna care when all we care about is trying to feed our families, and not who's gonna develop the next Mortal Kombat game.

shawn7324
shawn7324

Its crazy how many companies are losing money & still giving out bonuses.

vietboi89
vietboi89

well looks like its the best studios that will stay intact and the mediocre ones fall, u cant say that the most recent MK games were great but i guess its too bad

kayne2000
kayne2000

sucks but as long as this isnt another bailout though midway falling would be a good lesson to the industry even old powerhouses can fall i like midway i like MK but i guess its no more oh well. as long as no government bail out comes into play here im good. though this really isnt the feds business honestly aside from going to court over the chapter 11 thing.

kirklandx
kirklandx

@zintarr - U rock @vassago_ - All industries are hurting, yeah I get that. Put it's obvious people still have money for games, hence the record sales. The gaming industry is fine, people are just being more smart on how they spend. Besides, how did those games become used in the first place unless someone paid full price for it brand new in the first place. Hence, the developers made their money from the game. Maybe the developers need to take some re-seller money making lessons from the people making all this money.

Diernes
Diernes

Who cares, I dont remmember the last decent game Midway put out, it definately was not any of the MK games thats for sure

zintarr
zintarr

Keys4Ever98, I do not know you yet you attack me. Does it make you feel powerful? Do you get a thrill out of it? Does it make you look important?

You also speak of intellect and yet you show none. How grand.

Keys4Ever98
Keys4Ever98

[This message was deleted at the request of a moderator or administrator]

zintarr
zintarr

Throw these mother's in jail and seize their assets. If a company is tanking there are NO BONUSES! This is theft and this sort of trash needs to stop. Greed is good but this is not greed, its theft.

vassago_
vassago_

kirklandx - the game industry IS hurting right now, and badly. In the past year, more than 30 studios have shut down, including powerhouse companies like Ensemble, IronLore, BigHugeGames and ACES. Only the big publishers and developers are thriving, and only because they have assets to survive through this lull. In times like this, people tend to buy USED games. Developers don't get a single cent from used game sales. Nadda. Zip. Gamestop posted a record $8billion in profit or something to that tune, mostly all of it was used sales. Imagine if that had gone to developers. The game industry is a vice industry (like gambling and alcohol) which always proves to be recession-resistant. It will live to thrive again, but saying the game industry is "fine" or has "no problems" is a monumentally gross understatement.

Sins-of-Mosin
Sins-of-Mosin

Well, since the company has done so badly to have to file for bankruptcy, it's not surprising they are dumb enough to do this. What's even worse is that the idiots in charge will get jobs faster then the poor people who actually work for a living.

kirklandx
kirklandx

@chibi-acer Actually whether you love Midway's games is a whole bunch of the issue here. If they were a successful gaming company, they wouldn't be in this mess in the first place. Thanks for not paying attention to the big picture in this whole mess and all.

chibi-acer
chibi-acer

Whether you love or hate Midway's games isn't really the issue here. It's a case of upper management at a game publisher doing their usual crappy job and screwing over the company and their creditors.

kirklandx
kirklandx

Midway, Acclaim, LJN, whatever you wanna call them have done nothing but go down hill since the SNES days. They HAD some good game series on the go like MK, NBA JAM and a few others (I'm sure I'm forgetting a few) but overall these guys suck. This is just payback for all the crappy LJN games they game out with for the NES. I loved X-Men but that game was horrible! Sucks for the employees who will lose their jobs but the rest of the gaming industry isn't hurting from the current economy. As a matter of fact game sales are as strong as ever. These guys sound like the Chrysler of the gaming industry.

raahsnavj
raahsnavj

@angelGP32 - sorry, let me rephrase my statement in terms that a person that does 'research' would have said it: "sometimes I wish bankruptcy actually meant losing everything (only chaper 7, not 11)... instead it just means write the tax-payers a bill via getting a bureaucracy of courts and other useless people involved so we can drag out the process long enough so everyone that is still around has enough time to steal as much money as they possibly can before everyone finally agrees the company is doomed and the utilities finally turn off the lights." sure in cases businesses restructure and are able to return to profitabilty, but most of the time it is nothing other than a fancy way to write off a bunch of stuff at someone elses expense.

danopix
danopix

Our government is out of control. You may feel good that rich fat cats are getting messed with, but it does you no good what so ever. And they WILL get to YOU eventually. Barney Frank already wants to control the pay of ALL employees of companies that took bail out money, retroactively. No one seems willing to stop them so they just go farther and farther and farther. So that now politics and government is an appropriate topic on A GAMING SITE! Pretty horrible.

polsci1503
polsci1503

how do you payout bonuses for going through the steps of dismantling your company? That's crazy... it's like getting paid to cheat on your wife.

da1writer
da1writer

Don't get me wrong, Midway has brought us some good games... in the past. Their current games they are pumping out right now are downright awful (exception to the port/ publishing of UTIII). In all honesty, with the road Midway is heading into, I think they should just take a page from Circuit City. Close their doors and be done with everything... There are better studios pumping out better games than Midway. If cabbage has gone bad in the fridge, wouldn't you throw it away? Same with Midway, it's time to call it quits already... you won't be missed.

geist9049
geist9049

i own stock in midway, and i care that ppl are getting more money than they are worth. all payment to all emplyees should be based on the health of the company. if you do well u get money. if the stock is tanking u should get nothing more than a base salary.

WardCleaver02
WardCleaver02

@doomsoth It is none of our business what these people make. Again, the question still has not been answered: Why do people care? Do you own stock in Midway? No one gives these companies an ounce of praise when they are doing well (actually, the opposite is usually done), but my, we are quick to raise our fists and blame them for the entire collapse of civilization when they do poorly.

otanikun
otanikun

Please Midway, you need to live