Court will let Lasky regain psychic line

Bankrupt network's trustee, big creditors agree for expediency

`Everybody gets paid'

Suits against AT&T, MCI might win cash to satisfy all debts

April 27, 1999|By Jay Hancock | Jay Hancock,SUN STAFF

Michael W. Lasky got a judge's approval yesterday to regain control of the Psychic Friends Network, a once fabulously lucrative telephone advice line that he lost last year after the company fell on hard times and landed in Bankruptcy Court owing millions.

Under the deal approved by U.S. Bankruptcy Judge Paul Mannes, Lasky will pay $1.85 million and get Psychic Friends' name, phone lines and a roster of soothsayers working long-distance at $3.99 a minute. Lasky said he has the cash in hand and could sew up the sale in four days.

Lasky lost control of Psychic Friends last year after another U.S. bankruptcy judge ruled that he could not be trusted to shepherd the company's assets.

Urging yesterday's deal were Psychic Friends' major creditors, who not long ago saw Lasky as the source of their troubles, and bankruptcy trustee Paul-Michael Sweeney, who has been suing Lasky to recover assets allegedly taken improperly from the bankrupt company.

But all this was forgiven, or at least sublimated in the interests of expediency, as Sweeney argued that a sale to Lasky offers the best chance for creditors to get their money back.

"That is, in my judgment, the best deal," Sweeney said. Regarding further lawsuits against Lasky, he said, "we evaluated that and believe that the litigation would have cost more than we would have recovered."

Creditors, who say they are owed about $18 million, will not get any of Lasky's money -- at least not right away. Instead, the $1.85 million will finance legal action against two telephone companies that, if successful, could cover all Psychic Friends' unpaid bills and then some, according to Sweeney and Lasky.

Sweeney has sued AT&T Corp. in U.S. District Court in Baltimore, alleging that the company owes millions withheld from Psychic Friends in phone-bill disputes over psychic advice. He also contemplates action against MCI WorldCom Inc. over the same issue, he said.

"Even if you only recover a small portion of what Sweeney thinks these lawsuits are worth, everybody gets paid," said Alan Grochal, an attorney for Lasky. Lasky blames the phone companies for the cash shortage that led to Psychic Friends' Chapter 11 bankruptcy filing early last year.

An AT&T spokeswoman said yesterday that the company does not comment on pending litigation. An MCI WorldCom spokeswoman also said she was unable to comment.

In an interview after the court hearing, Lasky said he will try to rebuild Psychic Friends, which once took in $140 million in annual revenue. The company has been operating profitably under the bankruptcy trustee. Lasky will try to augment revenue by selling long-distance, cellular and other telephone services to Psychic Friends customers, he said.

"I'm an entrepreneur," Lasky added. "I know I'll be successful. But what's more important is being right. Being right is more important than money. Maybe I'll get some of my good name back. Because that's what I lost in this last year, my good name."

Lasky denied that he ever made any improper transfers from Psychic Friends' operating company, Inphomation Communication Inc., saying that he was trying to rescue Inphomation by establishing a separate business entity with a better credit rating.

Sweeney, the case's trustee, gained Lasky's yacht and other assets for the Inphomation estate through legal action.

"The people I owe money to, who were friends, I hope they get all their money back," Lasky said.

The people Lasky owes money to once urged Sweeney to sell Psychic Friends to "ABL -- anybody but Lasky," said one lawyer yesterday. But yesterday both NationsBank Corp., which says it is owed $6 million, and the unsecured creditors committee, representing claims of $12 million, supported the Lasky redux.

"We're pleased with the deal going forward," said Michael G. Gallerizzo, NationsBank's lawyer.

Reasons given by lawyers for the change in sentiment: difficulty in selling Psychic Friends to other parties, the decision by Sweeney that further action against Lasky might not bear fruit, and high hopes invested in the phone-company suits.

Lasky's was not the only offer on the table yesterday. A company identified by its lawyer as ICN Ltd., which has done business with Inphomation, offered $1.9 million at the last minute yesterday. But the offer contained an undisclosed contingency that Sweeney said was a deal-breaker.

Lasky declined to be specific about where he is getting the $1.85 million. "You borrow," he said. From whom? "People."

The case was heard in U.S. Bankruptcy Court in Baltimore. Judge Mannes was substituting for James F. Schneider, who is ill.

Pub Date: 4/27/99

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