Tribune Company's ESOP (employee stock option plan), which was a major component in Sam Zell's purchase of the publisher two years ago, has drawn a subpoena from the Department of Labor. Citing a bankruptcy court filing, WSJ notes that Labor Dept. is examining aspects of the ESOP under provisions in the federal Employee Retirement Income Security Act, which requires proper disclosure of funding details and risks related to workers' retirement plans. In a statement, Tribune played down the investigation, saying it was merely a "routine" inquiry.
It wasn't completely clear what aspects of the ESOP government officials were looking at. Last September, a group of current and former staffers at the Tribune-owned LAT filed a suit in federal court claiming that Zell improperly used the ESOP as part of his bid to acquire a controlling interest in the company. Zell's deal ultimately involved his own investment of some $315 million, while giving majority control to the ESOP in return for financing the rest of the $8.2 billion transaction. Even before the Tribune filed for Chapter 11 bankruptcy protection in Decembera situation that potentially puts staffers' retirement funds in jeopardythe plaintiffs argued that their stock ownership was used against them through layoffs and other cutbacks at the paper and so decided to bring a suit against the publisher.
By David Kaplan