Haven't seen this diary yet, so I threw this together.
Today, former employees of the Los Angeles Times filed a class action lawsuit against Sam Zell, alleging they were harmed by his mismanagement of the employee stockowner plan. The plaintiffs include several familiar bylines and at least one current Times star. A team has been looking into Zell's leveraged takeover of Tribune almost since he used employee money to get the company.
The Los Angeles Times is the largest of Tribune's nine daily newspapers.
In taking the company private under the ownership of an employee stock ownership plan, and Zell's firm individual control, the Tribune Co. has been left with a $13 billion debt burden.
The suit hinges on what he and his fellow plaintiffs allege is Zell's misuse of the employee stock ownership plan through which Zell was able to acquire a controlling interest in Tribune for a mere $500 million. "The ESOP law was not written so companies could be taken over like this. It's an abuse of the ESOP structure and, I think, a fairly obvious effort to avoid paying taxes."
The lawsuit, filed in U.S. District Court in Los Angeles, alleges that Zell has been most interested in breaking up the company and selling its assets since he took control of Tribune without spending much of his own money.It's been widely reported that Zell's been interested in selling the company as early as April 2007. Three months after he acquired the newspaper.
http://www.usatoday.com/...
Mr. Neil, the only current Times staffer currently party to the suit, said he and his former colleagues question Tribune’s actions of taking $400 million from its pension fund to pay for the severance and buyout of more than 1,000 employees throughout the company. Tribune claimed its pension was overfunded by $400 million.
http://www.nytimes.com/...
“What this company needs is an owner,” he said later. “It needs someone who accepts the responsibility for what this company does.”
http://www.reuters.com/...
According to the lawsuit, Mr. Zell and his hand-picked management team have repeatedly breached their fiduciary duty to employees through “their destructive management and self-dealings at the expense of employees.” The suit, which seeks class-action status, accuses Mr. Zell and Tribune Co. of violating of the Employment Retirement Income Security Act as well as aiding and abetting breaches of fiduciary responsibility.