Bondholders Want Zell's Acquisition of Tribune Investigated

We already know Sam Zell's acquisition of the Tribune Company was a mistake, but was it also a crime?

A group of Tribune bondholders wants to open an investigation into whether Zell's purchase drove the company—which owns the Chicago Tribune, the Los Angeles Times, as well as other newspapers and television properties, and (until last week) the Chicago Cubs—into bankruptcy. The group contends that the Tribune Company "would have been able to withstand this predictable downturn in the publishing business" were it not saddled with the extra debt of Zell's acquisition. The Tribune, which is now privately held in an Employee Stock Ownership Plan (ESOP) engineered by Zell in 2007, is $13 billion in debt. It filed for bankruptcy in December 2008.

As the Wall Street Journal notes, "Such allegations can be difficult to prove, entangling opposing bankers and lawyers in a debate over what was a proper valuation at the time of the deal." A judge will look at the request—which demands "disclosure of e-mails and documents after being denied access to certain information, according to the filing," according to Bloomberg—to decide.

This is just the latest bit of bad news for Zell, who's been so criticized in the press in the wake of the Tribune Company's sale of the Chicago Cubs to the Ricketts family (see: Zell Felled, et. al.) that Editor & Publisher's newspaper columnist Mark Fitzgerald took it upon himself to pull a Chris Crocker this week and demand, Can We Please Give Sam Zell a Break?

If the bondholders' request goes ahead following a September 4 court hearing in Delaware, there may be few breaks—and much more bad press—ahead for Zell.