Probe Ending on Alleged Insider Deals at Planet Hollywood

ORLANDO-Creditors alleging Robert I. Earl, British-born founder/chairman of Orlando-based Planet Hollywood International Inc., has submitted a bogus Chapter 11 reorganization plan to U.S. Bankruptcy Court will know shortly if their suspicions are on target or off the wall.

Fraud examiner Soneet R. Kapila, founding partner of Fort Lauderdale, FL-based Kapila & Co., is expected to forward his month-long report shortly to Judge Arthur B. Briskman in Orlando.

Earl; his Orlando lawyer Scott Shuker; and other Planet Hollywood officials deny the allegations. But the creditors’ lawyer, Denise Dell of Orlando-based Akerman, Senterfitt & Eidsen, has told the judge she has information that Planet Hollywood allegedly transferred several restaurants to company insiders and directors less than a year before the Oct. 15, 2001 bankruptcy filing.

In another related action, Dell has told the judge the reorganization plan notes a pending sale of Planet’s London property to a buyers’ group controlled by Earl and Tom Avallone, the firm’s former chief financial officer.

If true, those could be fraudulent actions and could void the restaurant chain’s May 13 reorganization plan, lawyers following the case tell GlobeSt.com on condition of anonymity.

Earl and Briskman approved Dell’s request for special examiner Kapila to review the reorganization plan for hints of any insider deals.

The plan leaves Earl in charge of the 11-year-old company at a base salary of $200,000 per year for three years. Earl would also receive a $400,000 consulting fee. Earl’s salary prior to the Chapter 11 filing was $600,000 per year, court papers show.

Under the plan, which the judge must approve or reject, Earl would control 10% of the company’s equity and continue as a director. Avallone would become chief financial officer. Mark Helm would remain general counsel and vice chairman.

Bondholders, owed a total $76 million, would get a $20 million promissory note and 51% of the equity. A total 100,000 shares of new stock would be issued and existing stock would be canceled.

Planet Hollywood’s common stock is no longer listed on the Over-the-Counter Bulletin Board. The stock traded on Nov. 28, 2001 for nine cents per share. There were 10 million shares outstanding. The company’s market capitalization at that time was $900,000.

Planet Hollywood first filed for Chapter 11 protection from its creditors under the U.S. Bankruptcy Code in October 1999 and completed a court-approved reorganization plan in May 2000.

That reorganization was short-lived, however. The company voluntarily filed for protection again on Oct. 15, 2001, listing assets of $121 million and liabilities of $131 million.