A court appointed examiner has found evidence of possible fraud in the $8.2 billion buyout of the Tribune Company. The Examiner, Kenneth Klee, issued a 600 page report with a finding of apparent “dishonesty” in the deal, engineered by Sam Zell and Tribune Company execs in 2007.
“It is somewhat likely that a court would conclude that the Step Two Transactions constituted intentional fraudulent transfers and fraudulently incurred obligations,” according to the report. “Other aspects of management’s projections, while aggressive, do not support the conclusion that the senior financial management at Tribune prepared them in bad faith.”
The report does not point to evidence of fraud by Sam Zell. However, it does indicate that “one or more of Tribune’s officers breached their fiduciary duties.”
Tribune is the parent company of the Chicago Tribune, WGN TV, the Los Angeles Times and KTLA-TV.
David Roeder reports in the Chicago Sun-Times, that the examiner’s report could throw Tribune’s 20-month-long bankruptcy case “into turmoil. ”
According to Roeder, “Klee, a Los Angeles attorney and law professor, pointed no finger at Zell, Tribune’s chairman. Instead, he concentrated on presentations of Tribune managers and an outside advisory firm, Valuation Research Corp., in preparing financial reports that Klee said did not reflect the media company’s deteriorating fiscal state.”