Sam Zell, chairman of Equity Group Investments, purchased the Chicago...

Sam Zell, chairman of Equity Group Investments, purchased the Chicago Tribune properties in 2007. Now an independent examiner is questioning the behind-the-scenes dealing as the sale closed. (April 2008) Credit: Bloomberg News

SAN FRANCISCO - The behind-the-scenes maneuvering that culminated in the 2007 leveraged buyout of Tribune Co. bordered on fraud, according to a report filed by an examiner appointed in the media company's bankruptcy case.

Independent examiner Kenneth Klee denounced the behavior of Tribune's management, board and some of its lenders after a two-month investigation into allegations of misconduct raised by bondholders seeking to get more of their money back.

Although he didn't validate all the allegations, Klee wrote that he believes it's "somewhat likely" a court would perceive some fraudulent behavior in the final stages of real estate mogul Sam Zell's buyout of Tribune.

That deal piled on debt that hobbled Tribune, which owns 20 TV stations and newspapers that include the Chicago Tribune, Los Angeles Times and, at the time, Newsday. As the recession deepened in December 2008, Tribune filed for Chapter 11 bankruptcy protection, where it remains.

Klee's findings could complicate Tribune's efforts to win court approval of its reorganization plan in a hearing next month. The plan would turn over ownership of Tribune Co. to a group of its debtholders.

Tribune spokesman Gary Weitman declined to comment late Monday, saying the company needed more time to review Klee's report.

Most of the report is being kept under seal until a judge can rule on the validity of confidentiality concerns raised by Tribune and some of the lenders involved in financing the buyout. Branding some of the confidentiality claims as "absurd," Klee hopes to persuade a judge to unseal his entire report during a hearing scheduled for Aug. 9.

Klee described Tribune's decision to shoulder an additional $3.6 billion debt as irresponsible.

Although he raised numerous red flags, Klee said he believed it was "somewhat unlikely" that a court would disallow any of the debt claims stemming from the 2007 buyout or find Tribune's board liable for "failing to perform their responsibilities."

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