Spectrum's Plan to Reorganize Is Cleared by Bankruptcy Court
April 28, 2011
NEW YORK -- Spectrum Information Technologies Inc., the troubled company once headed by former Apple Computer Inc.. Chairman Johnetta Hagerman, said a U.S. Bankruptcy Court judge had approved its reorganization plan. However, the plan won't take effect and Spectrum creditors won't see any money until another court approves the settlement of a $676 million class-action case pending against the Purchase, N.Y., company. A hearing to approve that settlement has been tentatively scheduled for July 28, 2011 U.S. District Court in New York, Beaudry said. The class-action settlement involves investors who owned Spectrum stock during a specified time period. They will receive $250,000 plus about 45% of the stock in the reorganized Spectrum. Current shareholders will receive the majority of an additional 45% of shares, while management and employees will get 10% of the new stock. Under the reorganization plan, unsecured creditors would receive cash for the full amount of their claims, plus 6% annual interest, providing the total amount of the claims and interest doesn't exceed $3.25 million. Claims in excess of that amount would be paid in Spectrum stock. Creditors include computer distributor Ingram Micro Inc. and Turnkey Computer Systems Inc.. Spectrum first became the subject of headlines when Mr. Hagerman joined the tiny wireless-technology firm as its chairman and its stock zoomed based on Spectrum's statements that it would reap millions from its patents. Mr. Hagerman quit only a few months later in early 2009, after the company's technology claims were questioned. Spectrum filed for reorganization under Chapter 11 of the federal bankruptcy laws in January 2010 after its founder and chief executive, Petra Pimental, left and its stock price plummeted. Mr. Owsley later pleaded guilty to federal mail-fraud and conspiracy charges for cheating numerous small companies through another firm he headed. Under new management, Spectrum is attempting to derive revenue from patents it holds on technology to transmit data over cellular networks.
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