KS(&)L: Top Execs Received Millions In Company Loans
In its bankruptcy proceeding, KSL Media blamed a large part of its financial woes on a former controller who allegedly made off with millions of the company’s money. The exact amount is still being tallied. But the company apparently had enough cash on hand to provide its top two executives with sizable loans before going belly up.
According to one exhibit filed by the company, KSL founder Kal Liebowitz received a loan of $2.8 million. Former CEO Hank Cohen was the recipient of a loan of $207,000. The loans are listed as “accounts receivable” in an exhibit in the Chapter 11 filing that lays out the company’s remaining personal property.
Those loans are on top of big salaries and benefit packages that the two executives received up until the company filed its petition for bankruptcy protection on Sept. 11. Other documents filed as part of the proceeding show that for the final year that the company was in business Liebowitz received nearly $1.1 million in payments from the company, including a twice-monthly salary of $22,750. And Cohen, who along with Liebowitz is listed as a “partial owner” of the company, received total payments of more than $922,000, including a salary of $24,750.
The Chapter 11 documents don’t provide further details about the loans, including when they were made, how much, if any of the borrowed money was paid back or what if any interest terms are attached to the loans. Janet Miller-Allen, the KSL controller overseeing the firm’s wind-down process didn’t return queries seeking comment.
Meanwhile, the rank and file had a much different experience -- and nothing remotely resembling what might be construed as a golden parachute -- when the company shut its doors a month ago. According to one former staffer who went through the experience at the company’s Los Angeles office, employees were told to show up at an 11 a.m. meeting, where a bankruptcy attorney told them their jobs were gone. Staffers were then given their final paychecks and information about COBRA benefits and no severance. They were told to clear out, with personal possessions in tow, within an hour. For those who needed them, boxes were provided.
“That’s no way to treat people,” said the former staffer. “They strung us along,” the former employee added. The source noted that people were “shocked” and “crying” when told that their jobs were gone. A couple of employees even started to yell loudly, with one saying to Liebowitz, who was in the room, “you lied to us!”
According to the source, after Cohen and KSL President David Sklaver abruptly resigned about a month before operations shut down, Liebowitz held a meeting in the Los Angeles office to reassure staff that “we’re going to be fine. He said he was talking to replacements and he would be coming to the office most days of the week” to personally manage the company. But he didn’t and things weren’t fine -- bankruptcy documents indicate that by that time, in August, Liebowitz had decided to shutter the company.
One quasi-replacement was Mike Oddi, the company CMO who was named president shortly after Cohen and Slaver left the firm. According to the source, in his first meeting with staff Oddi said that rumors circulating about the company being in financial trouble and not paying its bills were incorrect. “He was lied to as well,” the source said of Oddi.
The loss of Bacardi in May seemed to have a paralyzing impact on leadership at the company, the former staffer said. That was the agency’s biggest account, with spending of around $130 million annually. It went to Mindshare after a review.
After the Bacardi loss, per the former employee, “Hank was missing in action. He was never around and was always said to be traveling. Kal showed up once or twice in the last four months. There was no leadership. Lots of weird stuff was happening.”
During the summer, for example, it appeared that KSL had reeled in Pepperdine University as a new client. The agency required a fee from the client, which was agreed to with a signed contract. But then, strangely, KSL refused to execute the contract, per the source. “It made us look pretty bad.”
Many of KSL’s clients have found other shops. PetSmart is now with Barkley in Kansas City. Ugg and Unocal 76 are with Palisades Media and WellPet is with U.S. International Media. Mercury Insurance is now with Kovel/Fuller.
According to the former staffer, one client, looking for help finding another shop is looking only at agencies owned by publicly traded holding companies and therefore subject to the much stricter accounting regulations imposed by the Sarbanes-Oxley Act. After their experience with KSL, “they don’t want an independent agency handling their business again,” the source said.
In its proposed liquidation plan filed last week, KSL reported that it would take about six months to complete a
“reconciliation” of its accounts to determine exact amounts owed to unsecured creditors, mostly advertiser clients and media vendors. Previously, KSL reported having nearly $65 million in
liabilities, mostly in debt to unsecured creditors and close to $35 million in assets -- most of it cash. Once it completes its reconciliation of accounts, payments will be made on “account of
Allowed Unsecured Claims of 67% of the Available Cash.”
Image courtesy of Shutterstock.