Paul Ormond, former President and CEO of Toldeo, Ohio-based HCR ManorCare, which filed Chapter 11 bankruptcy March 4, may receive $116.7 million under a prepackaged bankruptcy plan, according to the Toledo Blade.
Although Mr. Ormond was consistently ranked among Toledo's highest paid executives, with annual pay frequently exceeding $10 million, the former executive allegedly never saw a large portion of those millions. He deferred a portion of his earnings to the future, when he was no longer with the company.
After struggling to pay its landlord, Quality Care Properties, ManorCare agreed to transition leadership and ownership to the real estate company later this year under a prepackaged bankruptcy plan. Despite ManorCare's bankruptcy, the plan states Mr. Ormond must receive what he is owed — $116.7 million.
"It just looks bad with a company that can't make its rent and the former CEO gets a package of $116 million," Stephen Monroe, a healthcare industry consultant and partner at Connecticut healthcare research firm Irving Levin Associates, told the Blade.
However, Mr. Monroe said the bankruptcy and the payment are not related. The problem, Mr. Monroe said, stemmed from the fact that a large portion of Mr. Ormond's pension had not been funded.
The Toledo company acknowledged it had an unfunded executive pension liability of $115.3 million in 2016, according to an SEC filing by Quality Care last April obtained by the Blade. The filing included a report on ManorCare's finances.
ManorCare and Quality Care declined to comment to the Toledo Blade. A bankruptcy judge still must approve the settlement and the payment may be reduced.
However, Mr. Monroe said he does not think the payment will be reduced because Quality Care said it would pay Mr. Ormond's claim. "[Mr. Ormond] has a claim because he had a contract and this was in all his different retirement plans. But if it was not funded, is he an unsecured creditor under bankruptcy?" he said. "However, if both sides have agreed to make the payment to [Mr. Ormond], I don't know how a judge can stick his nose in it and disallow it."