Infotech May Sell Businesses; Confirms SEC Investigation
NEW YORK (AP) _ The parent of Financial News Network and United Press International announced a management shakeup Wednesday and disclosed financial problems that could result in the sale of its businesses.
Infotechnology Inc. also confirmed it is under investigation by the government but declined to say why.
Infotechnology named Alan Hirschfield and Allan Tessler interim co-chief executives. They will ″serve as a restructuring team to address FNN’s and Infotech’s financial problems″ and explore options that could include the sale of some or all company businesses, Infotechnology said in a statement.
It also said the cash flow of Infotechnology and FNN is ″insufficient to meet operating expenses″ or cover some debts.
Infotechnology said it is renegotiating $20.7 million in loans for itself as well as $49.5 million in loans to FNN. In addition, both are trying to reschedule lease payments for $161 million worth of equipment.
Infotechnology owns 47 percent of FNN, which provides 24-hour stock quotes, business news and sports information on 3,500 cable television systems that reach more than 35 million homes. Infotechnology also owns 97 percent of UPI, the wire service.
Hirschfield and Tessler have been involved in several business restructurings, Infotechnology said. Hirschfield is a former chief executive of 20th Century Fox and Columbia Pictures; Tessler presently is chairman of International Financial Group Inc., Ameriscribe Inc. and International Controls Corp.
″We will be considering all available options to provide funding needed to meet obligations and maintain and realize the value of the FNN franchise and of Infotech’s other investments,″ Hirschfield and Tessler said in a statement.
″We believe that the fundamental franchise value of the FNN service is substantial and should provide a basis for restructuring and-or disposition of businesses that will enable the companies to meet their obligations and move forward.″
The two replace Earl Brian, who had been chief executive and will continue as ″non-executive chairman″ of the FNN and Infotechnology boards.
On Monday, Infotechnology disclosed in a filing with the Securities and Exchange Commission that the SEC had ″issued a formal order of investigation with respect to the company″ under federal securities laws.
Infotechnology spokeswoman Amber Gordon declined to say why the company was under investigation, but said it was cooperating. The SEC, which polices the nation’s securities markets, does not comment on any investigations as a matter of policy.
Gordon said the investigation was unrelated to FNN’s dismissal this month of C. Steven Bolen, its chief financial officer fired for improper financial dealings. FNN also dismissed its auditors, Deloitte & Touche.
At issue with the accounting firm was how FNN was reporting its $28 million investment in a new service. Deloitte contended the investment should have been deducted from quarterly earnings - which would have put FNN in the red - rather than spread out over several years.
Because of the dispute, FNN has been unable to file its annual financial reports with the SEC for the fiscal year ended June 30. In addition, Deloitte withdrew its opinions on FNN’s and Infotech’s 1989 financial statements.
Infotechnology and FNN since have hired Coopers & Lybrand.