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| Judge Unseals Examiner's Report On Tribune Fraud; Delays Trib Reorg Hearings |
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| Written by Larz | |||
| Wednesday, 04 August 2010 09:49 | |||
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Last year, Sam Zell, Chairman and Chief Executive of Tribune Company, said that he hoped to to have his company exit bankruptcy earlier this year. As of yesterday's developments, he might be lucky to have it happen at all this year.
The much-talked about examiner's report that looked into the events leading up to the Sam Zell-led buyout of Tribune Company was completely unsealed yesterday by U.S. bankruptcy court judge Kevin Carey in Delaware. The massive examiner report (1,000 pages in some reports; 1,500 pages in others) shows that two top Tribune executives took part in "intentional fraud" in 2007, in order to help push through the $8.2 billion sale of the company to Sam Zell. This sale greatly profited both men. The sale also helped cause the company's failure & bankruptcy according to a legal suit brought on by some junior creditors, whose case is now strengthened by this examiner's report. The report, done by Los Angeles attorney Kenneth Klee, found that Chandler Bigelow, then a Tribune company treasurer, and Donald Grenesko, then Tribune Senior Vice President of Finance, gave false assurances to the banks looking at financing the deal that the Tribune had an opinion from top global financial services firm Morgan Stanley, that the company could refinance its debt in 2014. The same assurance was given by Bigelow and Grenesko to Valuation Research Corp., which was the company hired to give a solvency opinion. That assurance was the key that gave Zell the financing he needed to complete the takeover. Unfortunately, Morgan Stanley strongly denies it ever gave that assurance, or anything even similar to it. Once the takeover was completed, Chandler Bigelow was promoted to Chief Financial Officer for the new Tribune Company and made a cash bonus of $400,000. Donald Grenesko left the company, but made almost $5 million dollars in stock sales and bonuses. Kenneth Klee's report was very clear in what was called the "dishonesty" of these two and their "intentional fraud." Klee's report also had a hard assessment of Valuation Research Corp., who never investigated Bigelow & Grenesko's false claims. The examiner's report did not directly find fault with Sam Zell, outside of the pressure Zell was putting on some to make the buyout happen. After viewing the report, Tribune Company issued a statement saying that it agreed with some of what Klee found, but disagreed with some other parts, adding, "some are simply wrong." In regards to the key examiner findings, the statement said, "...we disagree with the examiner's characterization of the company's dealings with Morgan Stanley and believe there are more facts yet to be disclosed regarding the company's relationship with that firm." Along with the unsealing of the examiner's report, U.S. Bankruptcy Court Judge Carey has done some delaying of the bankruptcy proceedings, to give junior creditors more chances to fight for the money they feel is owed to them, in light of this new information. Voting on the proposed reorganization plan has been pushed back two weeks, from August 6th to August 20th, with any objections due by August 27th. The hearings on the Tribune Company's reorganization, which was scheduled to start on August 30th, has now been pushed back to October 4th. Any experts hired to defend the positions of many parties involved must submit reports to the courts by August 30th, with depositions beginning September 7th. The current Tribune plan gives ownership of the company to the senior lenders who financed the buyout in exchange for wiping away most debt. The many junior creditors, who have claims in the billions, receive nothing under the plan. In 2008, a few months after Sam Zell was able to lead an over $8 billion buyout of Tribune Company, the company filled bankruptcy, looking to escape the debt it just took on. The bankruptcy case is In Re Tribune Co, U.S. Bankruptcy Court, District of Delaware, No. 08-13141. Tribune Company owns numerous media properties nationwide, including locally: the Chicago Tribune, RedEye, Hoy, WGN-AM, WGN-TV, and CLTV. 
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