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KSL Trustee Gets $1.75 Million From Sweet’N Low Parent

25 Feb, 2015 By: Doug McPherson

WOODLAND HILLS, Calif. – There is yet another bizarre twist in the bankruptcy proceedings of KSL Media.

About a year before KSL Media filed for bankruptcy in September 2013, the now defunct media agency struck a settlement agreement to pay $7 million to former client Cumberland Packing Corp., makers of Sweet’N Low.

Now Cumberland has struck a new deal with the trustee of the KSL estate to return $1.75 million of that settlement to the estate for potential disbursement to creditors. U.S. Bankruptcy Court Judge Alan Ahart approved the deal in January.

Steve McClellan, a writer for MediaPost News, says Cumberland’s agreement to return the money “is somewhat ironic given that its initial settlement with KSL was recompense for an estimated $32 million in advertising funds prepaid to KSL – funds that the agency allegedly used for other purposes than to buy ads for the client.”

Last March David Gottlieb – the KSL estate’s bankruptcy trustee – asked the court to void the settlement, calling it a “fraudulent transfer,” and one that the court could void because payments under the deal were made within 100 days of KSL’s bankruptcy filing.

In response to Gottlieb’s request to void the settlement agreement, Cumberland responded last summer that if the deal were voided, it would be entitled to file claims totaling $267 million against the KSL estate and the estates of two KSL sibling firms, TV 10s and Fulcrum 5, that are all tied to same bankruptcy proceeding. That figure represents treble damages against each of the estate entities. Cumberland never spelled out specifically in court papers why it believed it might be entitled to treble damages, but the implication was that KSL had intentionally defrauded it of pre-paid advertising dollars.

The agreement between Gottlieb and Cumberland came after months of discovery proceedings and several rounds of negotiations, parts of which were mediated by a retired U.S. bankruptcy court judge. Under the terms of the settlement, Cumberland agreed to waive its right to any further claims against the KSL Eetates.

Court papers say both former KSL executives signed “negative covenants” assuming responsibility for the $7 million in the initial pre-bankruptcy settlement agreement if those payments weren’t completed.

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