Michael W. Lasky has been dethroned as head of Inphomation Communications Inc., the now-bankrupt operator of the Psychic Friends Network.
In a decision that was remarkable in both its swiftness and its bite, U.S. Bankruptcy Judge James F. Schneider decreed yesterday that Lasky could not be trusted to keep running the company he founded, and ordered that he and other top executives be replaced by an outside trustee.
"My only question is: How soon are you going to have a trustee in there with a padlock to keep the current management out of there?" Schneider asked the representative of the Office of the U.S. Trustee as he concluded the two-day hearing.
Schneider's decision, made immediately after closing statements by attorneys representing many conflicting parties, capped a day of emotional and sometimes confrontational proceedings.
The Pikesville-based Inphomation, which once had annual sales of about $140 million, filed for Chapter 11 bankruptcy protection Feb. 2, claiming assets of $1.2 million and liabilities of $26 million. This week's hearing was held after a small group of creditors asked Schneider to appoint an emergency trustee, contending Lasky and other managers were stripping Inphomation of assets and diverting business to a clandestine shell company.
When the decision was rendered, Lasky clutched his jacket to his chest, slumped and covered his eyes with one hand, and finally left the courtroom and disappeared. During morning testimony yesterday, the tall and powerfully built Lasky mopped his brow, claimed nervousness and at one point became choked up and teary on the stand.
"The one who can save this company is the one who built the company -- that's me," he testified.
In announcing his decision to appoint a trustee, Schneider dispensed with much of the decorum usually observed in courtrooms.
"I've heard nothing but evidence of concealment, dishonesty and less than full disclosure," he said. "In some cases, I think I've heard evidence of criminal activity."
In announcing his decision, Schneider said: "I have no hope that this debtor [Inphomation] can reorganize with present management in control."
Edmund A. Goldberg, who represented the Justice Department's Office of the Trustee during the hearing, said he thought it would take a day or two to appoint an outside trustee, who must sift through Inphomation's finances to see if solutions to the company's problems exist. Schneider said he was not at all certain that any did.
Inphomation could appeal Schneider's decision to U.S. District Court, one of the company's attorneys said, but added that it was too early to say if that would be done.
Inphomation vaulted to profitability in the early part of the decade on the back of the Psychic Friends Network, which featured singer Dionne Warwick as a celebrity spokeswoman. The concept was simple: Employ revenue-generating 900 lines to let consumers dial up psychics for over-the-phone consultations.
Competition from rival services spiraled, and Lasky claimed that long-distance companies started gouging Inphomation by reserving big chunks of its revenues against "charge-backs" -- when consumers, numbed by their big phone bills, disavow some of the charges they have rung up.
Lasky claims AT&T owes Inphomation $50 million and that MCI Telecommunications Inc. owes $31 million -- claims the company says it is pursuing in lawsuits separate from the bankruptcy.
Schneider said one of the most troubling revelations was the existence of a separate company called "Friends to Friends Ltd.," a Maryland company incorporated Jan. 16 -- less than three weeks before Inphomation filed for bankruptcy.
Lasky's attorney, James C. Olson, initially said during the hearing that Friends to Friends was just a shell corporation, with no assets, employees or business. During the hearing, however, testimony from Lasky and others made it clear that Friends to Friends was in the same business as the Psychic Friends Network, and was using Inphomation assets to build a business. And at a time when Inphomation had a negative bank balance, Lasky said he obtained a no-interest, no-repayment-terms personal loan for $500,000 for Friends to Friends from a friend he identified as "Manny Gordon," a New York jeweler.
However, Inphomation controller Naresh Mirchandani appeared to contradict this by saying that money was a loan with 8 percent interest from a firm called Gemini Financial.
Lasky said the money was to finance Friends to Friends, because Inphomation's unpaid bills made it a pariah to its vendors. He said he intended to build Friends to Friends and use the profits to repay Inphomation's debts.
Schneider said this maneuvering probably violated bankruptcy laws, and said Inphomation's tardiness in telling creditors about the separate company seemed to indicate that the company was trying to hide its existence.
Pub Date: 2/19/98