THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, August 2, 1996 TAG: 9608020447
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: 75 lines
Max Media, the Beach-based broadcasting group that confirmed plans Wednesday to buy two more Hampton Roads radio stations, has been sued by one of its largest shareholders.
F. Gray Kiger Jr., a former chief financial officer for Max's television stations, filed suit this week in Virginia Beach Circuit Court alleging that four Max principals carried out a secret plan to cheat him out of ``the fair value of his ownership'' in the stations.
Kiger has asked for more than $20 million in damages in his suit against Max Chairman Aubrey E. Loving Jr., President John A. Trinder and fellow Max investors Charles A. McFadden and Stephen W. Burke. Burke is also an attorney for Max.
Gregory N. Stillman, an attorney for the defendants, called Kiger's lawsuit ``frivolous'' and ``bizarre.''
``Prior to the filing of this case,'' Stillman said, ``there had never been any complaint to us that Mr. Loving or Mr. Trinder or any of the defendants had breached their fiduciary responsibilities to Mr. Kiger or done anything other than make him a lot of money.''
Kiger's attorney, Walter D. Kelley Jr., declined to elaborate on the suit. But the crux of Kiger's claim is his allegation that the four defendants secretly implemented an elaborate plan hatched by Burke to effectively merge two different companies - Max TV and Max Radio - into Max Media last year.
Kiger claims he was kept in the dark because the defendants realized that he would probably oppose the combination. Unlike Loving, Trinder and McFadden, Kiger was not a shareholder in Max Radio last year. He sold his interest in the radio company in August 1993, but retained a 24.5 percent stake in Max TV.
The motivation for the radio-TV combination, Kiger contends, was the defendants' self-interest. Max Radio, which was launched several years ago with the acquisitions of local stations WWDE-FM and WNVZ-FM, was having trouble paying off interest on the loan to buy the stations, he maintains.
That resulted in the lender, a Richmond-based venture-capital firm called Quad-C, taking an ever-greater stake in Max Radio away from the other partners, Kiger alleges.
To keep their radio investments from being further diminished, Loving, Trinder and McFadden - with Burke's help - decided to secretly combine the radio and TV companies, Kiger alleges. That would allow the radio venture to then tap the weightier resources of the TV company, he contends.
In the creation of the new ``holding'' company, Max Media Properties LLC, Kiger says Max TV ended up as the majority owner. But he says that while the defendants ended up with voting shares in Max TV, he was made the only nonvoting shareholder of that company. After deals in the works are consummated, the overall holding enterprise will have nine radio stations and six TV stations, including WFOG-FM and WPTE-FM in Hampton Roads, whose acquisition was announced Wednesday.
Kiger claims that as voting shareholders, Loving, Trinder, McFadden and Burke can now pay themselves big bonuses that dilute the value of his share.
In separate interviews, Loving and the defendants' attorney, Stillman, refuted Kiger's charges.
Loving said the whole premise of Kiger's claim - that the defendants constructed the radio-TV combination to bail out their damaged investment in the radio company - is wrong.
He said that even though their percentage ownership of the radio company did decline prior to the radio-TV merger, the dollar value of the defendants' stake in the radio outfit was growing because Quad-C's financial assistance enabled the company to buy more stations.
``We consider Mr. Kiger's claim to be a frivolous one and, provided the opportunity, we will show that,'' Stillman said.
Kiger continues to be paid by Max, Stillman said. He said the defendants' actions have increased the value of Kiger's stake in Max - not diminished it. He also claimed that Kiger has had opportunities to sell his interest in the company ``at a substantial profit,'' but refused.
Stillman said the defendants are considering filing a countersuit against Kiger.
A lawsuit represents one side of a dispute. The defendants have 21 days to respond. by CNB