TRIBUNE DEAL: BORN BANKRUPT

The examiner appointed by a Delaware bankruptcy court to evaluate claims that the sale of the Tribune Co. to a group headed by real-estate billionaire Sam Zell was conducted fraudulently appeared to be of two minds concerning the transaction as he submitted his findings in an almost 700-page report on Monday. The $8.2-billion deal consisted of two “steps,” and it was the second step that would likely be found to be an example of “fraudulent conveyance,” which occurs when a buyer takes on more debt than he is ever able to repay. On the other hand, examiner Kenneth Klee wrote, “a court is reasonably likely to conclude that the Step One Transactions did not constitute an intentional fraudulent transfer.” Tribune is one of the nation’s leading media powerhouses, whose newspapers include the Chicago Tribune and the Los Angeles Times, and whose television stations include WGN-TV in Chicago, WPIX in New York, and KTLA in Los Angeles. The first part of the deal was concluded in June 2007, but by December of that year, Klee concluded, earnings of Tribune had plunged, a fact that management of Tribune kept hidden from its board by pushing a flawed assessment of the company’s overall value that “went beyond the optimism that sometimes characterizes management projections.”