Former Toys ‘R’ Us Executives Face Trial over Botched Bankruptcy

Former Toys ‘R’ Us executives are set to stand trial over allegations that they misled suppliers about the retailer’s dismal financial condition while the company struggled to stay afloat in bankruptcy and then stiffed them on over $600 million of bills. Bankruptcy Judge Keith Phillips rejected a request from the former executives to throw out the creditor claims saying a trial should go forward. The former directors and officers have so far denied wrongdoing.

According to the judge, open questions include whether the retailer was already insolvent when it paid nearly $18 million to its private-equity backers — Bain Capital, KKR & Co. and Vornado Realty Trust — between 2014 and 2017. The creditors also assert that millions of dollars of bonuses paid to over 100 Toys ‘R’ Us executives and managers just before the company’s 2017 bankruptcy demonstrate a breach of the former executives’ fiduciary duty. The largest of these bonuses–$2.8 million–went to former CEO David Brandon. A committee of low-ranking creditors negotiated a reduction in the bonus amounts, according to court documents.

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