Wednesday, December 10, 2008

Attorney suing Tribune cites pension risks

It is not clear that all employee pension funds at the Tribune Co. emerged “unscathed” in the bankruptcy filing, said the attorney for a group of employees suing Sam Zell over the takeover and subsequent management of the company.

Philip L. Gregory, who filed a class-action suit in September charging mismanagement of the employee stock ownership plan that was created to help fund the acquisition of the company, said an annual payment to the ESOP on behalf of the company’s workers remains in limbo as a result of Monday’s bankruptcy filing.

The payment, which was supposed to be made in the first part of 2009, would be equal to 5% of the annual pay of the employees covered in the plan in 2008. Based on my estimate that annual compensation averages $75,000 for the company’s 18,000 employees, the sum in question would appear to be approximately $67 million.

As a result of the bankruptcy filing, it is not clear whether the payment will be made, said Philip. If the payment were made, however, it would be for naught, because “the ESOP will have zero value going forward,” he said.

Because the employee contribution to the ESOP had not been funded prior to the bankruptcy, the Wall Street Journal concluded this morning that Tribune's workers “emerged largely unscathed.”

But Philip takes issue with that.

“While employees have not lost anything because no contributions were made yet to the ESOP, they all worked for the last year on the assumption that a certain percentage of their salary would be contributed to the ESOP,” he said. “If no contributions will be made, then they will have lost the value of that pension contribution.”

While the portions of his lawsuit directed at Tribune Co. will be stopped by the bankruptcy action, Philip said he intends to go “full speed ahead” with his challenge to GreatBanc Trust Co., the trustee designated to manage the ESOP on behalf of the employees.

The complaint filed in federal court in California accuses the trustee of failing to exercise proper fiduciary responsibility in representing the interests of the employees.

Despite three requests for comment on this post, Tribune spokesman Gary Weitman had no immediate comment on the concerns expressed by the attorney. But he did object to the publication of the post, saying in an email:

“You just gave this guy a platform and offered no analysis or counterpoint to what he said. Come on. The WSJ ran a considered story that examined the facts and analyzed the retirement plans. This guy clearly has an agenda and you just helped him further it, just because he ‘said it.’ So much for journalistic integrity. You should be ashamed.”


Anonymous Anonymous said...

The approach Gary Weitman took towards Alan and this story sounds very familiar. It is straight out of the George W. Bush school of public relations book on how to deal with the press. Namely, you don't deal with them. But after publication, you bitch, quibble, rail and complain that your side wasn't reflected in the story. Then you huff about standards of journalism. For Christ's sake, there is a lawsuit, and Alan wrote about it. You had your opportunity to comment, and you didn't. The reader (me) can make up his mind on the merits or demerits of the story either way.

6:52 AM  
Anonymous Anonymous said...

Oh come on. '...straight out of the George W. Bush school of public relations...'. More like the 'Politician's School of Public Relations'. And let's not even get started on 'standards of journalism'. There are none left!

10:36 AM  
Anonymous Anonymous said...

"So much for journalistic integrity" is right. Stand in front of a mirror and say it, pal.

2:13 PM  
Anonymous Anonymous said...

Alan: I think you underestimate Sam Zell. He doesn't know how to run a newspaper, but he does know how to, and will relish, negotiate with bondholders.
The story circulating here is that the Trib had to file because a group of noteholders had tumbled to the fact that they could turn there notes into cash because a default had occurred. That meant they could collect $70 million in cash ahead of the bondholders, an intolerable situation if one is a holder of a secured obligation. I think that was just cover; adecent lawyer could delay those payments by four years in any Chicago court I know of.
Zell just wanted to be the first Chicago paper to file a Chapter 11; the Sun-Times will be there pretty soon, and the opposition to a Tribune acquisition of the ST wil be less if the Trib has shown how desperate the situation is by filing first.
That will solve the Chicago situation, or at least give him a fair chance of solving it. LA is harder, and more important to the Company's long term survival. I haven't a clue as to what he will do there, but maybe he sees a way to set the bondholders on the Chandlers, and that will be a fun dogfight to watch. After all, reducing the bonded debt is what this game is about. If he can do that, he only has to put in a small amount of new money to bring his option to buy stock back to life. Dan Feldman

3:37 AM  

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