PAGE   19                                               
San Antonio Business Journal                                          
August 17, 1990

SECTION: Vol 4; No 31; Sec 1; pg 4

LENGTH: 1035 words

HEADLINE: Sale of Long-Distance Firm in 1983 Spawns Legal Tangle in Local 
Courts

BYLINE: Ashley Blaker

DATELINE: San Antonio; TX; US

 BODY:    The 1983 purchase of Long Distance Services Inc. of San Antonio 
by Metromedia Long Distance Inc. of New Jersey has culminated in three 
recent lawsuits seeking more than $ 5 million now pending in local 
courts.

   The charges leveled in the recent suits are made by both the LDS 
successor companies and former LDS officers and investors. Allegations 
range from failure to provide indemnity for officers, to supposed 
fraudulent accounting methods following the sale agreement.

   The first of the recent suits was filed by LDS former President Gary 
Scott of San Antonio. In 1984, Scott was a defendant in a stock trade 
suit filed by two investors in LDS. In April, Scott was ordered to pay 
the investors $ 4,347,440 for failing to disclose the circumstances of 
the upcoming Metromedia buy-out to them before repurchasing their LDS 
stock in 1981, Scott's new suit states.

   Scott is now seeking to recover the $ 4.3 million damages awarded in 
April from LDS's successor, Metromedia, alleging that the company 
promised to indemnify its officers and directors for any negligence suits 
brought against them.

   Scott joined forces with the two former investors, Robert Hughes and 
Johnnie Rogers of Austin, to pursue the suit. To partly satisfy the 
judgment against him, Scott has assigned 60 percent of his claim against 
LDS to the former investors. The three have now joined as plaintiffs in a 
suit seeking to recover the $ 4.3 million award from the recent 
settlement, plus punitive damages and interest from the long-distance 
company, according to the suit.

   Metromedia Long Distance Inc. of Texas was merged into Communications 
Services Inc. last month. Metromedia Co. is the New Jersey parent 
company. It succeeded Metromedia Inc. in 1986. Communications Services 
and Metromedia Co.

have filed two separate suits, one denying Scott's indemnity claims, and 
another suing Scott and 18 other former investors in LDS for breach of 
contract in the 1983 sale.

   In its suit denying indemnity, Communications Services alleges that 
the long-distance service has no liability for the judgment awarded on 
the 1984 suit because it was dismissed from the original lawsuit in 1985 
after settling with Hughes and Rogers, the suit states.                                                                        
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Courier               

   The local attorney for Scott, Hughes and Rogers said that the terms of 
the 1985 settlement didn't affect his clients' claims.

   "It was a settlement of claims that Hughes and Rogers had against LDS. 
But it wasn't a settlement of claims that Gary Scott had for indemnity," 
said Steven Walraven of Shaddox, Compere, Gorham & Good.

   In its breach of contract suit, Metromedia asks for the return of 
about $ 1.3 million in payments made to the former stockholders in LDS in 
1983 and 1984 as part of a post-sale profit payment clause in the buy-out 
agreement.

   Metromedia acquired all of the outstanding stock in LDS in 1983 for $ 
30 million, plus 20 percent of the net income from LDS for the next five 
years. In the first two years after the purchase, former LDS stockholders 
were paid $ 1,265,966 of the profits made in the two years, according to 
the suit.

   But since 1985, LDS has lost money. Over the five-year period 
stipulated in the buy-out agreement, LDS lost more than $ 11 million. 
Metromedia claims that, because there was a loss over the period, it owes 
the former LDS stockholders nothing. So it wants the $ 1.3 million it 
paid in 1983 and 1984 back, plus interest since then, the suit states.

   The 19 stockholders in LDS at the time of the purchase by Metromedia w ere Gary Scott, Lyn Noble Hawthorne, Mike Adkins, Terry Gould, Jack 
Guenther, Art Collier,  Stanley Rosenberg,  Louis Nelson, Thomas Bloomer, 
David Mechler, Michael Reimherr, Don Freiling, James Burch, Charles 
Barrett, Michael Douglass, Ronald Walby, Raul Tamez, Robert Mahler, and 
Darrell Kirkland, according to an exhibit to the Metromedia suit.

   Meanwhile, four former LDS shareholders are alleging in a counterclaim 
that Metromedia owes them more under the profit agreement.

   The former shareholders, Thomas Bloomer, James Burch, Charles Barrett 
and  Stanley Rosenberg,  claim that Metromedia fired Scott as LDS 
president in 1984 so that it could scuttle future LDS profits and relieve 
itself of the burden of paying a percentage of those profits to the 
former shareholders in LDS.

   In their counterclaim, the former LDS shareholders allege that 
Metromedia. drained profits from LDS by charging debts to the company 
that actually should have been charged to Metromedia. The claim asks that 
the accounting records of Metromedia from the time of the LDS purchase 
through the end of the five-year profit-sharing agreement be opened for 
inspection.

   Another provision of the buy-out stipulated that the former LDS 
shareholders would receive $ 5 million, less any profit shares paid them, 
if Metromedia sold the assets or capital stock in LDS in the first five 
years following the LDS purchase, according to court documents.

   Metromedia did resell LDS during that period, and the former 
stockholders of LDS are entitled to receive the portion of the $ 5 
million not previously paid as a share of earnings, the counterclaim 
alleges.

   The immediate battle, however, is over which court the suits will be 
tried in. Walraven and Cox & Smith partner Larry Macon both want to 
consolidate the cases in local state district court, they said.

                                                                       
PAGE   21               San Antonio Business Journal  1990 UMI/Data 
Courier               

   Scott, Hughes and Rogers filed the first suit in the local state 
district court late in June. But Communications Services had the suit 
removed to the U.S. District Court for the Western District of Texas San 
Antonio Division late in July. Subsequent suits have been filed in the 
federal court or removed to federal court from state district courts 
around the state.

   The U.S. Western District court is overburdened with criminal cases, 
and long delays for civil procedures there can be expected, said 
Walraven.

   Macon, who is representing former LDS shareholders, said that 
Metromedia lawyers first filed their suits in the overburdened state 
district courts in Harris and Montgomery counties, and since has been 
attempting to keep them in the local federal court to delay their trial.

   Attorneys representing Metromedia and Communications Services declined 
any comment on the litigation.

SUBJECT: Telecommunications industry; Long distance carriers; Litigation; 
Acquisitions & mergers; Southwest; Middle Atlantic

NAME: Gary Scott; Robert Hughes; Johnnie Rogers

GEOGRAPHIC: Southwest Region; San Antonio; TX; US

COMPANY: Long Distance Services Inc; SIC: 4813 Metromedia Co; DUNS: 
00-698-7630; SIC: 4813;4812;1721;7371

CO:  METROMEDIA CO; 

LOAD-DATE-MDC: September 19, 1990 ---