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Judge: KSL Accountant Must Testify

23 Apr, 2014 By: Doug McPherson

WOODLAND HILLS, Calif. – The judge overseeing the bankruptcy of KSL Media has given David Gottlieb, trustee for KSL, the power to interrogate William Hughes, an outside accountant for the now defunct firm.

Hughes, with the accounting firm of Rosen Seymour Shapss Martin & Co., handled the company’s financial books and tax filings. Gottlieb, who has now been investigating KSL’s downfall since the beginning of the year, says Hughes “communicated frequently” with company principals Kal Liebowitz and Hank Cohen and former controller Geoffrey Charness, who KSL has claimed stole millions from the company from 2006 to 2010 and was at least partly responsible for the firm’s demise.

Gottlieb says KSL’s troubles started well before any alleged duplicity on the part of Charness.

“My investigation to date indicates that the Debtor KSL appears to have been operating on a cash negative basis from at least 2002 (i.e., prior to Charness’ tenure) and continued to operate on a cash negative basis consistently through Sept. 11, 2013 when the company filed for bankruptcy," Gottlieb wrote in court papers.

Insiders say Hughes might shed light on how the company managed to operate on a cash negative basis for so long. Sources say KSL basically operated “on the float” of prepaid media buys from clients such as Bacardi, its biggest client, which appointed a new media agency in May 2013, just four months before KSL went belly up.

“It appears that the debtor’s principals, most notably Kalman Liebowitz, siphoned millions of dollars out of the company in undocumented loans, which have not been repaid to this date,” Gottlieb alleged in court papers filed last week. “I am informed and believe that [Hughes] has within his possession and control substantial accounting and financial information relating to the debtors relevant to claims I may be able to assert on behalf of the estates relating to the conduct of the debtors and the management thereof.”

Among the topics Gottlieb intends to question Hughes about:

  • An agreement under which KSL paid former client and Sweet’N Low marketer Cumberland Packing Corp. an estimated $10 million to settle allegations by Cumberland that it was overcharged for media it placed via KSL. Gottlieb says the deal is legally voidable and has asked U.S. Bankruptcy Judge Alan Ahart to order Cumberland to pay back the fees it received by way of that pact to the KSL Estate, which would in turn distribute the money to creditors. Liebowitz and Cohen also allegedly received payments as part of that deal, which Gottlieb also contends should be returned to the KSL Estate.
  • The nature and extent of alleged defalcations by Charness.
  • The destruction, shredding and/or removal from any of the debtors’ business premises of any of the debtors’ books and records.

The judge has green-lighted Gottlieb’s demand that Hughes and his firm produce reams of documents related to its work for KSL and its principals going to back to 2002.

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