Judge Slashes Pay for CEO of Ala.-based Vesta Insurance

A bankruptcy judge slashed the monthly salary of Vesta Insurance Group chief executive David Lacefield to $15,000, siding with creditors who claimed he was making too much as the company is liquidated.

U.S. Bankruptcy Judge Thomas Bennet ruled that Lacefield’s salary for November will be cut from $37,000.

The judge said Lacefield will be entitled to pay until he quits or Dec. 15, the expiration date of a contract for a skeleton crew at Vesta.

Lacefield has been drawing pay since the insurer sought Chapter 11 protection from creditors in August. The move resulted in the firing of the company’s workforce of 300 people.

Lacefield said in court filings that he works nine hours a day, even though the company has been seized by regulators and is being sold to pay creditors who are owed a combined $214 million. The largest group of creditors are bondholders who are owed about $59 million.

Vesta filed for bankruptcy after years of losses, missed loan payments and corporate spending that included almost $1 million in 2005 for executive cars and improvements to a hunting lodge in Clarke County.

This summer, the insurance subsidiaries selling home coverage in Florida, Hawaii and Texas went insolvent and were seized by regulators to protect policyholders. The move left Vesta without any income.

Court documents show that Birmingham-based Infinity Property & Casualty, a rapidly growing insurer, is preparing to take ownership of Vesta’s headquarters building.

The liquidation, which involves refunding unused premiums to policyholders, closing the corporate books and selling assets, is costing about $340,000 a month. Court documents show that was the amount Vesta lost in October, when it paid out $286,000 in legal fees, executive salaries, and $111,000 in other operating expenses.

Topics Legislation Alabama