Equity's Management Cause of Downfall, Former CEO Asserts

by Mark Hengel  on Monday, Feb. 2, 2009 12:00 am  

A weird message scrolled across the screens of Retro Television Network viewers in early January: the cell phone number of RTN's new owner.

The network had just gone off the air in more than 70 markets spread across more than 30 states, and RTN's former owner, Equity Media Holdings Corp. of Little Rock, gave Henry Luken's cell number as the contact number for viewers to call.

The resulting calls overloaded Luken's cell phone for about three days, Equity's former chairman, president and CEO told Arkansas Business.

Luken, of Chattanooga, Tenn., is also Equity's largest shareholder, having invested more than $13 million in the company – an investment he said he'd written off.

Luken Communications LLC bought RTN for about $18.5 million in June, with an option for Equity to buy it back within six months. The option expired in December, and Luken said Equity, which is currently in bankruptcy, complicated the transfer of RTN to his company.

"They applied extreme pressure for me to sell it back to them for a note – to basically lend them money to buy it again," Luken said of Equity's board of directors, citing specifically Robert Becker, a board member since 2000, and Larry Morton,

who was Equity's CEO before Luken began his brief tenure in January 2008. Becker could not be reached for comment. Morton could not be reached and no longer works with the company.

According to Luken, Equity gave Luken Communications only 30 hours to transfer the network's distribution from Little Rock to Chattanooga. And the instructions for distributing the programming to local stations were sent as a PDF document – one almost 30,000 pages in length – meaning much of the computerized information had to be entered by hand.

Luken also learned that the company did not pay RTN's vendors with the money it received when he purchased the network. Luken has since paid the bills, he said.

(Click here to view a list of Equity's holdings.)

Looking Under the Hood

Luken said Equity was a company with promising products hampered by a board of directors that was unable to manage day-to-day operations. That view was supported by other former managers and employees who agreed to interviews with Arkansas Business.

Equity acquired more than 100 television stations across the nation, but on the way lost $133 million between 2001 and 2008, according to Securities & Exchange Commission filings.



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