DOJ Pushes Back on Financial Group Bonuses

( – The former parent company of Silicon Valley Bank has said they will be changing their structure for executive bonuses after objections from the Department of Justice. SVB Financial Group indicated that it had reached an agreement with the Biden DOJ that would alter previous terms that saw company executives walk away from a March 2023 bank collapse and bankruptcy with enormous payouts.

An attorney for the now-bankrupt company called the new terms more “substantive” and better “focused.” The investment wing of the company is composed of nine executives and their performance benchmarks have now reportedly been reset. The bonus threshold for lower level performers will drop by $500,000 and the company’s best performers will receive an increase of that same amount.

The U.S. Trustee Program, which is often referred to as the country’s “bankruptcy watchdog,” had argued along with the DOJ that SVB Financial’s metrics for calculating bonuses were not strict enough. A bankruptcy judge authorized the plan in New York on August 22.

Chapter 11 bankruptcy was filed by SVB Financial not long after Silicon Valley Bank collapsed. It was the largest banking failure since the house market collapsed in 2008.

Officials with the DOJ are still reportedly investigating the actions of senior bank officials at the California company. The agency has suggested that the reason executives were given inflated bonuses was to keep them in place at the company as a way of conveying stability. That perceived stability was meant to increase the company’s sale value in the eyes of potential buyers.

Company executives ultimately walked away from the banking failure with combined bonuses of around $12.5 million. At the time of the collapse, bonuses for lower level associate employees were estimated to be around $12,000. Managing directors were thought to have received around $140,000.

SVB paid out those bonuses only one day before the Federal Deposit Insurance Corporation seized the failing company.

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