UPI Probes Asset Sales as Possibly Fraudulent
United Press International, itemizing debts of more than $40 million for a federal bankruptcy court, says it is investigating possible “fraudulent transactions” in which company assets may have been sold for sub-market prices.
“The debtor intends to pursue these investigations and, where appropriate, to pursue liquidation and recovery of all claims resulting from these transactions,” company lawyers said in a 1,400-page filing Friday in U.S. Bankruptcy Court in Washington.
The court papers did not specify which assets UPI might seek to recover, but Chairman Luis Nogales has publicly criticized the firm’s chief owners for making “bad deals” he said helped lead the firm to file for Chapter 11 bankruptcy protection.
The court papers said: “The debtor is investigating possible fraudulent transactions and other claims against various entities.”
Under bankruptcy law, a “fraudulent transaction” is defined as one in which an asset is sold for less than full market value, said Richard Levine, an attorney representing UPI.
Bankruptcy experts have said state and federal laws permit a company to sue to recover assets sold at below-market value prior to a Chapter 11 filing. Under federal law, such sales must have occurred within 12 months of the filing, but some state laws permit recovery on assets sold as long as six years earlier.
Nogales’ management team has criticized several joint ventures or sales of UPI assets, including deals with Comtex Scientific Corp., Fintext Inc. and the competing, British-owned Reuters news agency.
The court papers said UPI owners Douglas Ruhe and William Geissler sold UPI’s foreign news-pictures service to Reuters on June 25, 1984, for $3.3 million, plus $41,000 in monthly fees for five years. Some UPI officials have placed the value of the foreign newspictures service at triple or more.
Ruhe has said that, “if we hadn’t desperately needed the cash, we wouldn’t have done the deal.” Reuters, which now swaps foreign pictures for UPI’s domestic photos in a joint arrangement, has approached Nogales about a possible purchase of UPI.
Ruhe also sold much of UPI’s electronic publishing business, in which the news report is made available as a computer data bank, to Comtex for $1 million and 45% of Comtex’s stock. Comtex has yet to declare a stock dividend and has not significantly expanded electronic publishing revenues from sale of the UPI report, while collecting $800,000 to $1 million in annual revenues UPI previously received.