Tribune Co. has hired Chicago law firm Novack and Macey to explore the possibility of bringing legal action against Morgan Stanley, the New York investment bank.
The disclosure came in a bankruptcy court filing Friday asking for retroactive permission to hire the firm, which began looking into the matter in late August.
The document said the potential claims against Morgan Stanley may involve certain financial transactions from years ago as well as a dispute with the firm stemming from media company’s disastrous 2007 leveraged buyout, which itself has generated a thicket of legal claims that now lie at the center of Tribune Co. 22-month-old Chapter 11 case.
The Tribune Co. buyout, which was led by Chicago real estate magnate Sam Zell, has been challenged by junior creditors in the bankruptcy, who have charged that it was a case of “fraudulent conveyance,” meaning it left the company insolvent from the start.
An independent examiner in the case found that at least part of the transaction was improper and focused a significant amount of his attention on the relationship between Tribune Co. management and Morgan Stanley, which advised the special committee of the company’s board of directors before and during deal.
The examiner, Los Angeles lawyer Kenneth Klee, suggested that Tribune Co. senior financial management improperly used Morgan Stanley’s imprimatur when providing projections that served as the foundation for a key solvency opinion they needed to complete the second part of the buyout transaction. He also uncovered a disputed account of what was said in a critical board meeting where that solvency opinion was approved.
Tribune Co., which owns the Chicago Tribune, the Los Angeles Times and other media properties, has strongly disputed the Klee report’s findings and has said it didn’t represent a full investigation into the matter. The company has suggested there are other documents that may shed new light on the relationship and the actions of Chief Financial Officer Chandler Bigelow and Donald Grenesko, his predecessor as chief financial officer.
“Novack and Macey’s representation, if necessary, will include the prosecution of any litigation relating to the Morgan Stanley claims and/or recommending settlement of those claims,” the filing said.
