Bankruptcy Court Judge John Cook on Wednesday afternoon agreed to allow Chattanooga-based Luken Communications to make a payroll of $86,884 on Friday despite a filing for bankruptcy protection. The bankruptcy petition was filed Sunday after a federal jury in Arkansas returned a $47.4 million verdict against CEO Henry Luken for "fraudulent transfer."
Mr. Luken was the former CEO of Equity Media Holdings Corp., and he bought its Retro Television Network for $18.5 million. Bankruptcy Trustee Randy Rice said Equity Media was valued at $115.8 million just seven months prior to the Luken transfer.
The jury returned the whopping verdict on Friday, and attorney Jim Fields quickly filed for bankruptcy protection for the Luken firm.
At an emergency hearing, Matt Winn, Luken executive vice president, said it was necessary to meet the payroll to keep morale up among the 38 employees and keep the company afloat during a reorganization.
He said Luken operates five cable TV networks showing on 320 affiliate stations.
Mr. Winn said none of the payroll would go to company executives Henry Luken and Forrest Preston.
Trustee Rice is among those asking to intervene in the case, and his representative was at the Wednesday hearing.
Henry Luken is listed as one of the creditors. The document says he is owed $17,718,127.
It says Mr. Preston, Life Care Centers of America executive of Cleveland, Tn., is owed $18 million.
Other creditors listed include Friends of the Festival, $45,000; Harris Corporation in Dallas, $156,456; Jim Owens Entertainment in Nashville, $431,156; Marex in Canada, $40,000; Peter Rodgers Organization in Los Angeles, $61,197; Decosimo accountants, $25,000; Adman Electric, $43,577; 8th Street Holdings of Chattanooga, $12,740; Entertainment Concepts of San Clemente, Calif., $45,000, and Anchors Construction of Chattanooga, $46,478.
Henry Luken launched Luken Communications in 2008 after he earlier made a fortune in the phone business.
A conflict between Equity Media and Mr. Luken occurred in early 2009, and the lawsuit was filed against him in 2010.
Mr. Luken also heads Luken Holdings with over 40 properties in Chattanooga, including the former extensive properties of U.S. Senator Bob Corker.
The Luken networks include RetroTV, The Nashville Network, MyCarTV, Frost Great Outdoors (FGO), TUFF TV, PBJ and My Family TV.