RadioShack Creditors Sue To Expose ‘Scheme’ They Say Doomed Chain to Liquidation

RadioShack creditors that collectively are still owed more than half a billion dollars from the chain’s bankruptcy liquidation (see 1502060023) aren’t walking away quietly without their money, they said in a breach of fiduciary duty complaint filed Monday in U.S. District Court in Fort Worth, Texas. The complaint “arises out of a scheme” in which Standard General, the New York hedge fund that bought RadioShack, “delayed actions that could have preserved significant value in the company,” the filing said. Standard General deliberately did so “in order to orchestrate a change of control transaction” to acquire “an insolvent RadioShack at the lowest possible cost,” and acted with “the complicity of RadioShack’s conflicted CEO,” Joseph Magnacca, and the chain’s “faithless board of directors,” all of whom are named as defendants, the complaint said. “A mere four months” after Standard General bought RadioShack, the chain “met its inevitable fate of chapter 11 in the Delaware bankruptcy court,” it said. “The company’s crash-landing into bankruptcy involved immediate closure of half of RadioShack’s operations and handed over the company’s most valuable assets to Standard General less than 60 days later.” The creditors -- none is named individually in the complaint -- brought the case to expose how Standard General “came to control the senior-most debt of the company” and how it even got RadioShack, through Magnacca, to pay for Standard General’s planned acquisition, the filing said. While Standard General and its key investment officer, Soohyung Kim, “masterminded the scheme,” it couldn't have been “executed without the participation of a banking institution with the financial prowess to fund the various moving pieces," the complaint said. Wells Fargo, also named as a defendant, “willingly fulfilled” that role, it said. Representatives of Kim, Magnacca, Standard General, Wells Fargo and the various other firms and individuals named as defendants didn’t comment on the complaint. The case number is 4:15-cv-00652.