A federal bankruptcy judge yesterday granted United Press International permission to make good on paychecks issued last week to its employes, but the wire service's future remained clouded in a dispute over control of the company.
Judge George F. Bason approved a total of $1.4 million in overdue salary payments. UPI officials said the checks already had been written and would be distributed today. UPI employes were given paychecks last Friday, but the wire service was unable to make good on them.
Bason denied for the time being, however, UPI's request to use another $35,000 to make severance payments to 35 of the 80 employes it fired over the weekend in a cost-cutting move. The judge said he would rule on the request next week after members of the company's creditors' committee and the Internal Revenue Service -- which has a lien against UPI's assets for nonpayment of $1.8 million in back payroll taxes -- have time to review the request.
The money to fund the paychecks will come from UPI's principal lender, Foothill Capital Corp. Bason yesterday approved an interim financing plan under which Foothill will restore UPI's $4 million line of credit, providing the company funds to continue operating while it attempts to reorganize under Chapter 11 of the federal bankruptcy code.
Foothill forced UPI to file for bankruptcy last week when it refused the wire service the money for the payroll. Stephen F. Beigenzahn, an attorney for Foothill, told the court yesterday that Foothill had decided to stop UPI's credit line because of a dispute over whether Foothill or the IRS would get first call on the company's assets. That dispute appeared to linger yesterday, with Justice Department attorney S. Martin Teel telling the court he was not sure the IRS would give up first claim on the assets to Foothill. Negotiations between the government and the company apparently are continuing.
The court's decision to allow payment to UPI's 1,600 employes was almost overshadowed yesterday by legal bickering over just who owns the company and possible plans for its sale.
A lawyer for the company's principal owners, Douglas Ruhe and William Geissler, said the owners wanted to fire UPI's management team, led by Chairman Luis Nogales. Nogales said they have no right to do so.
The owners' attorney also claimed that Ruhe and Geissler had received an offer for the company from an investor group led by the chief executive of a Florida savings and loan association. He said the owners also had received inquiries about a possible takeover of UPI from other companies, including a rival wire service, Reuters.
But in an interview outside the courtroom, Nogales said UPI management, with the advice of officials of investment banker Bear Stearns -- which was hired by UPI to screen possible purchase bids -- had decided that the purported offer was undercapitalized and not viable. "This company has already suffered the very grave consequences of being owned by somebody who was undercapitalized, and we don't need that any more," Nogales said in a clear reference to Ruhe and Geissler. He added, "If owners can be fired for incompetency, they ought to be fired several times."
Ruhe and Geissler's attorney, Gary N. Jacobs accused Nogales of "dissipating" the company, however, and said "Mr. Nogales is not, in fact, administering the affairs of the company in a manner in the best interests" of UPI's owners, employes and customers.
Jacobs said he plans to ask the bankruptcy court to void a March agreement under which Ruhe and Geissler signed over their control of the company to Nogales. "We believe that the best solution would be to restore UPI to the possession of its owners . . . and to remove from the management of UPI persons who the owners do not believe are acting in the best interests of UPI."
In court yesterday, UPI offered more exact figures on its debts and assets than it had in its initial bankruptcy filing Sunday. UPI said it has about $35.7 million in debts and assets of about $21.8 million -- although the company's lawyers said that, if market values are placed on some of the assets, that figure would drop to $12.8 million.