New Boss Seeks to Repair Financially Troubled KADY-TV

Thirty-three years after he entered the entertainment industry as a studio mail clerk, two decades after he produced his first motion picture, Hollywood corporate trouble-shooter John Hyde is in Oxnard on a salvage operation.

Hyde’s mission is to resurrect financially troubled KADY-TV, a family-owned station that once flew high on the dreams of former CBS producer John Huddy, then plummeted into bankruptcy.

In the three weeks since a federal bankruptcy judge sent Hyde to save KADY from economic collapse, the entertainment industry’s preeminent Mr. Fix-it has concluded that the troubled station has a bright future even though it is perhaps $10 million in debt.

Despite alleged mismanagement, Hyde said Ventura County’s principal English-language television station may operate in the black by November and could fetch as much as $15 million from one of several interested buyers.

That would be twice the amount bargain hunters were offering beleaguered owners John and Erica Huddy just a few months ago.

“This station is like a horse that’s been rode hard and put away wet,” said Hyde, 55, a ranch owner and executive producer of motion pictures such as “Short Circuit” and “The NeverEnding Story.”

“But it can be profitable,” added Hyde, who said he has overseen about 40 entertainment industry bankruptcies. “It’s wonderfully positioned in a very strong, growing market. If it’s properly run, it could become a very viable entity.”

Hyde, who stands to make $450,000 plus management fees if KADY can be sold for $15 million, took over the station July 8 after a bankruptcy examiner found “mismanagement” and U.S. Bankruptcy Judge Robin Riblet in Santa Barbara chastised general manager John Huddy for alleged misstatements to the court. In another slap, the judge told attorneys last week that testimony about how station books were kept “made my skin crawl.”

That was just one more blow for Huddy, 52. Yet, although Hyde moved Huddy out of the station two weeks ago and converted his office into an employee lounge, Huddy was not acting last week as if he had been forced to leave KADY to another boss.

His job now, Huddy said, is to make sure Hyde and his team do not claim excessive management fees to fix up a station that is salable as it is.

“Next week my group will present a $10-million offer to the court from a qualified buyer who is prepared to run the station immediately, and without spending large amounts of money to ‘buff up’ the property,” he said.

“My job is to watch Mr. Hyde very carefully,” he added. “I’m not going away. Hey, this could be fun.”

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Indeed, Huddy could end up a big winner. Since Huddy and his wife, Erica, are still station owners through a family corporation, they would indirectly receive the several million dollars that could be left after creditor and bankruptcy fees are paid.

Huddy’s new role as outside critic contrasts with his 8 1/2 years at the helm of KADY-TV, a small station that has struggled to survive almost from the day it was founded in 1985 as KTIE-TV.

The outspoken former boss of CBS News’ “Nightwatch” program and his wife bought KADY for $50,000 down and a $3.75-million note in 1991. Huddy had run the station as a $150,000-a-year general manager the three previous years and his wife was programming manager, according to court documents.

Since the purchase, the Huddys, their son, daughter and son-in-law have all worked at KADY.

From the start, their goals were ambitious. They launched the county’s only locally produced news program in 1993 with typical bravado: “We want this to be the best local news coverage in America,” John Huddy said.

And for a while, the station hustled the news and advertisers. KADY was there for local elections, fires, floods and mudslides. Its sales staff hawked air time to potential advertisers at a white wine and crab cake promotion at a hilltop country club.

It even made a profit in 1993 and 1994, Huddy maintained. But then the bottom fell out.

By last fall KADY was bleeding badly: Court documents show that station payroll checks were bouncing. And Huddy’s personal secretary said in a sworn declaration that the station even borrowed about $12,000 from her last October so it could make its $24,000 biweekly payroll.

Advertising revenue eventually dropped to less than half of its 1994 peak of $2.9 million, Huddy said, and he was forced to fold his beloved newscast a month ago to save money.

“I took my eye off the ball” in the summer of 1995 because of legal distractions, Huddy said, and that let the station begin to slide into disarray.

“I began to spend virtually all my time and a lot of resources on that litigation,” he said, referring to an exchange of lawsuits between him and former station owner Donald Sterling, a retired accountant living in Colorado.

Sterling usually prevailed, winning tens of thousands of dollars in back rent and the right to foreclose on the station because of missed rent and property tax payments. Then Huddy’s Riklis Broadcasting Corp., which operates KADY, was forced into federal bankruptcy court on March 22 by other creditors.

Huddy, meanwhile, was also struggling to survive another type of crisis--a severe heart attack in late January following months of increased tension from some of the two dozen lawsuits and monetary claims filed against his companies since 1993.

There was “a snowballing effect,” he said.

“The station was growing in every conceivable area where an outsider would evaluate a broadcast property, then it hit a wall in the fall of 1995,” Huddy said. The final blow was his two-month absence recovering from triple-bypass surgery.

