Examiner Finds Management 'Dishonesty' In Tribune Buyout

Cuts Bonus Plan

The independent court-ordered examination report of the leveraged buyout that put SAM ZELL in control of TRIBUNE CO. says that the examiner found evidence of "dishonesty and lack of candor" in the 2007 deal and that the buyout "rendered insolvent and without adequate capital" the media giant. 

Examiner KENNETH KLEE said that the company's senior management did not "adequately discharge their duties" when they projected the company's finances and that evidence shows they may not have told the board or special committee of relevant information regarding those projections.  KLEE said that a court might conclude that the transactions by which the company assumed $3.6 billion in debt "constituted intentional fraudulent transfers and fraudulently incurred obligations," and that the management's actions bear "the earmarks of a conscious effort to counterbalance the decline in TRIBUNE's 2007 financial performance and other negative trends in TRIBUNE's business, in order to furnish a source of additional value to support a solvency conclusion," but added that "other aspects of management's projections, while aggressive, do not support the conclusion that the senior financial management at Tribune prepared them in bad faith."  KLEE said that there is no credible evidence against the ZELL GROUP or other parties to the leveraged buyout.

Tribune Cuts Back On Management Bonus Plan

Earlier, stung by creditor and union complaints about its proposed management bonus plan, the company scaled the plan back to cut almost $20 million from management bonuses as the company tries to reorganize.  The changes raise the plan's goals and lowers payouts, resulting in a $16.5 million bonus pool if the company meets a $500 million operating cash flow target this year, and $33 million if the cash flow hits $550 million; if the company makes $685 million in cash flow, the bonus pool will remain $42.9 million.

The plan will be considered by the court at a hearing AUGUST 9th.TRIBUNE CO., stung by creditor and union complaints about its proposed management bonus plan, has scaled the plan back to cut almost $20 million from management bonuses as the company tries to reorganize.  

The changes raise the plan's goals and lowers payouts, resulting in a $16.5 million bonus pool if the company meets a $500 million operating cash flow target this year, and $33 million if the cash flow hits $550 million; if the company makes $685 million in cash flow, the bonus pool will remain $42.9 million.

The plan will be considered by the court at a hearing AUGUST 9th.

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