Tribune?s Unsecured Creditors Seek to Sue Sam Zell, Board of Directors

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By: Mark Fitzgerald

Tribune Co.’s tangled bankruptcy case took a new turn Monday as the official committee of unsecured creditors formally asked a federal judge for permission to sue Sam Zell, the real estate mogul who engineered the leveraged buyout of the company, and its board of directors.

In a filing in U.S. Bankruptcy Court in Wilmington, Del., the committee said it didn’t plan to file a lawsuit while Tribune is still negotiating with creditors to exit Chapter 11, but wants to protect its right to sue if those negotiations fall apart. The judge overseeing the case has appointed a mediator to help with the talks. A previous reorganization plan by Tribune was shelved when several big creditors abandoned their support for it.

The unsecured creditors said they could allege several complaints against Zell, the current and former board of directors and Valuation Research Corp., the firm whose solvency opinion on the leveraged buyout was roundly criticized in the report last month by a court-appointed examiner. Among the allegations are fraud, breach of  fiduciary duty, unjust enrichment and fraudulent transfer.

The eight named groups “collectively caused massive damage to the debtors,” the committee says in its filing.

“The D&O (directors and officers) defendants, subsidiary defendants and Zell defendants engaged in a pattern of misconduct to enrich themselves at the expense of their debtors and their stakeholders,” the filing alleges.

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