Posted by chicagomedia.org on August 19, 2009 at 09:52:03:
ZELL'S ESOP FABLE
TRIBUNE EMPLOYEES ARE SHORTCHANGED
By HOLLY SANDERS WARE and JOSH KOSMAN | NY POST
Last updated: 1:41 am August 19, 2009
Posted: 1:30 am August 19, 2009
Tribune's short-lived experiment with employee ownership is coming to an end.
While Tribune is still navigating the bankruptcy process, the creditors are unlikely to keep the employee stock ownership plan, leaving workers with worthless shares, a source involved in the negotiations said.
In 2007, real-estate tycoon Sam Zell used the stock plan, called an ESOP, to gain tax benefits on the $8.2 billion buyout of the struggling company.
The plan made employees official owners with 100 percent of the equity, but they have no say over management or the board. In the bankruptcy, they are viewed as common shareholders with less claim than other creditors.
"That's the typical scenario for bankruptcy," said Corey Rosen, executive director of the National Center for Employee Ownership. "The creditors say, 'Forget about the ESOP. It's common stock and well down the list of creditor situations.'"
When the plan began, Tribune's board appointed GreatBanc Trust to serve as the trustee for the ESOP.
GreatBanc's Marilyn Marchetti, who helped structure the transaction, declined to comment on creditors' plans but said the trustee remains involved in the negotiations.
"We are certainly representing the ESOP in the bankruptcy process," she told The Post. "We've been very active."
Although Tribune's ESOP has created a lot of confusion, experts said it is important to note that workers didn't directly fund the plan. Instead, the company agreed to make contributions like it would to other benefit plans, such as a 401(k) or pension.
The contributions were supposed to be invested in Tribune stock. However, Tribune filed for bankruptcy before it made its first contribution.
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