Vesta creditors committee asks court to reduce excessive executive compensation

By Caroline Salls

Pittsburgh, Oct. 17 - Vesta Insurance Group, Inc.'s official committee of unsecured creditors requested court approval to reduce the compensation of senior management member David Lacefield, saying Lacefield is no longer essential to the company, according to a Monday filing with the U.S. Bankruptcy Court for the Northern District of Alabama.

According to the motion, on Aug. 17, the company filed a motion seeking the authority to transfer funds to affiliate J. Gordon Gaines, Inc. for the purpose of funding the portion of the Gaines' payroll attributable to some executives of Vesta and Gaines, including David Lacefield, Donald Thornton and Norman Gayle.

The court authorized Vesta to fund 50% of the executive payroll due on Aug. 18 and Sept. 1 and deferred the request to fund 100% of the executive payroll attributable to future pay periods.

After a hearing on Sept. 6, the court entered an order authorizing the company to transfer funds to Gaines to pay 50% of the payroll obligations due Lacefield and Thornton for the month of September, and deferring issues related to future compensation until a later date.

On Sept. 29, the court authorized transfers from Vesta to Gaines to fund 100% of Gaines's payroll obligations to Lacefield and 50% of Gaines's payroll obligations to Thornton for the month of October.

At the hearing, the court also said the committee could file a motion to reduce the executive payroll.

According to the motion, Vesta is currently paying Lacefield a salary of $37,500 per month "despite the fact that he provides little, if any, benefit" to the company's estate.

As a result, the committee is requesting court approval to reduce Lacefield's compensation, effective Oct. 1.

The committee is asking the court to reduce Lacefield's salary to no more than $10,000 per month, and to authorize the company to setoff any future post-bankruptcy obligations on any amounts paid to Lacefield after Oct. 1 in excess of that amount.

"There should be little question that Lacefield's salary is excessive and entirely unreasonable in the context of a debtor whose business has all but discontinued and which is about to liquidate," the committee said in the motion.

The committee said the "excessive compensation paid to Lacefield" only serves to unnecessarily reduce Vesta's limited resources, to the detriment of creditors.

The committee said that, after consultation with the Vesta, its professionals and the committee's financial advisers, it has determined that Lacefield is no longer essential to Vesta's management and his salary is grossly excessive given that the company is in the process of liquidation.

Vesta is a Birmingham, Ala., insurance company. Its involuntary Chapter 7 case was converted to a voluntary Chapter 11 case on Aug. 7. Its case number is 06-02517.

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