In newspapers' Ch. 11 case, hint of a secret recording

In a new development in their Chapter 11 bankruptcy case, the owners of the Inquirer and Daily News suggest that their major creditors secretly recorded at least one meeting between the newspaper and its lenders.

Philadelphia Newspapers LLC filed an application in U.S. Bankruptcy Court seeking to hire a law firm for "[i]nvestigation of certain incident(s) involving the unauthorized recording of confidential pre-petition meeting(s) between the Debtors and their senior secured lenders."

Details of the alleged "unauthorized recording" were not disclosed. The newspapers' chief executive, Brian Tierney, declined comment on the court filing, and a spokeswoman for Citizens Bank, the newspapers' top creditor, said the bank would not comment.

But the newspapers' filing suggests continuing friction with the creditors who hold about $395 million in company debt - the money that Tierney and other local investors borrowed to buy the Inquirer, the Daily News and Philly.com, their Web site, in mid-2006.

In Pennsylvania, it's a crime to record conversations without the consent of all parties involved.

To look into the allegations of "unauthorized recording," the newspapers sought permission to hire Elliott Greenleaf and Siedzikowski, P.C., a law firm based in Blue Bell and headed by John M. Elliott, by reputation one of the region's most aggressive litigators.

The request needs approval from the federal bankruptcy judge assigned to the case, Jean K. FitzSimon. She set a hearing on the motion for March 16.

In another action in the case, two labor unions, the Metropolitan Region Council of Carpenters and the Newspaper Guild, representing editorial, advertising, circulation and other employees, were named yesterday to a committee representing unsecured creditors, along with Airlie Opportunity Master Fund Ltd., based in Greenwich, Conn. *