RadioShack Creditors Seek Permission to Question OfficersDawn McCarty and Steven Church
RadioShack Corp.’s creditors’ committee is seeking permission to investigate the retailer’s finances in a bid to find assets and “expose any conduct” that may lead to claims in its bankruptcy case, according to a court filing.
The committee, which represents more than $500 million of unpaid claims owed creditors, bondholders, landlords and employees, asked for authorization to request copies of documents, electronically stored information and other items, in addition to questioning some executives.
Lawyers for the committee said Tuesday that they want to examine possible breaches of fiduciary duty by company directors in light of “puzzling decisions that flew in the face of their earlier disinterested business decisions.” Those moves “benefited” Standard General LP, LiteSpeed Management LLC and other firms, the lawyers said.
Fort Worth, Texas-based RadioShack filed for bankruptcy this month with a plan to sell 1,500 to 2,400 stores to Standard General, which has a deal with wireless carrier Sprint Corp. to set up shop in as many as 1,750 locations. The rest will be shuttered.
Lawyers for the committee are seeking to question current and former officers and directors at RadioShack, Standard General, LiteSpeed and other companies, according to the filing.
“These allegations are without substance or merit and threaten to derail a material opportunity for the company’s stakeholders,” Liz Cohen, a spokeswoman for Standard General, RadioShack’s biggest shareholder, said in an e-mail Wednesday. LiteSpeed is the next-largest shareholder.
RadioShack listed assets of $1.2 billion and debt of $1.38 billion in documents filed Feb. 5 in U.S. Bankruptcy Court in Wilmington, Delaware.
“Our recent proposal to acquire approximately half of the store base is the best chance to preserve the business as a going concern, thereby preserving more than 10,000 jobs and resulting in creditor recoveries substantially above liquidation,” Cohen said.
The committee hired two law firms to represent it during the bankruptcy case: Cooley LLP which will handle the day-to-day activities in the case, and Quinn Emanuel Urquhart & Sullivan LLP, which will run the investigation.
The probe is “stumbling a bit” before it even gets started, Quinn Emanuel lawyer Susheel Kirpalani told the judge overseeing the bankruptcy Wednesday during a court hearing held by telephone.
RadioShack lawyers refused to help the committee contact the current and former directors, Kirpalani said.
Company lawyer Greg Gordon of Jones Day told the judge his firm represents RadioShack, not individual directors and officers. Gordon said during the phone hearing that the request to question company officials under oath came so quickly that the law firm couldn’t immediately respond.
Gordon and Kirpalani told U.S. Bankruptcy Judge Brendan Linehan Shannon that they should be able to resolve the disagreement without his help.
Kirpalani leads Quinn Emanuel’s bankruptcy division and specializes in investigating and filing lawsuits against bankrupt companies on behalf of creditors.
Such probes are common in big bankruptcies and are designed to collect more money for lower-ranking creditors by seeking to hold company officials accountable for their actions.
The case is In re RadioShack Corp., 15-10197, U.S. Bankruptcy Court, District of Delaware (Wilmington).