Psychic line trustee backs sale to Lasky

Move is called best hope for creditors to be paid

2 suits may net $10 million

Inphomation founder accused of siphoning funds from TV show

Bankruptcy

April 24, 1999|By Jay Hancock | Jay Hancock,SUN STAFF

A court-appointed trustee who accused Michael W. Lasky of siphoning money from the Psychic Friends Network before it sought bankruptcy protection now favors selling Psychic Friends back to Lasky for a small fraction of what the company owes creditors.

Unless a better offer surfaces before a court hearing Monday on the sale, putting Lasky back in charge of the psychic-advice firm he founded is the best deal for creditors, said Paul-Michael Sweeney, the trustee appointed to run Psychic Friends after Lasky was removed last year.

Under the tentative agreement, Lasky would take control of Psychic Friends and its operating company, Inphomation Communication Inc., for $1.85 million.

The trustee, who has already claimed Lasky's 55-foot yacht and other assets allegedly bought with Inphomation money, would drop further lawsuits against him.

Creditors -- who are essentially Psychic Friends' current owners -- would get only pennies on the dollar for more than $15 million in unpaid bills left by the company when it sought bankruptcy protection in February 1998. But pending lawsuits against two long-distance phone companies might eventually produce millions more for creditors, lawyers said.

"It's the best deal out there right now, and the trustees need to sell the company because a Chapter 11 trustee should not be operating almost any business, but especially a psychic reading business," said James A. Vidmar Jr., a lawyer assisting Sweeney.

Judge James F. Schneider of U.S. Bankruptcy Court in Baltimore is scheduled to approve or reject the deal Monday.

Creditors and their attorneys did not return phone calls yesterday. But the trustee's office and Lasky's representatives said major creditors had approved the agreement.

"We think that on Monday morning the creditors' group is going to come in and support us," Vidmar said. However, he added, "we do believe there are some disaffected creditors out there."

"The creditors' committee is supporting this deal," said Alan Grochal, an attorney for Lasky. NationsBank, a major creditor, also supports it, lawyers said. NationsBank lawyer Michael G. Gallerizzo did not return phone calls.

Lasky did not respond to a message asking him to call The Sun.

Inphomation landed in Chapter 11 bankruptcy proceedings last year after running short on cash. It was a rough landing for Psychic Friends, which once commanded more than $100 million in yearly revenue with singer Dionne Warwick as its hostess and a stable of purported psychics spinning telephone advice at $3.99 a minute.

Negotiations to let Lasky take back the company, which began in October, were described by Grochal as "tortuous" as the creditors who blamed Lasky for their woes started to come around to the idea of playing ball with him.

"The passage of time has educated everybody that Michael Lasky is the one guy who can turn these assets into something that is money," Grochal said. "I think the creditors' original assumption was that they'd rather not do business with Mr. Lasky and they could get more money if somebody else took over the assets and ran them."

Sweeney has tried hard to sell Inphomation to an independent buyer, but with no success, Vidmar said. At least one other offer is on the table, he added. It's "close" to Lasky's, "but not close enough," Vidmar said. "I would characterize it as a fallback offer."

He declined to identify the bidder.

Sweeney probably would have filed new lawsuits to regain more money from Lasky if it weren't for the sale agreement to be considered Monday, Vidmar said. But there was no assurance that the suits would have been successful, and it would have drained resources from Inphomation meanwhile, he said.

Grochal refused to say how Lasky would finance the purchase or to describe the ownership structure of a post-bankruptcy Inphomation. "I think it would be fair to say that he is resuming control of the company," he said.

Even though Lasky's $1.85 million covers only a small portion of creditors' receivables, the price is justified because Lasky won't get what could be Inphomation's biggest assets: a pending lawsuit against AT&T and one yet to be filed against MCI, Grochal said.

Inphomation claims that the phone companies owe it more than $10 million for funds that were improperly withheld after psychic customers disputed their phone bills. If the litigation pays off, "it'll make a big difference to creditors," Vidmar said.

Psychic Friends is still operating under Sweeney's trusteeship, earning more than $60,000 profit in one recent month even though it does almost no advertising, Grochal said.

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