Toys “R” Us executives allegedly cheated suppliers on more than $600m of bills. Picture: Bloomberg
US bankruptcy judge Keith Phillips on Monday said a trial should go forward, rebuffing a request from the former executives to throw out the creditor claims entirely. The former directors and officers have denied wrongdoing. The creditors also allege that millions of dollars of bonuses paid to 117 Toys “R” Us executives and managers just before the company’s 2017 bankruptcy amount to a breach of the former executives’ fiduciary duty. The largest bonus — $2.8m — went to former CEO David Brandon. An official committee of low-ranking creditors later negotiated a reduction in the bonus amounts, according to court papers.
The directors revealed in pretrial depositions that they knew the company could not comply with the terms of debt taken on to finance the bankruptcy, according to filings by the unpaid creditor group. Financial forecasts the directors describe reviewing in August 2017, before the bankruptcy began, showed the company would breach a liquidity covenant by January 2018.
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