Bankruptcy judge orders taping documents produced

Philadelphia Newspapers L.L.C., parent company of The Inquirer, Philadelphia Daily News, and Philly.com, was given a boost Thursday in its efforts to see whether anything untoward was behind a senior lender's attempt to tape a meeting with company officials.

Chief Bankruptcy Judge Stephen Raslavich ordered the senior lenders to turn over any documents they might still have pertaining to the Nov. 17, 2008, incident.

The order was less than the company had sought, however. Raslavich stopped short of permitting company attorneys to take depositions as part of their inquiry or seek a much broader range of documents.

He did so, he said, in part because he remains unconvinced that anything the company discovered would affect the outcome of its April 27 auction.

"Today was another very good day for the company in court," Scott Baker, Philadelphia Newspapers' general counsel, said in e-mail to employees. "As we have said all along, we want this review and investigation done prior to the auction and confirmation process to ensure that any potential claims that may arise are dealt with fairly in the context of our plan confirmation."

The auction is central to the company's reorganization plan, which calls for the senior lenders, including Angelo Gordon & Co., CIT Group, and Credit Suisse, to receive the proceeds from the sale to settle about $318 million in debt. The lenders have said they intend to bid on the company.

The taping incident involves a meeting between company officials and some of its senior lenders at Philadelphia Newspapers' Broad Street headquarters to discuss a possible negotiated settlement of the company's debt.

Brian P. Tierney, Philadelphia Newspapers' CEO, discovered Vincent DeVito, a representative of the CIT Group, taping the meeting. In Pennsylvania, taping a meeting without permission is a crime.

According the senior lenders, it was an innocent act meant to help DeVito keep track of what was said at the meeting.

Tierney contends that after he reported the taping to DeVito's superiors, the senior lenders turned on him and ended any serious efforts to negotiate a settlement.

Lawrence G. McMichael, attorney for the company, argued Thursday that with the coming auction it was more important than ever to find out whether the senior lenders had been conspiring to retaliate against his client.

"This is a matter of grave concern," McMichael said. "We are running out of time."

Abid Qureshi, a lawyer for the senior lenders, dismissed the effort as an ill-conceived fishing expedition.

"This seems to be an obsession of Mr. Tierney that, from our perspective, borders on the irrational," Qureshi said.

Last April, when the company initially sought permission to investigate the taping, Raslavich asked the Committee of Unsecured Creditors to handle the inquiry.

The committee concluded that the taping was an isolated incident. It blamed the conflict between Tierney and his lenders on Tierney's own behavior, including his decision to accept a large bonus and pay raise as the company approached bankruptcy.

The committee's inquiry, however, failed to take sworn depositions from participants. Nor was the committee aware that DeVito kept a file of e-mail exchanges concerning Philadelphia Newspapers. In a deposition with company attorneys, DeVito said he kept such a file.

Raslavich's order Thursday was aimed at determining whether that file might contain exchanges dealing with the taping incident or whether there were other documents missed by the committee's investigation.

The lenders were given five days to produce any additional documents.