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ERISA Class Action Demands Zell's Ouster From Tribune
Headline Legal News |
2008/09/17 07:43
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A federal class action accuses Sam Zell of conspiring with directors of the Tribune Company to use employees' retirement money to fund his takeover of the Tribune, an $8.2 billion acquisition in which Zell used only $315 million of his own money. "Zell conspired with insiders and aided and abetted the breach of fiduciary duties," according to the complaint. Zell did this, in part, by claiming that the Tribune's pension plans were "overfunded by more than $200 million."
"Sam Zell's plan could not be clearer," the complaint states. "He took the Tribune Company private with the intention of breaking up and selling the assets because he saw a collection of assets worth billions of dollars that he could purchase at a bargain price with a minimal outlay of his own money.
"To accomplish his plan, Zell enticed the members of the Tribune board and aided and abetted Dennis J. FitzSimmons, among others, in breaching their fiduciary duties by paying them millions of dollars. Indeed, the Tribune Company's SEC filing of Dec. 28, 2007 indicated that Zell and the Company created a $25 million pool for a management equity incentive plan to provide money for Tribune executives to complete the going-private transaction and retain them over a transition period. FitzSimmons received about $3 million this pool and a total of approximately $17.7 million in several and other payouts.
"Now, Zell and his accessories threaten to destroy the Tribune Company and its assets, which include some of the nation's oldest and best daily newspaper, including the Los Angeles Times, the Chicago Tribune, and the Baltimore Sun, along with several other great daily newspaper. They are doing so illegally, without consideration for the employee-owners, without respect for the institution, and with a focus on liquidating company assets to line their own pockets."
Zell's so-called employee stock ownership plan (ESOP) increased Tribune's debt from $4 billion to nearly $13 billion "overnight," the complaint states.
It adds: "The Tribune Company has cut more than 1,100 employees since the ESOP acquisition and, after declaring that the employees' pension fund is 'overvalued' by $400 million, has improperly funded their severance and buyout packages with money taken from the supposedly 'overvalued' portion of employees' pension fund."
The 67-page page includes 56 pages of attachments and exhibits.
Plaintiffs want the new Tribune board removed, an accounting of the "supposedly overfunded pension plan," and declaratory judgment that the defendants violated ERISA, among other things.
Plaintiffs are represented by Joseph Cotchett with Cotchett, Pitre & McCarthy. |
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