Tribune Co. Chief Executive Officer Randy Michaels resigned and was replaced by an executive council to oversee the bankrupt publisher’s newspaper and television operations, the company said.
Michaels’s resignation Oct. 22 came as creditors of Tribune won a judge’s approval to sue real-estate billionaire Sam Zell, who took the company private in 2007 for more than $8 billion, and shareholders who benefited from the deal.
While the company didn’t explain the resignation, it sent an e-mail to employees that referred to recent “media attention, much of it negative.” The departure of Michaels followed the resignation a week earlier of Lee Abrams, Tribune’s chief innovation officer. Days before resigning, Abrams was suspended for distributing an e-mail with video links that were “offensive” to workers, Tribune told employees in an e-mail.
“The board took this action as a way of ensuring stability and continuity for the company and its various media businesses,” the four members of the new executive council said in an Oct. 22 e-mail to employees.
Separately, U.S. Bankruptcy Judge Kevin Carey in Wilmington, Delaware, said Oct. 22 he will let the official committee of unsecured creditors use a lawsuit to recover some of the more than $12 billion Tribune owes all creditors.
The creditors have claimed that the Tribune buyout was a so-called fraudulent transfer that loaded the media company with too much debt and benefited only the shareholders, Zell and the banks that helped arrange the sale. A court-appointed bankruptcy examiner found in July that creditors may be able to recover billions of dollars through litigation.
“There are claims here based in part on what the examiner reports,” Carey said. “I think they should be pursued.”
Typically, such suits are brought by the bankruptcy estate. Because the defendants in this instance may include Zell, who is Tribune’s chairman, as well as other company advisers, the committee sought legal authority to sue.
Under the proposal Carey said he will approve, the committee will sue as many entities involved in the buyout as possible, including Zell, shareholders (TRB:US) such as the non-profit McCormick Foundation, and the banks that arranged the financing, including JPMorgan Chase & Co. (JPM:US) Carey said he will sign an order authorizing the suits once the creditors work out the final wording.
This month, the seven-member committee voted 5-2 to support Tribune’s plan to exit bankruptcy in part by settling potential lawsuits against some shareholders and banks. Suits may be filed in federal court and pursued after Carey holds a hearing to decide whether to approve the bankruptcy-exit plan, said Graeme W. Bush, an attorney for the committee.
Carey won’t approve the exit plan until after the two-year deadline to file the lawsuits on Dec. 8 has already passed, Bush said.
A complete list of the specific Tribune insiders who may be sued hasn’t been made public.
Michaels, a former disc jockey and radio executive, had been searching for ways to profit in the changing newspaper industry, he said in an interview last month. “What we don’t have is a business model that cannot change, and still be successful,” Michaels said.
The four members of the new executive committee are: Don Liebentritt, chief restructuring officer; Nils Larsen, chief investment officer; Tony Hunter, publisher of the Chicago Tribune; and Eddy Hartenstein, publisher of the Los Angeles Times.
Tribune has been operating under in bankruptcy since December 2008.
The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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