What little benefit accrued to Tribune employees from the ill-fated 2007 buyout may now be erased, as lawsuits seek the return of $180 million in payments from stock purchases to take the company private.
In keeping with the widely varying size of stock investments -- including performance-based bonuses and "phantom equity" in the new employee-owned company -- their liabilities range from relatively modest sums of under $100,000 to grand fortunes approaching $30 million, according to a summary of legal claims obtained by The Chicago Examiner.
Lawsuits demanding the return of the money have been brought by the Official Committee of Unsecured Creditors, a group of aggrieved bondholders suing 209 individuals it alleges benefited improperly from a buyout deal which was doomed to bankruptcy -- and therefore a "fraudulent conveyance."
The lawsuits are the latest phase in a tortuous, bitterly contested bankruptcy process that has yet to be resolved.
Earlier this month, various groups of Tribune creditors submitted four rival bankruptcy reorganization plans for consideration by the Delaware bankruptcy court. If approved by the court, the competing plans will go to a vote at a special meeting of all Tribune creditors beginning Dec. 22.
At this point, the bankruptcy seems to be proceeding through an agreement to divide creditors' claims into a two-part payment structure. Claims in the first part, corresponding to the undisputed Step 1 funding of the buyout deal, may be settled by whatever bankruptcy reorganization plan wins on Dec. 22. Claims in the second part, corresponding to the disputed (and possibly fraudulent) Step 2 funding, will be settled through litigation -- including the lawsuits described above.
Many of the payouts were relatively small: Of the 209 individuals named in the lawsuits, 95 (45%) received less than $150,000; the smallest payment sought by the lawsuits went to one Laura L. Tarvainen, who received $3,750. By contrast, there were only 21 individuals (10%) who received payouts of more than $1 million -- yet their collective payout came to about $132 million, or 73% of the total claims.
At the high end of the group, former Tribune CEO Dennis FitzSimons received $28.7 million in deferred bonuses, stock sales, phantom equity and special compensation for taxes on all this, a measure which was built into many contracts. David Hiller, CEO of the Los Angeles Times, received $15.4 million in similar deals. Donald C. Grenesko, Tribune's former senior vice president of finance and administration, received $13.8 million; Scott C. Smith, former president of Tribune publishing, $12.4 million; and John E. Reardon, former president of Tribune broadcasting, $10.2 million.