A court appointed examiner in the Tribune Company’s bankruptcy case has determined that Sam Zell’s takeover of the company was “marred by the dishonesty and lack of candor of its then-senior management,” says the Chicago Tribune.
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Examiner Kenneth Klee concluded that it was “somewhat likely” that a court would find the second part of Chicago-based Tribune Co.’s controversial $8.2 billion buyout to be an example of “fraudulent conveyance,” meaning that the debt associated with that part of the deal overwhelmed the company’s ability to pay its bills.
Junior creditors in the case have argued for more than a year that the entire transaction, led by real estate magnate Sam Zell, was a “fraudulent transfer.” But Klee drew a line between the larger part, which closed in June of 2007, and a smaller, second step that closed in December of that year.
The first step, he said was a plausible deal based on the company’s financial condition at the time. But he charged that management of Tribune Co., owner of the Chicago Tribune, misled the company’s board into signing off on the second part amid a sharp decline in the company’s fortunes, making the company’s bankruptcy filing a year later inevitable.