'Unsecured UPI Creditors Still Waiting'

Here's a story by Andrew Radolp from the Aug. 8, 1987 edition of Editor & Publisher:


The unsecured creditors of United Press International, which came out of Chapter 11 bankruptcy in June 1986, are still awaiting distribution of the funds that were set aside for them as part of the settlement.

The original pool of money totaled about $9.5 million and, with accrued interest, has increased to more than $10.3 million.

There are a number of claims which still have to be heard by the bankruptcy court in Washington, D.C., before any distribution can take place, according to Michael Veve, counsel for New UPI Inc., the corporation which purchased UPI to take it out of bankruptcy.

One sticking point was that the bankruptcy court clerk's office did not produce a reliable creditors' register, according to Paul Thomas of Shaw, Pittman, Potts & Trowbridge, UPI's outside law firm in the matter.

Thomas said UPI decided to compile its own creditors' register. The creditors' committee representing the unsecured creditors, "is in the process of reviewing the list," which then must be approved by the bankruptcy court.

Another major stumbling block involves a dispute over six libel suits that were filed against the news service before it declared bankruptcy. None of the six libel suits has come to trial and they were automatically stayed as a result of the bankruptcy filing. The presiding judge will rule which cases, if any, will be allowed to proceed.

The creditors' committee has asked Judge George F. Bason for a declaratory judgment directing UPI's insurance company, Mutual Ltd. of Hamilton, Bermuda, to cover any allowed libel claims.

The creditors' committee had drawn up a plan for distribution of funds, established for unsecured creditors, but later withdrew its proposal in order for the court to rule on the issue of libel liability.

The committee contends that the amount of money distributed to unsecured creditors will be substantially diluted if the libel claimants share in any disbursement.

"The whole picture is clouded by the bankruptcy," said Arthur McKey of Hanson & O'Brien, Mutual's law firm in Washington. "The comprehensive plan did not address the libel claims. We are not conceding that we have an obligation to the unsecured creditors' committee.

"Whenever bankruptcy courts get involved in the libel picture, things get out of hand," McKey added.

According to Thomas, UPI's position is that any claims by the libel plaintiffs should come out of the existing pool of money established for unsecured creditors.

UPI contends that as a result of the bankruptcy proceedings, it was "discharged from debts" arising from the libel suits and that liability for the claims "passed to the unsecured creditors fund."

Remarking that UPI's libel insurance with Mutual is an "indemnification policy that comes into play only if UPI is found liable," Thomas said that if UPI does not have to pay for the libel claims, then neither should its indemnifier.

Since the comprehensive plan for paying unsecured creditors does not "spell out" the libel claims, Thomas continued, the suits should be considered "ordinary pre-petition claims" covered by the creditors' fund.