Polaroid sale worth$47 to each retiree

Some Polaroid retirees consider it a $47 slap in the face.

But if all goes according to plan at a meeting this morning to approve the $426 million sale of the storied corporation, Polaroid's chairman and chief executive will receive a combined payout of $21.3 million.

Polaroid retirees will get $47 each.

The meager amount ''just adds insult to injury," said Paul Hegarty of Arlington, who worked at Polaroid for 40 years. ''It's like picking off an old scab."

How it happened demonstrates the oddities of Bankruptcy Court. Polaroid, which declared bankruptcy in October 2001, was able to renegotiate its debts with creditors while reneging on commitments it had made to retirees, including promised health and life insurance benefits.

Chairman Jacques A. Nasser, who joined Polaroid in November 2002, will receive $12.8 million for his shares. J. Michael Pocock, who became chief executive about two years ago, will receive $8.5 million.

The $47 payouts that about 6,000 retirees will receive is money left over from unsuccessful attempts to force the company to reinstate benefits.

Nonetheless, some retirees are eagerly awaiting their payments, said Les Embrey, a former Polaroid engineer who was laid off in April 2001 and volunteered to disburse the funds.

''Some people who didn't get their $47 check have called me up literally crying and begging for it," Embrey said. ''That's how bad off they are now."

Today's vote, by shareholders in a New York hotel, will finalize Waltham-based Polaroid's acquisition by Petters Group Worldwide LLC of Minnetonka, Minn.

One Equity Partners, the buyout firm that purchased Polaroid for $237.7 million in a court auction in August 2002, controls 53 percent of the shares and has agreed to approve the merger.

Only one group, led by One Equity Partners, bid for Polaroid in the court auction. Some critics claimed Polaroid intentionally understated the value of its assets and real estate and noted that One Equity used $136.8 million in Polaroid funds to help finance its purchase of the company.

Skip Colcord, a Polaroid spokesman, said no company executives would comment on the sale. One Equity also declined to comment.

One Equity is ''making a return because they bought the assets at a good price," said Lucian Bebchuk, director of the Harvard Law School Program on Corporate Governance and coauthor of ''Pay Without Performance."

''As a good merchant you can make a lot of money by buying low and selling high," he said. ''If there's a villain here that enabled them to make a lot of money, it's the bankruptcy process that did not capture full dollar for the auctioned assets."

In its proxy statement, a disclosure document Polaroid was required to file in advance of the sale, the company blamed its financial problems on the decline of its instant-camera and film business and the failure of its instant digital printing efforts. That made ''the certainty of the cash consideration" from Petters appealing.

A variety of high-profile Polaroid directors also stand to profit from the sale. Former US Representative Rick A. Lazio of New York, now an employee of JPMorgan Chase & Co., will gross $512,675, as will former Kmart chief executive Joseph E. Antonini and former Fiat SpA chief Paolo Cantarella.

During negotiations in fall 2004, Petters raised its initial $350 million bid to $426 million, or $12.08 a share. Lehman Brothers and JPMorgan Chase, hired by Polaroid to assess the deal, determined the share price was fair.

On the eve of its bankruptcy filing in 2001, Polaroid abruptly canceled lifetime healthcare and life insurance benefits for retirees. In an effort to have them reinstated, a group of retirees hired a law firm, Greenberg Traurig LLP, and won formal standing from US Bankruptcy Court in Delaware. The designation made them a party to the proceedings, and forced Polaroid to pay their legal bills.

Greenberg Traurig negotiated a settlement under which Polaroid assigned its rights to file a lawsuit against its insurance company to the retirees' committee.

''Continuing to fight in the Bankruptcy Court was a no-win situation," said Al Gray, a former Greenburg attorney. ''Getting the ability to take legal action against a policy with real dollars was a positive thing."

The retirees hired a separate law firm, Conroy Cournoyer LLP of Marlborough, to pursue the case. But Dan Conroy, who handled the case, said the group was unlikely to win in court.

The retirees did receive some good news when Greenberg Traurig presented its bill to bankruptcy Judge Peter J. Walsh. He threw out much of the request, saying the law firm had charged too much. The difference, about $300,000, was put into a trust for retirees.

Embrey, who is not compensated for his efforts, started mailing the $47 checks in February. He said all that remains from his 22-year career is an empty feeling caused by ''the rape of Polaroid."

''Some of the most brilliant minds in optics and film were just thrown out the door. Management just trashed one of the most innovative companies in the world."

Jeffrey Krasner can be reached at krasner@globe.com.