1986 Houston Post Story on UPI's Sale

Here's a May 13, 1986 story from the now-defunct Houston Post on the proposed sale of UPI to Mexican publisher Mario Vazquez-Rana and Houston developer Joe Russo:

Post News Services

WASHINGTON -- Mexican publisher Mario Vazquez-Rana and Houston developer Joe Russo, winners in the battle to buy United Press International, reached a "settlement in principle" with a losing bidder that clears a final roadblock to the firm's sale and emergence from bankruptcy, it was announced Friday.

The settlement between Vazquez-Rana, minority partner Russo and the losing bidder, a seven-member business consortium led by the Financial News Network, Inc., should allow closing of the sale and UPI's emergence from Chapter 11 bankruptcy protection at a confirmation hearing on June 10, said Richard Levine, a lawyer for UPI.

Levine disclosed the settlement during a hearing at which U.S. Bankruptcy Judge George Bason reviewed and gave final approval to a disclosure statement to be distributed to some 300 UPI creditors who must vote on the reorganization plan, with votes to be tabulated that evening.

"Congratulations to you all," said Bason, who has presided over the case for more than a year. He said creditors would be allowed until noon on June 9 to cast their ballots on the reorganization plan, with votes to be tabulated that evening.

Exact terms of the tenative settlement were not disclosed, but Levine said it would resolve all litigation between Vazquez-Rana, UPI and FNN, which filed a $975 million lawsuit against most key parties involved in selecting Vazquez-Rana and Russo as the buyers last November.

Six of the seven counts in the FNN suit later were dismissed, but the remaining count seeking $150 million in damages is pending. Vazquez-Rana has filed his own $50 million suit against FNN.

The settlement would also resolve the long-running disputes between UPI's management and its chief stockholders, Douglas Ruhe and William Geissler, who have engaged the wire service in a stream of litigation since yielding operating control a year ago.

Through their holding company, Media News Corp., the pair had joined ranks with FNN and threatened to file a competing sale proposal with the court by a Monday deadline. Lawyers close to the case expressed fears that a split decision among creditors could cause delays that would jeopardize UPI's chances of successfully reorganizing from Chapter 11 bankruptcy protection.

"I've been advised that a settlement in principle has been worked out between New UPI (the firm formed by Vazquez-Rana and Russo), FNN and MNC," Levine said. "We're delighted that this fight has been resolved."

"An agreement in principle has been reached," acknowledged Joe Levin, a lawyer for FNN. "We're working towards a finalization."

Stressing the urgency of closing a sale, Levine noted that Vazquez-Rana now has provided UPI with the full $2.5 million in interim operating cash he pledged in a sale agreement and it is unclear how far into the summer the company can operate without additional funding. Under the sale proposal, Vazquez-Rana and Russo would provide an additional $15 million in working cash by 1988.

Parties involved in the negotiations refused to discuss the settlement. Sources have said previously that FNN had offered to drop its litigation if it were awarded an interest in certain UPI assets.

During the hearing on the 69-page disclosure statement, Bason dismissed an objection on behalf of former UPI president William Small, who flew from New York with his lawyer to attend the hearing.

Small's attorney, Lawson Bernstein, argued the company has been "less than energetic" in seeking to recover between $2 million and $4 million stripped from the firm in "self-dealing transactions" by Ruhe and Geissler.

Following his abrupt firing in September 1984, Small filed a $10.8 million breach of contract suit against the company and a separate damage suit against Ruhe and Geissler.

Bernstein said news stories transmitted on UPI's own wires and published elsewhere provided evidence of "fraudulent conveyances" of company assets by Ruhe and Geissler -- defined under bankruptcy statutes as the sale of company assets at prices below market value.

Bernstein asked Bason to appoint a court examiner to investigate such possible "fraudulent conveyances," such as the sale of UPI's foreign newspictures services to the rival Reuters news agency for $5.5 million, which Bernstein said he understood was "substantially below the market value."

Levine said, however, that appointing an examiner would disrupt the sale plan. He questioned whether in the event of a successful judgment, Ruhe and Geissler would have the resources to cover the amounts claimed.

Jules Teitelbaum, a lawyer for a committee of key unsecured creditors who argued against Small's request, told the court that while there were "possible actions against Ruhe and Geissler" such a strategy might have left creditors with court victories but delays so lengthy that UPI would have been forced to liquidate.

"What were we to do," he asked. "Have a good judgment and get a nickel on the dollar?" He noted that creditors will receive 40 to 50 cents for every dollar of the more than $22 million owed under the proposed plan.

The proposal would fully satisfy employee claims and all unsecured claims of $3,000 or less.