Excerpt: Creditors sue to get money back from Tribune Co. executives, managers
- Some of the 200 are former senior executives, like Dennis FitzSimons, who left the company as chairman and chief executive with tens of millions of dollars and who, as an architect of the deal, might have expected to become the focus of litigation.
- It’s another strange twist in the saga of Tribune Co.’s Chapter 11 case, which passed the two-year mark last week. Creditors are engaged in a high-stakes battle with the Chicago-based media company to win control of the reorganization process, and the Official Committee of Unsecured Creditors wants to claw back about $180 million in compensation.
- It’s routine for creditors to try to recover payments made to company insiders and suppliers before a business goes into Chapter 11. But what makes the legal claims filed in the Tribune Co. bankruptcy unusual is not just the number of targets — separate lawsuits against each of the approximately 200 current and former employees — but the amount of money at stake.
- Nine executives received more than $5 million, and 12 got more than $1 million that the creditors want back, according to a review of the complaints. FitzSimons is the biggest target; the creditors committee wants to take back $28.7 million.
- Creditors can recover payments made to satisfy pre-existing obligations to suppliers within 90 days of the bankruptcy filing because the law presumes that a company was insolvent during the three months prior to going to court. Creditors can reach back a year if the payment was made to a company insider.
- In the Tribune Co. matter, the preference claims may have additional clout. Some creditors have alleged that the 2007 leveraged buyout was a case of fraudulent conveyance, meaning it left the company insolvent from the start.