• by Steve McClellan  @mp_mcclellan, April 4, 2016

In 2013, when KSL Media filed for Chapter 11 Bankruptcy protection, then company controller Janet Miller-Allen submitted a sworn statement that alleged that a predecessor who left the firm three years earlier—Geoffrey Charness—was largely responsible for the firm’s going under.

Miller-Allen stated that Charness was responsible for the “embezzlement” of $145 million from the company and that he had bungled financial reports causing the loss of a key client—Cumberland Packing Corp., the parent company of Sweet’ N Low.

But now, according to the Trustee of the KSL Media Estate, David Gottlieb, who hired investigators to probe those charges, the allegations appear false. Gottlieb told U.S.  Bankruptcy Court Judge Martin R. Barash that Charness had little if anything to do with the firm’s going belly-up.

Gottlieb has proposed settling a lawsuit against Charness for $100,000 that would waive all claims by both parties. Gottlieb stated that he believed Charness did misuse some company funds, but that the exact amount is hard to track — and it’s a tiny fraction of $145 million.

He noted that the proposed settlement comes after “good faith” negotiations and a “review of sworn financial information provided by Charness pursuant to a Confidentiality Stipulation.”

Among Charness’ biggest transgressions was the use of 180 million American Express points from corporate cards in his name for his personal use. Gottlieb acknowledged that it was subject to debate whether Charness was within his rights to do so or not.

In a declaration to the court, Gottlieb stated that Charness “was likely not the cause of tens of millions of dollars in damages and losses and did not ‘embezzle’ $145 million of Debtor money through transfers to credit cards…” Rather, stated Gottlieb, “it appears that the overwhelming majority of the KSL funds transferred to make credit card payments were unquestionably used to make payments to KSL’s trade creditors and not for personal transactions.”

As to the record keeping, any sloppiness or negligence had as much to do with changes in accounting software and “actionably lax corporate oversight by KSL’s principals and officers.” Gottlieb has filed suit separately  against KSL founder Kal Liebowitz, former CEO Hank Cohen and former CFO Russell Meisels for negligence and breach of their fiduciary duties while overseeing the agency.

The actions (or inactions) of Charness, Gottlieb told the court were unrelated to the departure of client Cumberland, which left after the agency couldn’t demonstrate that it had placed all of the media dollars that Cumberland had paid up front to the firm.

The two parties entered into a legal settlement over the dispute.

Gottlieb added that his investigation “did not reveal the actions or inactions of Charness to be a significant cause of KSL’s unprofitability, nor what made continued business operations unviable or bankruptcy inevitable.”