US Labor Dept joins fight over Tribune bankruptcy

[Omaha Steve]

http://www.reuters.com/article/idUSN1415751420100514

* Dept of Labor concerned about loss of legal claims

* Tribune plan may release Zell, even from current case

By Tom Hals

WILMINGTON, Del., May 14 (Reuters) - Tribune Co's reorganization plan wrongly tries to shut down a lawsuit against Sam Zell, who took the company into bankruptcy, and block potential claims by the government, the U.S. Department of Labor said in a court filing.

Zell led an $8.2 billion leveraged takeover of the owner of the Chicago Tribune, Los Angeles Times and cable television station WGN in 2007. The company filed for bankruptcy in 2008.

The Labor Department is investigating Tribune for federal violations for the way Zell used the company's employee stock ownership plan, or ESOP, to finance the leveraged buyout, according to bankruptcy court filing on Thursday.

If the Labor Department determines the leveraged buyout's reliance on the ESOP was a prohibited transaction, the government could press potentially valuable claims against those who had a role in that deal, including Zell.

An Illinois court hearing a lawsuit against Zell and others has already essentially determined the transaction was prohibited, according to the Labor Department filing.

FULL story at link.