Tribune Co. has disclosed that the U.S. Department of Labor has opened an investigation into the company’s employee stock ownership plan, or ESOP.
The Labor Department sent a subpoena March 2 to the Chicago-based media company seeking “an extensive range of documents,” Tribune Co. said in a filing made Thursday as part of its bankruptcy case. The company said it produced documents that its lawyers say “substantially complied” with the subpoena.
The court papers provide no other details about the probe other than that it concerns the ESOP and the Employee Retirement Income Security Act, which protects pensions.
A spokeswoman for the Labor Department declined to comment, maintaining the agency’s policy to neither confirm nor deny investigations.
A Tribune spokesman said, “We view this as a routine inquiry and are responding by producing the requested documents concerning the ESOP.”
Tribune owns the Los Angeles Times, KTLA-TV Channel 5, the Chicago Tribune and other news organizations.
The company’s ESOP has been a source of scrutiny since Tribune Co. set it up in December 2007 as part of a complex transaction engineered by Chicago real estate billionaire Sam Zell to take the media company private.
The highly leveraged deal saddled Tribune Co. with nearly $13 billion in debt, but establishing the ESOP provided the company with tax advantages.
The debt load proved too big a burden amid rapidly declining advertising revenues, and Tribune Co. filed for Chapter 11 bankruptcy protection in December. The company has said the value and role of the ESOP, which holds all of Tribune Co.'s stock, would be determined in the bankruptcy proceedings.
The federal probe follows a private lawsuit against Zell and Tribune board members contending that they violated federal pension laws in their handling of the ESOP’s role in the takeover and harmed employee-owners. The suit was filed in September by a group of six current and former employees of The Times.
Tribune Co. has denied the allegations and asked the Bankruptcy Court to halt action in the case because it could obstruct its reorganization.