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Big player on Tribune issue


In the melee that erupted last week between the Chandler family and the Tribune Co., it has been hard to tell who is driving the Chandler caravan. After all, the Chandlers, who owned the Los Angeles Times for more than a century, are a diffuse clan numbering about 170 members, many of whom have never met one another.

One of the major players behind the scenes is Thomas Unterman. He is neither a member of the family nor a trustee overseeing its billions, nor is he one of the trust's appointees on the Tribune board.

Rather, Unterman is a lawyer turned media executive turned venture capitalist who has worked for the family for years. He has acquired a reputation as a financial and legal wizard for helping put together a series of complex and sometimes contentious deals the family and the former Times Mirror Co. did in the 1990s.

Minimize taxes

All of those transactions were intended to minimize the payment of taxes by the family and company.

Indeed, in the specialized realm of tax-avoidance aficionados, "he's a living legend - he's a Mount Rushmore kind of guy," said Robert Willens, an accounting expert at Lehman Brothers.

Unterman, who is 61 and lives in Los Angeles, is back in the picture as an adviser to two family trusts that are represented by seven trustees, three of whom sit on the Tribune board.

The Chandler trusts, which own 12 percent of Tribune, are at loggerheads with the company over the value of two partnerships Unterman created with Times Mirror in the 1990s - and over who gets stuck with a potential tax bill from unwinding those partnerships.

In a stunning display of seller's remorse, the Chandlers branded last week the Times Mirror merger a failure and publicly demanded that Tribune - which acquired The Sun as part of that merger - spin off its TV business or put itself up for sale.

As Times Mirror's chief financial officer in 1999, Unterman secretly acted as the Chandlers' emissary to Tribune in talks that led to the acquisition.

$8 million in bonuses

Unterman, who was paid more than $8 million in bonuses for his work on the sale of Times Mirror and three other deals in the 1990s, resigned shortly after the sale was announced and began running the $500 million venture capital arm of the Tribune-Chandler partnerships, which are known as TMCT I and TMCT II.

He also was the architect of Times Mirror's sale of two publishing businesses in 1998, deals that last year resulted in Tribune being stung with a tax ruling for nearly $1 billion, now being appealed. While Tribune executives have said they knew they were taking on a potential liability when they acquired Times Mirror, they did not anticipate such a large hit.

People who know him depicted Unterman as a good listener and negotiator, but aggressive and unflinching once his mind is made up.

"He is Solomonesque," said Willem Mesdag, a former Goldman Sachs banker who worked as an adviser to Times Mirror and is president of the board of trustees of the Los Angeles Museum of Contemporary Art, where Unterman is treasurer.

'Seeker' of solution

"I see him as a seeker of the right solution, which could make some parties unhappy," Mesdag said. "I don't see him as a compromiser - I think he's quite comfortable with the right solution and a disgruntled party."

Behind the scenes, Unterman has been an advocate of the Chandlers' hard line in talks with Tribune and has for months been personally handling the negotiations with the company over dissolving the TMCT partnerships, people involved said.

Unterman has been adamant, along with the Chandler trustees, that the dispute with Tribune is not about unwinding the partnerships in a way favorable to the Chandlers.

Rather, they argue, the real issue is Tribune's lack of a growth strategy at a time of uncertainty in the media industry.

Among other things, Unterman has criticized the company's efforts to develop Internet businesses around its powerful local news franchises in cities such as Los Angeles, Chicago, Hartford and Baltimore.

The Tribune board and its chief executive, Dennis J. FitzSimons, have rejected the Chandlers' demands and have accused the Chandlers of putting their own interests ahead of those of the rest of Tribune's shareholders. Specifically, the Chandlers are opposed to the company's previously announced plan to buy back more than $2 billion of its stock by Monday, calling it "hasty and ill-informed."

A more drastic revamping of Tribune - such as spinning off its TV business, which the company said it has studied for months - is not feasible for tax reasons until the TMCT partnerships are unwound.

Loss of three seats

The Chandlers would lose their three seats on the Tribune board if they tendered more than 15 percent of their shares into the buyback. The Chandlers asked the board several weeks ago if it would change its bylaws to allow them to sell more than 15 percent in the sale without losing the seats, but the board said no.

Personal animosity does not appear to be a factor in the rift between the Chandlers and Tribune.

But the $1 billion tax ruling on the deal Unterman devised in 1998 has made Tribune executives wary of agreeing to any proposals he puts forward that do not include the Chandlers indemnifying Tribune from more unexpected tax rulings.

"The company has no intention of assuming any additional tax liability," FitzSimons said - echoing the position that Unterman has helped the Chandlers maintain for years.

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