“The problem when you have a funky, scrappy, family-owned business is that when the [business] has a major crisis . . . it affects the whole family. It’s the Italian restaurant where papa gets sick, then there’s no Italian restaurant any more.”

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Adding to Huddy’s troubles were more than a dozen claims filed since March 1995 by former employees with the state Labor Commission, seeking back wages, unpaid sales commissions or money to cover paychecks that bounced. That record prompted a state labor official to brand KADY a “problem employer” earlier this year.

The claims, and two related wrongful termination lawsuits, are laced with vivid descriptions of workers’ confrontations with Huddy, whom several former employees described in interviews as sometimes articulate and charming but also a bully with a bad temper.

On one hand, Jeff Chang, former national sales manager at the station, said he liked Huddy, whom he considers a mentor.

“He was a good motivator,” said Chang, a manager at a television ad placement firm in Los Angeles. “He was a visionary. But at times I think he got caught up in the vision. The analogy I would use is you’re so busy with your dreams that you’re not caring to your day-to-day duties.”

But electrician Norman Keller, who recently returned to the station after quitting over bounced paychecks, said of Huddy: “He systematically burned everyone along the way. I’m back because we have an opportunity to do it right now.”

Several former employees mentioned derisively the Huddys’ routine monitoring of employee phone calls at the station, which they agreed to in consent waivers as a condition of employment. Hyde shut down the practice two weeks ago.

According to court documents and police reports, Huddy claimed his jaw was broken in December by one employee who had been fired. One of Huddy’s employees claims to have been assaulted by Huddy before being marched to his car. And another employee charged in a lawsuit that an infuriated Huddy pulled a pistol, then chased him through a live newscast, where the fleeing worker said he screamed, “Call the police.”

Huddy said he would happily weigh his record against other employers.

“There have been over 350 employees at KADY since 1988. There have been two wrongful discharge suits, and in my mind both are laughable,” he said. “I don’t think that’s a bad track record at all.”

As for Huddy’s alleged gun-waiving and assault, it never happened, he said. And he added that he suffered his broken jaw while properly confronting an employee who had kicked station walls. Huddy filed assault complaints with police after two of the incidents. Authorities said charges were not filed because of conflicting accounts or lack of evidence.

“I have to admit I have a low tolerance for fools,” Huddy said. “I can be quite impatient with people who are selfish, dishonest or disloyal. I would say that probably we’ve had more of that kind of employee in the past year. . . . No question in 1995 we made some very bad hires.”

Some of those employees said in interviews that all they ever wanted from Huddy was to get paid on time and to be treated with respect. Salesmen said Huddy ran the station’s sales staff like a drill sergeant, sometimes berating them and ordering them to collect from advertisers quickly, which sapped employee morale and drove away good advertisers.

One disgruntled advertiser was Rep. Elton Gallegly (R-Simi Valley), who said he broke a cardinal rule of politics by filing a lawsuit last summer against a constituent--Huddy. Gallegly said Huddy would not repay $9,500 his reelection campaign deposited for air time but never used.

“Nobody likes people who sue, and my name is at the top of the list,” Gallegly said. “I saw a side of him I didn’t know existed. . . . It was a situation of him trying to win by intimidation . . . by making threats and blatant lies.”

Huddy said Gallegly used the air and production time he paid for, and got a good deal to boot. The station owner characterized Gallegly as a political bully and, in an interview with The Times last July, challenged the smaller man to a fight:

“If he wants to meet me in an alley sometime I’d be happy to do that . . . ,” said Huddy, who is about 6 feet tall and weighed nearly 240 pounds at the time, before dropping to 189 after his heart attack. Gallegly is 5-foot-7 and weighs 135 pounds.

The suit was settled two months ago, Gallegly said. The precise settlement is confidential, he said.

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Now Hyde--who said he has led about 20 companies successfully out of financial problems, including MGM and Orion Pictures--has concluded that KADY is in a shambles.

Indeed, in finding mismanagement at KADY in a July 1 report to the court, bankruptcy examiner Frank G. Sweeney cited the company’s failure to pay payroll and withholding taxes for employees, missed rent on the station, and the Huddys’ mingling of KADY funds with those of a second Huddy-owned company.

“It at least equals the most poorly managed companies I’ve seen,” Hyde said last week during a tour of the Maulhardt Avenue station in an Oxnard industrial park. “I’ve seen two or three that have just hit the bottom, and this certainly is right in there with them.”

Hyde and his corporation’s legal counsel and chief operating officer, Ann Jacobus, cited as problems the station’s alleged lack of a monthly chart of income and expenses, “primitive and incomplete” bookkeeping and an alleged lack of insurance to cover liability, fire and on-air slander since 1994. The IRS has leveled $230,000 in claims for unpaid taxes back to 1994. KADY filed no federal income tax returns in 1995, Hyde said. And some bank accounts have not been balanced for two years, he said.

