Four South Bay cities that withheld approval of the sale of Group W Cable Inc. are considering filing suits against the new owners that could result in the cities taking over their cable systems.
Attorneys for Torrance, Hawthorne and Lawndale, and the mayor of El Segundo, contend that Westinghouse Electric Corp. breached its cable franchise agreement with them when it included those franchises in the sale to a consortium of five cable firms. The sale was concluded June 19.
An attorney representing Westinghouse and the consortium said they do not admit violating the franchise agreements, but they are working to reach settlements with those cities to avoid litigation.
"Whether or not there was a breach, the sellers and buyers want to move forward with the cities to ensure that everyone's interests are met," said William Koplovitz, a New York attorney involved in the sale.
Specifics Not Revealed
Neither Koplovitz nor attorneys representing the cities would reveal specifics of the potential settlements.
However, Nick Miller, a Washington, D.C., communications attorney who is advising Torrance and Hawthorne, said: "The interests of the cities are real obvious. We want to make sure that there is no substantial change in the performance of the systems, or the guarantees that stand behind the system while we attempt to get the illegal behavior corrected. We want to make sure that none of the cities' future rights are compromised through actions taken by Westinghouse or the buyers during the interim period between now and when the issue is ultimately settled."
Miller said that if settlements are not reached, the cities are prepared to file suits early this week to seek damages or revocation of the franchises.
If the courts allow the cities to revoke the franchises, the cities would be free to find a new operator, or take over the systems themselves for the cost of the assets, Miller said.
City officials have said that one of their concerns is the financial and technical ability of Century Communications Corp., one of the five buyers and the firm expected to eventually become the permanent operator of the South Bay systems.
Higher Rates Feared
The cities have hesitated to approve of Century as the new operator because they fear that the company will cut services and increase rates. Century currently operates the system in Redondo Beach.
Westinghouse officials contend that El Segundo did not have the right to approve the sale under its franchise agreement. However, they said El Segundo has the right to approve any new operator.
El Segundo Mayor Jack Siadek said last week that he wants the city to purchase its system, and is exploring the possibility of acquiring the system through eminent domain.
The cities found out two weeks ago that Century had begun moving in as interim operator of the South Bay systems when Group W employees were told that future paychecks would be paid by Century.
In Lawndale, city officials said Leonard Tow, the president of Century, told them his company was the new permanent operator of the cable system there.
However, Koplovitz, the attorney representing the consortium, said Century's involvement in the operation of the South Bay systems is minimal, and that a decision to make Century the permanent operator of the systems has not been made.
The cities have been suspicious of Century partly because of a preliminary financial analysis of the company prepared for the city of El Monte earlier this year.
In that report, consultant Carl Pilnick concluded that the company would be under heavy pressure to reduce costs because of high debt. Pilnick estimated that Century has a debt-to-equity ratio of 15 to 1. Still, he recommended that El Monte approve the sale to the consortium because Century has the ability to raise money for the operation of the system.
Century President Tow, however, said that Pilnick's conclusions were based on "book" value rather than "market" value of his assets. However, he declined to say what he believes the value of those assets to be.