The seemingly never-ending bankruptcy proceeding for defunct Interep goes on. Bankruptcy trustee Kenneth Silverman is now seeking to make CBS Radio repay $63 million to the bankruptcy estate.
When Silverman filed claims against lots and lots of other former Interep clients last year he indicated that he was in negotiations for a settlement with CBS Radio, which had been far and away the biggest client of Interep. Those negotiations failed to produce and agreement, so the trustee recently filed a complaint with the bankruptcy court seeking an order to make CBS pay approximately $63 million, which would then be used to make distributions to Interep’s creditors.
Silverman rejects the idea that Interep just temporarily held money that belonged to CBS when advertisers paid for spots that aired on CBS Radio stations via Interep’s unwired networks, extracting its commission and then delivering most of the cash to CBS. The trustee notes that the payments for CBS airtime were not kept in a separate account, but rather deposited into the same bank account that received advertiser payments for unwired network buys on all client radio groups and also commission payments from the radio groups for national spot sales.
The trustee is seeking to make CBS return all of the payments its stations received from Interep for unwired network spots for a period of one year prior to Interep’s Chapter 11 filing in March 2008, which was subsequently converted to Chapter 7 liquidation in October 2008. CBS would then have to stand in line with other unsecured creditors to seek a portion of whatever is left, if anything, after higher priority creditors have been repaid.
The trustee’s complaint against CBS Radio was filed with the bankruptcy court several weeks ago. CBS has not yet filed its response. A company spokesperson told RBR-TVBR that CBS would not comment on pending litigation.
RBR-TVBR observation: On the surface the trustee’s position seems absurd. Interep got to keep its commissions on both national spot sales and unwired network sales, but now the bankruptcy estate is seeking the non-commission portion of the unwired money as well. That doesn’t make any sense, but the bankruptcy law was not created with any thought of a business model like the unwired network sales of a national advertising rep, where most of the revenue is collected on behalf of the clients and only a small portion is retained as business receipts by the rep.