Tribune's IRS settlement OK'd; judge 'days' from confirmation ruling

By Jim Witters

Wilmington, Del., Oct. 19 - Tribune Co. received court approval Wednesday for two settlements that open the way for judge Kevin J. Carey to make a ruling on the company's plan of reorganization.

Carey approved Tribune's settlement of disputes involved Employee Retirement Income Security Act of 1974 claims and issues the IRS raised about the company's Employee Stock Ownership Plan during a hearing in the U.S. Bankruptcy Court for the District of Delaware.

Debtors attorney Bryan Krakauer said a hearing is scheduled Oct. 24 before judge Rebecca Pallmeyer of the U.S. District Court for the Northern District of Illinois, during which the ERISA plaintiffs will seek preliminary approval of the class action settlement.

The settlements, coupled with the resolution of several objections, appear to resolve all disputes regarding Tribune's plan of reorganization, Krakauer said.

Krakauer also said that the settlements necessitate an amendment to the plan but that no further procedures are needed because the amendment enhances the estate and does not adversely affect any parties.

"That's good, because I literally am within days of issuing an opinion on confirmation," Carey said.

ERISA settlement

Tribune will pay $32 million to settle claims alleging violations of ERISA in connection with Tribune's ESOP.

Insurers will pay $26.4 million, the company $4.45 million and GreatBanc Trust $1 million.

The money will go to participants in the employee plan and to cover expenses under a non-opt-out class action settlement.

There will be no finding of fault by Tribune nor any admission of wrongdoing or liability by the company or its officers, directors or employees.

The claims were made in a 2008 lawsuit by former Tribune employees. They sued GreatBanc Trust, which acted as ESOP trustee.

The agreement also resolves claims by the U.S. Department of Labor in connection with the ESOP and the Department of Labor's and GreatBanc's objections to Tribune's proposed plan of reorganization.

IRS settlement

The settlement with the Internal Revenue Service resolves a dispute over a $37.5 million pension-related tax claim concerning the Tribune ESOP.

The settlement provides:

• Tribune will pay the IRS $7 million;

• The $3.2 million claim allowed to the Department of Labor in settlement of that agency's ERISA claims will be reduced dollar for dollar by any payment made by or on behalf of Tribune to the IRS;

• The IRS will not seek to access or collect any excise tax or interest claims against Tribune in connection with Tribune's sale of 8.9 million shares to the ESOP on April 1, 2007 or Tribune's loan of $250 million to the ESOP; and

• The IRS will not seek to access or collect any claims against the ESOP for the period between Jan. 1, 2007 and Dec. 31, 2012 for unrelated business income tax stemming from the ESOP's ownership of Tribune shares.

The $37.5 million IRS claim was asserted as an unsecured priority claim against Tribune and is part of $351.7 million the IRS claims Tribune underpaid in taxes.

"The IRS pension claim settlement represents the final component of a comprehensive resolution of all ERISA-related claims, which arise from and relate to the allegations that Tribune and/or the ESOP engaged in one or more prohibited transactions under ERISA in connection with the leveraged ESOP transactions," the settlement states.

Tribune denied any wrongdoing, and the parties agreed that the settlement is not an admission of liability.

Tribune, a Chicago-based media company, filed for bankruptcy on Dec. 8, 2008 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 08-13141.

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