Toys “R” Us board members and owners face new allegations of fraud and breach of duty over the company’s 2017 bankruptcy. Creditors claim in ongoing litigation that seven company directors have now said they knew they shouldn’t have approved executive bonuses and onerous bankruptcy loans at the outset of the case that put the retailer on the fast track to a sudden liquidation six months later. The additional debt served to keep Toys “R” Us in business during its restructuring, but cost it more than $500 million in fees and interest and came with strict terms, or covenants, court documents show. The costs were borne by trade creditors and employees who continued to work with the company on the promise of a successful turnaround, but went unpaid when it couldn’t comply with the debt terms and shut down. Meanwhile, the owners and directors who signed off on the ill-fated financing received immediate bonuses of as much as $2.8 million as part of the plan, according to the filings. The creditors allege the authorization of those bonuses violated federal criminal law.
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