The Office of the U.S. Trustee objected to a proposal by Borders Group Inc to pay over $8 million in bonuses to high-level employees this early in its bankruptcy proceeding.

In a filing on Thursday, the U.S. Trustee's Office said the plan to pay 17 executives, 25 director-level employees and additional key employees over $8 million in bonuses was really a disguised retention plan for insiders, which also provides for discriminatory bonuses for non-insiders.

The Trustee's Office, which is the Justice Department agency charged with overseeing the administration of bankruptcy cases, said Borders failed to show that the proposed payments complied with the bankruptcy code.

Seeking the approval of the bonus motion at this early juncture, prior to the debtors finalizing their business and operational plans is not a sound exercise of the debtors' business judgment, said Tracy Hope Davis, the U.S. Trustee, in the filing.

The book retailer filed for bankruptcy protection in February and said it would close 200 stores, after years of shriveling sales made its debt load impossible to manage. It said at the time that 6,000 jobs would be affected.

The company defended its proposal on Friday, saying it was designed to retain key executives during the reorganization process and noted that nothing would be paid out unless certain targets were met. It also said it was working to address the questions that were raised.

Borders has made significant progress during the first six weeks of its reorganization. Retaining key executives is essential to continuing the progress underway for the benefit of all of the company's stakeholders, said spokeswoman Mary Davis in an emailed statement.

(Reporting by Martinne Geller; Editing by Gary Hill)