What had once been the largest minority-owned supplier in the U.S. auto industry is no more. On June 30, business units of Dearborn, Mich.-based Plastech Engineered Products Inc. were sold off.
As the five-month breakneck bankruptcy case of Plastech comes to a close, a final chapter was written in late June when Crain's Detroit Business, a sister publication of Plastics News, obtained documents Plastech's lawyers had tried to keep private: compensation details for Chief Executive Officer Julie Brown, her husband Jim and eight other family members.
Those details are missing from the current official court record, but Detroit Business discovered the details from salaries to car allowances to country club memberships in a document previously filed in the Detroit bankruptcy court.
It's not unusual for privately held companies to hire family members of owners. And compensation for Brown and her family does not seem out of line for the titles.
According to the documents filed earlier with the court, Brown earned $3.23 million in the 12 months prior to the financially troubled company's Chapter 11 petition Feb. 1.
Her compensation package included a base salary and life insurance benefits worth $957,724, use of a company-paid aircraft totaling $379,464.88, dues for Brown's membership at the Fairlane Country Club in Dearborn worth $22,263.36, company car use valued at $30,750 and a $1.84 million bonus.
Precisely when Brown received the $1.84 million bonus is unclear. No date for the bonus was provided in the document listing the details of Brown's compensation.
Jim Brown, Julie Brown's husband and Plastech chief operating officer, topped the Brown family roster with a $2.25 million compensation package. It included a base salary and life insurance benefits worth $2.21 million and company car use worth $39,541.25.
Julie Brown's three brothers, two sisters-in-law, sister, cousin and nephew were also on Plastech's payroll for a total of $6.4 million for the 2007 fiscal year.
As the CEO of a company of Plastech's size, Brown's compensation package is not out of line with some of the compensation packages of Detroit Business's Top 50 Highest-Paid CEOs. Those executives work for publicly traded companies. Her compensation package was about 40 percent more than the median of $2,303,538 on the list.
The base salaries of Brown and her family members were left off an attachment to a $9.25 million proposed settlement between Brown and some of Plastech's lenders filed June 19.
U.S. Bankruptcy Judge Phillip Shefferly approved Brown's $9.25 million settlement on Thursday. Some of the term lenders will pay Brown's $9.25 million.
Also included with the settlement proposal was an excerpt from Brown's 2007 W-2 that indicates Brown's personal driver, cook and two housekeepers were paid by the company. The employees were listed on Brown's W-2 because they were not working directly for Plastech and could not be declared on company taxes.
``In a closely held business, it's not unusual to have several family members who are part of the business,'' said Walter Koziol, a past chair of the Troy-based Michigan Association of Certified Public Accountants. ``Most of these businesses do not have a nepotism policy to speak of.''
Koziol said he was unfamiliar with the day-to-day operations of Plastech, so it would be impossible to comment on specifics about the Brown family members employed at the company.
Family members on company payroll are often closely scrutinized if the company is having financial problems, Koziol said. ``Typically what happens when a turnaround person comes in, the first thing they will look at is this issue,'' he said.
Family members can be problematic in the long run if they have low productivity and don't have an adequate background for the job, Koziol said.
``When you're looking for fat to cut, everybody's in play,'' said Pat O'Keefe, founder and managing member of Bloomfield-Hills, Mich.-based O'Keefe & Associates Consulting LLC, a firm that specializes in aiding closely held private companies in financial trouble.
``Probably family members get a little more scrutiny because you wonder whether they're really performing a function, or if they're just reallocating the family income,'' O'Keefe said.
Things can also get dicey if it becomes clear that a relative of the owner is not able to perform their job being forced to balance sound business judgment with the love one has for their family.
And for companies like Plastech in bankruptcy, the fallout affects more people than just the owner.
``In a case like that, when you've got family employed at a troubled company, it adds to the additional burden to know that the problems are going to be coming home. It's one thing for Aunt Julie to lose her business, but it's another thing to have five families that are related to her lose their bread winner,'' O'Keefe said.
``Everybody gets hurt in that, but it brings the issue of bankruptcy home to ownership.''