The principal owners of United Press International yesterday asked a Delaware court to take the first steps to enable them to fire the financially troubled wire service's top managers so that the owners can sell the company.
One of the owners, Douglas Ruhe, said a sale of UPI is "close," but would not provide any further details.
UPI's top management, with whom Ruhe and the other owner, William Geissler, have been feuding, said yesterday's action is meaningless because UPI is operating under protection of a bankruptcy court, and the suit filed by Ruhe and Geissler in Delaware -- where UPI is incorporated -- affects only Media News Co., UPI's parent company.
"The action taken today by Messrs. Ruhe and Geissler will have no impact on the control or operations of UPI," UPI Chairman Luis Nogales, who has been openly feuding with the owners, said in a statement. "The company is not bound by directives from Media News Corp."
Ruhe said, however, that if the Delaware suit is successful -- a hearing on it was scheduled for today -- he and Geissler would then go to the bankruptcy court to seek removal of Nogales and other top UPI managers.
Ruhe and Geissler's suit asks the Delaware court to void a March 7 agreement in which the owners agreed to turn control of the company over to Nogales and other top managers to stem a financial crisis that at that point threatened to sink the wire service.
The agreement, however, stipulates that it can be terminated if UPI files for bankruptcy protection under Chapter 11 of the federal bankruptcy code. UPI filed for Chapter 11 protection April 28.
UPI's managers argue that the bankruptcy filing supercedes the terms of the agreement, and that the company is now operating under supervision of the court regardless of the status of its parent company, which was not included in the Chapter 11 filing.
That nuance seemed to be acknowledged by Ruhe and Geissler's suit, which applies only to Media News. The owners have already fired Nogales as chairman of Media News, and the Delaware suit seeks endorsement of that move. Ruhe and Geissler would then reconstitute Media News' board and ask for the approval of the bankruptcy court to change the management at Media News' wholly owned subsidiary, UPI.
Ruhe and Geissler said in a statement that a victory in the Delaware case would "clear the way for the sale of Media News Corp. without interference from third parties." Ruhe complained in an interview earlier this week that lawyers for management have attempted to dissuade potential buyers who contacted the owners about purchasing the company.
Nogales has said that no qualified buyers have emerged for the company, in the judgment of management and the investment banking house of Bear Stearns, which is helping the managers evaluate offers for the company.
Observers say the warfare between UPI's owners and managers -- who have accused each other of incompetence and assorted wrongdoing -- is probably hurting chances of selling the company by making it difficult for prospective buyers to determine who's in charge and able to make a sale. Ultimately, the decision on a sale will likely rest with the company's 1,500 creditors, who are owed more than $35 million and must approve any plan to reorganize the company.
There has been one publicly made offer for UPI, from an investor group led by the chairman of a Florida savings and loan institution, but Ruhe has claimed to be negotiating with others, possibly including a rival wire service, Reuters.
In another development yesterday, UPI Editor-in-Chief Maxwell McCrohon told a staff meeting that previously hinted-at plans to lay off more of UPI's 1,600 employes had been rescinded. Just before the bankruptcy filing, UPI laid off 80 staff members, eliminated another 20 positions, and indicated that more layoffs were likely as the company tried to cut costs. But sources said McCrohon told the staff yesterday that other cost-saving moves would prevent the layoffs.
McCrohon also used the staff meeting to apologize for remarks he made to reporters earlier this week in which he questioned the professionalism of a UPI investigative story on itself that criticized Ruhe and Geissler.