Citing a bankruptcy court filing, the WSJ noted that the Labor Department is examining aspects of the ESOP under provisions in the federal Employee Retirement Income Security Act (ERISA), which requires proper disclosure of funding details and risks related to workers’ retirement plans. “We view this as a routine inquiry and we are responding by producing the requested documents concerning the ESOP,” Tribune said in a statement.
Tribune turned over materials in response to the subpoena for an “extensive range of documents,” the court filing said. The stock plan was an important piece of Sam Zell’s plan to acquire the company in an $8.2 billion deal that involved $13 billion in debt (see “ESOP at Center of Chicago Tribune $8.2B Deal’).
Tribune, which owns eight major daily newspapers and several television stations, filed for bankruptcy protection after collapsing under a heavy debt load, just a year after real estate mogul Sam Zell took it private. The ESOP was designed to hold all of Tribune’s then-outstanding stock, with Zell holding a subordinated note, and a warrant entitling him to acquire 40% of the common stock for $500 million.
Even before the Tribune filed for Chapter 11 bankruptcy protection in December—a situation that potentially puts staffers’ retirement funds in jeopardy—the plaintiffs argued that their stock ownership was used against them through layoffs and other cutbacks at the paper and brought suit against the publisher. The lawsuit, filed in September, alleges Tribune and Zell failed to uphold their fiduciary duty to the ESOP.