Posted 2/7/2011 12:00 am
Updated 2 years ago
On Dec. 8, 2010, M. Randy Rice, acting as the Chapter 7 trustee for Equity Media Holdings Corp. of Little Rock, filed a complaint against Luken Communications LLC of Chattanooga, Tenn., and its president, Henry Luken. Prior to starting his own company, Luken served as president and CEO of Equity Media.
According to the complaint, in June 2008 Luken Communications purchased Equity Media's interest in the Retro Television Network for $18.5 million, though a November 2007 valuation put the network's worth at $115.8 million. RTN, a network providing content consisting of popular shows from the 1960s through the 1990s, was developed by Equity Media's founder, Larry Morton.
In the complaint, Rice alleges that the transfer of RTN from Equity Media to Luken Communications was made "with actual intent to hinder, delay, or defraud" Equity Media. The complaint also states that the transfer may have "resulted in Equity Media becoming insolvent."
"RTN was an asset of Equity Media at the point in time when Equity Media was insolvent," said Gregory Bevel, counsel for Rice. He said that by selling RTN to Luken, who was an Equity Media director at the time of the transfer, Equity Media was selling it to an insider for less than it was worth.
"Entities that are going into bankruptcy can't give away the family cow to the neighbor for less than what the family cow is worth," Bevel said.
Bevel said that Equity Media is either looking for Luken Communications to pay the actual value of RTN or to "unwind the transaction."
In response to Rice's complaint, on Jan. 6, Luken and Luken Communications filed a demand for a jury trial. They also filed a response to the complaint, which denies that RTN was ever valued at $115.8 million. In fact, he said, the transfer was made "in an attempt to assist Equity Media in surviving financially."
Luken did not respond to a call seeking comment.