Jacobus told Judge Riblet last week in court: “When we arrived, for example, there were no paper towels and toilet paper for employees in the bathroom.” And she added in an interview, after displaying piles of outdated electronic equipment, junked furniture and mounds of trash inside and behind the station: “In terms of just physical plant, this is about as dilapidated as I’ve seen.”

While acknowledging that company books were a mess in recent months because of his illness and that checks were bouncing, Huddy said KADY has always had insurance and that he kept detailed cash flow charts. He said he disputes the IRS claims that he owes back taxes.

Hyde and his staff are denigrating his family’s long-term accomplishments, Huddy said, so they can justify their own large fees and make themselves look good in the end.

“The game is afoot,” Huddy said. “And the game is . . . [for] Mr. Hyde to remain in control of Riklis Broadcasting for as long as possible . . . to malign the previous management to justify the money he is now spending on the most expensive attorneys and the most expensive accountants,” Huddy said. “Therefore, he can shrug off criticism by saying, ‘Look at the mess I have inherited.’ And before you know it, he will have bled the estate white.”

Hyde’s management company, Crossroads V Communications of Los Angeles, has requested at least $30,000 a month in fees to run KADY for the next six months. That request, and additional lawyer and accountant fees, would have to be approved by the judge. In addition, the judge by law may grant trustee Hyde up to 3% of the sales price of the station, or $450,000, if it is sold for $15 million.

Hyde said the process is by the book, and that the vast majority of KADY’s creditors supported the judge’s decision to turn the station over to him instead of leaving Huddy in charge.

Huddy is one creditor who objects. He claims KADY owes him about $2.5 million, including more than $1 million in deferred salary and $1.5 million in personal loans or loans from other Huddy companies.

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Just how much Huddy has received from the station is a point of contention in the bankruptcy. He said he received no salary for five years as owner. But an attorney for four program sellers maintained in a court filing that the Huddys had personal expenses of $12,000 a month, four times more than Erica Huddy’s take home pay from KADY.

Arguing for appointment of a trustee to protect station assets, attorney Linda K. Ford wrote that since the Huddys refused to produce documents to explain their “expensive lifestyle” she concluded they “have drawn substantial sums of money out of the debtor for which no accurate accounting has been maintained.”

John Huddy said that additional funds for personal use were from KADY’s repayment of loans made to the station by the couple. And the couple’s expenses were about $8,000 a month, not $12,000, he said. “What we’re dealing with is a smear,” he said. “If you don’t have the facts, talk trash.”

Hyde said Huddy’s claims will be evaluated along with others by the bankruptcy court. There will probably be enough money from the station’s sale to cover all legitimate claims, he said.

Indeed, he thinks the station can be sold within six months, once its books are in order and its flagging advertising revenues are boosted about 80%--to levels achieved two years ago.

This month’s sales are projected at $106,600, with December sales projected at $189,300. That would result in a monthly operating surplus of $15,300, according to estimates Hyde prepared for the court.

Advertisers now are more interested in booking time on KADY because of the change in management, said national sales manager John Dobel. He said he is interviewing to hire two new sales people, increasing his staff to five.

Even under siege, Huddy maintains that he is responsible for turning KADY into a valuable station, and that overall he was a successful manager.

“We took the station a long, long way,” Huddy said.

During his years as general manager or station co-owner, annual revenue went from $350,000 to a peak of $2.9 million in 1994 and viewership increased from 30,000 homes to a peak of about 149,000 in 1995, Huddy said.

A “classic shadow market station” when he took over, with coverage of only 4% of the Los Angeles ratings market and 30% of the Santa Barbara ratings market, KADY increased its ability to reach 100% of the Santa Barbara market by building a microwave network that extends 200 miles to gain exposure on local cable systems.

“Probably the biggest single achievement was becoming for the first time in 1995 a real station that actually covered a market that could begin generating hard ratings,” he said.

Under the Huddys’ ownership, the station also paid about $4 million of a $6-million programming obligation and paid off $2.2 million in equipment leases, John Huddy said.

“I don’t know how everybody runs around saying Huddy’s an idiot, Huddy’s mismanaged,” Huddy said. “Then how do we get to having a $15-million station? There’s something inconsistent about that.”

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Hyde, however, said that KADY’s value has escalated because broadcast stations in good markets nationwide are selling for historic highs.

“The value of this station is based on its [federal] license and its position in a growing market,” he said. “If what Huddy says is true and he has done such wonderful things, where do those profits go and why weren’t they used to keep up the station and to pay creditors?”

Huddy acknowledges the contradiction of claiming to be a success when at the same time losing his station.

“Since I’ve been in town, we’ve been nominated for seven Emmys and won three, so how stupid can I be?” he said. “On the other hand, the station’s in Chapter 11 bankruptcy, so how smart can I be?”