August 6, 2010 4:42 PM

Bankruptcy Files Extra: Tribune Examiner Speaks

Posted by Zach Lowe

It has been a few days now since Kenneth Klee, a professor at UCLA's law school and a name partner at the boutique Klee, Tuchin, Bogdanoff & Stern, released his massive report investigating the downfall of The Tribune Company following a disastrous 2007 leveraged buyout. We're still making our way through the report, which raises serious questions about the second step of the buyout and whether it left Tribune with an unsustainable amount of debt. It remains to be seen whether the report will help out-of-the-money creditors pursue fraud claims against the higher-ups and banks that engineered the buyout.

In his first interview since nabbing the role as the official court-appointed examiner in the case, Klee discussed how he got the job, and how his team managed to produce the report in just 12 weeks.

Hi, Ken. So, how much more work was this than you anticipated when you got the job?

The scope of the assignment was much, much greater than I had imagined. My fee estimate will end up being way under the actual fee level. The investigation turned into something I didn't expect it to turn into.

Your firm is a boutique. How many lawyers did you have? How did you staff this thing?

We've got 17 lawyers and we had ten working on this full-time over 12 weeks. Our counsel in Delaware, Saul Ewing, had more than that working on it. You're talking about going through millions of pages of documents and preparing to examine witnesses, writing the report, and doing the analysis. Our financial adviser had at least ten people working on it.

The time pressure gave us no choice other than to really staff it up.

How much did you end up spending on this? What will the final bill look like compared to your estimates?

Our final fee estimate was that this would cost $7.5 million to $8 million. And that isn't bad when you look at the overall scope of this. My guess is that the final cost will come out--I shouldn't guess at this point, but I think it will be in the $12 million to $15 million range. But that's not bad when you look at what was produced and the value it will add to the case.

You mentioned earlier that the examination went in some directions you hadn't anticipated. Can you expound on that?

Sure. We ended up interviewing many, many more people because there was so much conflicting testimony. I don't want to go into the details of it too much, but the conflicting testimony was really material in terms of what happened in the 2007 transaction, especially in step two of that transaction. In the past I have used an informal interview process, but I determined early on that we needed to have sworn testimony on the record--that you can see now in exhibits attached to the report--so that no one could ever doubt what was said. Before, I simply took notes. But I came to think it was very important to get all of this on the official record.

It sounds like you were almost taking depositions.

Yes, but we were looking for the truth, not advocating a particular position. And we had several people asking questions at the same time. Once we had two witnesses answering questions together, simultaneously. They interacted with each other, and when they had differences of opinion, one would interject and that would spark more recollections. I hadn't seen anything quite like that except when we used to do it on congressional panels. (Ed. note: Klee was associate counsel for the House Judiciary Committee in the 1970s.)

When you got conflicting testimony, did you have to go back and interview people two or three times, to give them a chance to respond--almost like a journalist?

Yes, exactly. We interviewed some people three times.

How did you get this assignment? As I recall, none of the parties in the case submitted your name into the pool of candidates, but the U.S. trustee overseeing the case picked you anyway. Did you make your interest known? Or was the trustee familiar with your work?

I had made my interest known. I had talked to a couple of the U.S. trustees at the beginning of the year saying this sort of thing was something I'd be interested in doing, and this case worked with my teaching schedule, since we're in the summer.

I just thought it was going to be a fun thing to get into. Little did I know how much fun it could be.

So are you going to relax and take a vacation now?

I'm going to go see my granddaughter, who was born during this case. I haven't seen her yet. But I already start teaching again on Aug. 18.

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