Erickson Leaves Its Workers In The Lurch

February 05, 2010|By Jay Hancock | Jay Hancock,

William Brattain, former head of construction for Erickson Retirement, had his Country Coach motor home repossessed on Monday.

That was a few days after lawyers from DLA Piper billed Erickson $779,000 for one month's work, including $3,000 in restaurant expenses.

Clearly, some folks are doing better as a result of Erickson's bankruptcy filing than others.

Brattain and scores of others who got laid off by the company are doubly unlucky. First they lost their jobs. Now Erickson has withheld severance pay that it promised and that they were counting on for rent, health insurance, and mortgage and car payments.

Erickson owes former auditor Stacey O'Neale severance of $6,927, according to court records. She postponed her job search last year because the company promised a bonus if she stayed a few extra weeks to shut down her department. But the company's October bankruptcy filing froze severance for O'Neale and about 90 other laid-off employees.

She and her husband had to sell their house in Canton and move in with a relative. Although she found a new job, the only Christmas present anybody in her home got was a talking horse for her 2-year-old daughter, she said.

"I'd like to personally thank Erickson for ruining my child's Christmas and for putting us in this horrible position," she said in an e-mail.

It's not like Erickson doesn't have the money. Although it's reorganizing its finances under protection of the bankruptcy court, it had $2.2 million in revenue in December and $34 million in cash, according to court filings. One bankruptcy lawyer at Piper is billing the company $835 an hour.

To pay the severance, which adds up to $1.8 million, Erickson needs approval from Stacey Jernigan, the Dallas bankruptcy judge handling the case. In an eloquent document, the company formally asked her permission in late October.

Failure to pay the money "could result in extreme hardship to the laid-off employees," said Erickson's legal motion. Payment is "critical and essential to the morale of the remaining employees" who might worry about their own layoffs, it said.

But that was three months ago, and Erickson hasn't followed up.

Former Erickson facilities manager Kelly Kight, owed $12,965, had to take a job at one-third her former pay just to get health insurance for her family. Meanwhile, Erickson hasn't asked Jernigan for a hearing on the severance payments for Kight and the other ex-employees.

Former Erickson construction manager Jeff DeBois, owed $48,364 in severance, is so strapped that he and his wife are thinking about moving to Costa Rica for its low cost of living. Meanwhile, the bankruptcy court clerk has sent Erickson lawyers two "deficiency" letters indicating the severance matter is overdue for consideration.

I talked with four former Erickson employees who are prematurely tapping retirement accounts to meet expenses, paying big penalties to the IRS. One family headed by two spouses laid off by Erickson has been staying above water only by burning up home-equity cash.

But neither Erickson, its lawyers nor anybody else will explain why the severance is held up.

"The bankruptcy court process is moving forward and when the appropriate time occurs, the severance matter will be addressed," says a spokesman for Catonsville-based Erickson. "Until then, we will have no further comment."

Erickson lawyers at Piper in New York, unsecured creditors' lawyers at Bracewell & Giuliani in Dallas and Jernigan's assistant didn't return phone calls.

Former Erickson employees can't afford a lawyer. But they're pooling dollars and frequent-flyer miles to send one of them from Baltimore to a bankruptcy hearing in Dallas to try to find out what's going on.

Good luck with that. It's getting hard to disagree with former Erickson auditor O'Neale. Erickson lawyers, she says, "are probably trying to pay everybody as little as possible."

In many bankruptcy cases, severance payments are only briefly delayed and then paid in full within weeks of the filing. Erickson's unsecured creditors, however, may be getting greedy. Every dollar that goes in severance to former employees might be a dollar that doesn't go to creditors.

"What is the benefit to the creditors of giving money away to people who don't even work for Erickson any more?" says Peter Chapman, publisher of Erickson Retirement Bankruptcy News and a longtime bankruptcy watcher. "Someone's probably squawking behind the scenes about it."

Welcome to a little slice of the Great Recession with a painful twist.

Perhaps surprisingly, most of the former employees I talked with are still fond of Erickson.

"I have no ill feelings toward John Erickson or the company because I am sure they did not intend for things to go down the way they did," said DeBois. "I do believe, however, that they did not treat the [laid-off] employees fairly."

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