KSL Creditors Committee Adds Ugly Accusations8 Jan, 2014 By: Doug McPherson
ENCINO, Calif. – The story of KSL Media Inc., which went belly-up in September leaving debts of nearly $100 million, took some more ugly turns over the holidays.
Initially, investigators alleged that former KSL Controller Geoffrey Charness stole millions from the company in a scheme that bankrupted the company. Now, the Official Committee of Unsecured Creditors believes KSL founder, and sole board member, Kal Liebowitz likely bilked the company too.
The committee told the California branch of the U.S. Bankruptcy Court hearing the case in late December that Liebowitz constructed “fraudulent conveyances arising from excessive compensation, apparently unpaid loans owed to [the estates of the bankrupt KSL] totaling at least $2.82 million and unexplained ‘reimbursements’ for legal expenses totaling at least $425,000 within three months preceding.” One trustee has alleged Liebowitz may have used company funds to pay for his divorce.
The committee is also investigating former KSL CEO Harold “Hank” Cohen. Its filing reads: “The committee’s investigation regarding Mr. Cohen is still ongoing, but at this point, the committee believes that the estates also have substantial claims and actions against Mr. Cohen.”
Plus, the committee is raising questions about KSL’s failure to take “remedial measures,” after it discovered Charness’ alleged fraud. Charness left the company in 2010, yet the company didn’t sue him until the summer of 2013. The committee said Liebowitz, at the very least, breached his fiduciary duty as head of the company by failing to take effective action earlier.
Then, on Dec. 31, MediaPost reported that KSL controller and trustee overseeing the company’s wind-down, Janet Miller-Allen, resigned amid allegations from the committee that she wasn’t competent. Miller-Allen was replaced by David Gottlieb, partner in charge of bankruptcy and insolvency services at the accounting and consulting firm of Crowe Horwath.
Both the committee and the U.S. Trustee had previously requested the Judge hearing the case replace Miller-Allen. KSL says Miller-Allen resigned because the committee refused to waive rights to sue her for any actions she has or would have taken in her role overseeing the wind-down process.
In a further twist, KSL told the court it was converting its Chapter 11 proceeding into a Chapter 7 case, and that it wants to go directly to liquidation without further effort to reconstruct past financial records over a period of years, which the company said was a virtually impossible task.
With Miller-Allen’s departure, KSL said, “The Debtors cannot complete the reconciliation process because they now lack anyone with: 1) the historical knowledge of the Debtors’ media contracts; and 2) the necessary knowledge to manage the proprietary software related to the Debtors’ business.”
The firm has employed a forensic accountant to help reconstruct the firm’s books. In its latest filing however, KSL said that it was now “unaware of the identity of any reliable third-party media claims reconcilers that could finish the Debtors’ claims reconciliation process.”
Essentially, the firm said, its books are in such disarray that it “cannot determine specific amounts owed to any particular creditor.” It has estimated however, that total debt amounts to approximately $100 million.
Neither the Creditors Committee nor the U.S. Trustee has commented on KSL’s move to Chapter 7 proceedings.
The U.S. Trustee overseeing the case formed the creditors committee in October. It includes leaders of Fox Cable Network Services, MacDonald Media, NBC Universal, TELEBrands Corp., TV Guide Networks, Valassis and Viacom Media Networks. Collectively those companies are owed millions by KSL and two affiliated companies.