The Connecticut attorney general's office objected Wednesday to a plan by Journal Register Co. to pay its top executives up to $1.7 million in bonuses even as the newspaper publisher seeks Chapter 11 protection from creditors.

"We say that it illegally detracts from money owed to creditors like the state of Connecticut," Attorney General Richard Blumenthal told The Associated Press.

Journal Register owes $21.5 million in corporate income tax as well as other unpaid taxes, including sales taxes, he said.

Giving out bonuses partly for helping the company lay off hundreds of employees and close publications would violate federal bankruptcy law and "add insult to injury" in the midst of the current economic crisis, Assistant Attorney General Denise Mondell wrote in a motion filed in U.S. Bankruptcy Court in New York.

The bonus plan would apply to 31 "key employees" who could receive an average of $15,700 each if 450 positions are cut by March 31, according to the company's motion for "incentive pay" filed with the court.

Further bonuses totaling about $1.2 million would be available if the employees met other goals including eliminating publications and reaching certain financial targets.

The proposal must still be approved by a judge.

Journal Register, owner of the New Haven (Conn.) Register and other newspapers in Connecticut, Pennsylvania and other states, already has sold two Connecticut dailies and closed several weeklies, including the Hershey (Pa.) Chronicle, although a full list was unavailable.

The newspaper industry has seen advertising revenue fall over the years as advertisers increasingly migrate to the Internet, particularly to Craigslist and other sites offering free or low-cost alternatives for classified ads. Starting last summer, the recession has intensified the decline in advertising revenue in all categories.

The company's motion notes that the Yardley, Pa.-based publisher already paid out $450,000 in bonuses "tied to significant headcount reductions" at the end of 2008, just weeks before filing for bankruptcy protection.

The company argues that awarding additional bonuses is cheaper than hiring outside people to perform the same tasks and that the employees need incentives "to motivate them to maximize creditor recoveries."

But Mondell wrote that the money would be better spent "to retain even a few of the positions slated for elimination or to provide some recovery to the unsecured creditors."

In Wednesday's motion, Connecticut calls itself a creditor and party-in-interest.

Marc Abrams, an attorney for Journal Register, declined comment on the case.

When Journal Register made its Chapter 11 filing Feb. 21, it said it had already reached a deal with most of its lenders to cancel its stock and become a private company controlled by its lenders.

Separately, a shareholder has asked the bankruptcy judge to let him examine Journal Register's finances and to allow him to see a "transition and separation agreement" with company CEO James Hall that has not been publicly disclosed.

Court documents indicate Hall signed the agreement on Jan. 20, but remained chief executive on Feb. 20, when he signed an affidavit in support of the bankruptcy filing. The company is asking the judge to approve Robert Conway as chief restructuring officer.

It is unclear if Hall remains CEO, though the company's Web site still lists him as chief executive.

Shareholder Richard Freeman, who filed the motion Monday, said in an interview Wednesday that he's concerned Hall might have been given a "golden parachute" — substantial severance money. A court document refers to Hall's "settlement payment" and a stipulation that lenders not seek repayment of it.

"The shareholders are being asked to take it on the chin and lose their equity when the CEO, or former CEO, is inflating his golden parachute," Freeman said.

The company's stock, which traded as high as $23.875 a decade ago, traded for less than one cent on Wednesday.

It's next bankruptcy hearing is March 17.