FPA MEDICAL MANAGEMENT: Top Execs Got Pay Hikes Days Before Bankruptcy Filing
FPA Medical Management Inc.'s top three executives got large pay increases just days before the San Diego-based physicians group filed for Chapter 11 bankruptcy. The San Diego Union-Tribune reports that court documents indicate that FPA CEO Dr. Stephen Dresnick got a pay raise of $350,000, bringing his salary to $850,000, while Executive Vice President Jack Greenman and General Counsel James Lebovitz received salary hikes of $50,000, bringing their annual incomes to $395,000 each. The company's board of directors approved the increases July 14, just five days before FPA filed for bankruptcy in federal court July 19. The Union-Tribune reports that the "pay raises were in addition to a previously reported bonus program, which could bring Dresnick an additional bonus of $1.1 million, and each of the executive vice presidents an additional $296,000 if they stay with the company through the filing of a reorganization plan." Dresnick said the pay hikes were "commensurate with their positions" at the financially troubled company. "All three people were given new jobs, new sets of responsibilities," he said. He also noted that the bonus "payments are only due if we emerge successfully from the bankruptcy." He said, "If management is successful in holding everything together and of bringing it out of bankruptcy, the board felt there should be an appropriate bonus" (Rose, 8/1). The Wall Street Journal reports that the bonus proposal is subject to bankruptcy court approval, and will be considered at a hearing August 10.
It Wasn't Us
According to sources familiar with the situation, the move to increase the executives' salaries was recommended by "FPA's financial advisor, Arthur Andersen LLB, and approved by FPA's compensation committee." An Andersen report "determined that the top executives of FPA were compensated well below the median base salary of the industry," according to sources. The Journal reports that these sources "said there was some concern at the committee level and among some of FPA's banks that the company can't afford to lose the three executives because its senior management ranks are very thin" (Rundle, 8/3). Click FPA Medical Management to read past California Healthline coverage of the company's financial difficulties.