KSL Trustee Subpoenas Liebowitz, Cohen29 Jan, 2014 By: Doug McPherson
ENCINO, Calif. – The new trustee overseeing the closure of the KSL Media, David Gottlieb, is using newly granted subpoena power to force the media shop’s founder, Kal Liebowitz, to submit to questioning under oath.
It’s all part of an extensive investigation into how KSL’s finances decayed so badly they forced bankruptcy.
Gottlieb’s criticism of Liebowitz is well documented. He has alleged Liebowitz may have been trying “to pull the strings behind the scenes” after KSL filed for bankruptcy in September 2013. Gottlieb also said it’s likely that the agency estate would sue Liebowitz for defrauding the firm.
Gottlieb replaced Janet Miller-Allen, a KSL veteran Liebowitz designated as trustee of the debtor company when it filed for Chapter 11. Miller-Allen resigned in December after the unsecured creditors’ committee deemed her unqualified to serve in the trustee role.
That committee investigated Liebowitz and other officers of the company until the end of 2013, when KSL shifted from Chapter 11 to Chapter 7 liquidation. The committee said there was evidence Liebowitz “borrowed” $2.8 million from KSL and apparently had not repaid any of it. And a paper trail seemingly leads to “unexplained reimbursements” for legal expenses, totaling some $450,000, including payments to an attorney handling Liebowitz’s divorce. Reportedly if that money can be recouped, the estate will give it to creditors.
MediaPost News reports that Gottlieb noted that KSL had claimed that a former controller, Geoffrey Charness, had stolen millions from the agency from 2006 until he was fired in 2010. KSL cited Charness’ actions as a key reason for the firm’s financial decline and subsequent bankruptcy. A key unanswered question is why it took the agency three years to pursue any legal action against Charness. That action came in the form of a civil lawsuit filed in summer 2013.
But when KSL filed for Chapter 11 protection, it agreed to a stay of the civil suit against Charness, pending the outcome of the bankruptcy proceeding. Gottlieb called that decision “nonsensical.”
Gottlieb contends KSL’s former CEO, Hank Cohen, may owe the estate money, too, and told the court that both Liebowitz and Cohen were the “apparent beneficiaries” of a settlement agreement between KSL and a former undisclosed client which resulted in the transfer of $7 million in company funds “to or for the benefit” of that client. More than $2 million in payments were made within 90 days of KSL’s bankruptcy filing and is therefore recoverable by the estate, Gottlieb said, as are payments received by Liebowitz and Cohen stemming from that deal.
Gottlieb also has subpoena power to get Miller-Allen and Cohen to testify about their involvement in the firm’s affairs.