Blockbuster Creditor Banned From Probing Icahn

A Blockbuster creditor is denied the right to investigate documents regarding Carl Icahn's involvement with the company leading up to the Ch. 11 filing.
By Jeanine Poggi ,

NEW YORK (

TheStreet

) -- A

Blockbuster

(BLOAQ.PK)

creditor's plea to investigate billionaire

Carl Icahn

were denied in bankruptcy court on Thursday.

Creditor Lyme Regis Partners requested documents to probe Icahn's involvement with the company in the months leading up to Blockbuster's Ch. 11 filing.

But U.S. Bankruptcy Judge Burton Lifland in New York said it's up to the creditors' committee to investigate any potential lawsuits on behalf of all creditors.

Icahn's relationship with Blockbuster has been a sore spot for shareholders. The billionaire's interest in the movie-rental giant escalated in 2004, when he gobbled up shares, hoping to push through a merger with Hollywood Video -- a deal that never materialized.

Then in May 2005, Icahn waged a successful proxy fight to add himself and two other members to Blockbuster's board of directors. Icahn accused Blockbuster of overpaying then-CEO John Antioco. The battle between the two eventually drove out Antioco.

But by the beginning of 2010 it appeared that Icahn's interest in Blockbuster had died down, as he stepped down from the board of directors and divested most of his stake in the company.

Then in the weeks leading up to Blockbuster's Ch. 11 filing it was also reported that Icahn invested in one-third of Blockbuster's debt, giving him a dominant voice in the company's restructuring plans.

Since Blockbuster has gone bust, shareholder outrage has escalated, prompting one group to make claims of security fraud.

In October, shareholder Jasbir Sandhu filed a complaint with the U.S. Bankruptcy Court in the Southern District of New York, claiming that CEO Jim Keyes and Icahn worked together to stymie recapitalization efforts in order to increase the return on investment for Icahn and other stakeholders.

--Written by Jeanine Poggi in New York.

>To contact the writer of this article, click here:

Jeanine Poggi

.

>To follow the writer on Twitter, go to

http://twitter.com/jpoggi

.

>To submit a news tip, send an email to:

tips@thestreet.com

.

Loading ...