Feb. 1, 2008 — Jeffrey Prosser's title to an $8.7 million home in Palm Beach, Fla., is a "fraudulent conveyance" and a "sham," ICC Chapter 11 bankruptcy trustee Stan Springel charges in a motion filed Thursday in U.S. Bankruptcy Court, asking Judge Judith Fitzgerald to void Prosser's ownership of the property.
Prosser is in involuntary Chapter 7 bankruptcy and ICC, the parent company of Vitelco, is in Chapter 11 bankruptcy. ICC owes several hundred million dollars to the Rural Telephone Finance Cooperative and a family of hedge funds called the Greenlight entities. The exact amount is part of the bankruptcy dispute. At one point, all parties agreed on a $524 million settlement, but that collapsed when Prosser was unable to secure the necessary loans to fund the settlement.
ICC owns Emerging Communications, which in turn owns New ICC. New ICC is a management and holding company that owns, directly or indirectly, all of the stock in various operating subsidiaries that provide telephone, newspaper and other services to the territory. These include Vitelco, Innovative Wireless, Innovative Cable television and the V.I. Daily News.
Springel argues that the Palm Beach house may be titled in Prosser's name, but is rightfully the property of New ICC, which paid for it. The house should be taken and sold and the cash put into the corporate estate, Springel argues. The trustee says he has authority to do so because New ICC was already getting sued by its creditors when Prosser had New ICC buy the house.
"Soon after the commencement of significant litigation against Jeff Prosser and his companies … Jeff Prosser began improperly and fraudulently liquidating the capital of New ICC for his own personal benefit and for the personal benefit of insiders, friends and family members," Springel's attorneys wrote in his motion to the court.
With respect to the Palm Beach Property, Prosser directed New ICC to purchase it, "although New ICC had no legitimate business purpose for owning a personal residence," Springel's motion says.
After having the company buy a house for him to live in, Prosser had the company sign the house over to himself, signing a promissory note to New ICC that provided for zero payments over its seven-year life, then a single balloon payment due April 10, 2007, according to court documents. The balloon payment was not made, the documents say.
Having never paid anything on the promissory note, "the Prossers have lived in the Palm Beach house for free since taking occupancy," Springel says in the motion to the court.
Getting the house from New ICC for free while New ICC got sued by creditors is just the beginning of the Palm Beach house chapter in the Prosser saga, according to the trustee.
"At the direction of Jeff Prosser," Springel writes in the motion, "New ICC directly remitted approximately $2 million to vendors in order to furnish the Palm Beach Property with rare antiques, extensive artwork and lavish furniture. New ICC further used its business capital to pay for over $1.5 million in 'remodeling' costs for the Palm Beach Property, all of which went solely to the personal use and benefit of the Prossers. The Prossers have never paid a single cent for these furnishing or remodeling costs."
Prosser then got Vitelco, a phone company regulated by the V.I. Public Services Commission, to borrow $3 million from the Global Bank of Commerce and then used the funds from the loan not for Vitelco, but to offset New ICC's loan to himself.
"Thereafter, Jeff Prosser caused New ICC to make all of the payments on the Global note, with the net effect being that Jeff Prosser got credit against the Prosser note balance without spending a dime of his own money," Springel's motion says.
In short, Springel contends Prosser had New ICC give him a $5 to $10 million dollar house while companies that loaned New ICC money were suing for payment from New ICC. Prosser put cash in his pocket through the transaction, too, Springel tells the court in his motion. Once the house was titled to the Prossers, they, as a couple, borrowed $5 million from Bank of America against the equity in the Palm Beach property.
"The Prossers did not use any of the $5 million in loan proceeds from the (loan) to repay New ICC," Springel's motion reads. "Instead, the Prossers kept the funds for themselves."
If that weren't enough, according to Springel, New ICC has also paid more than $700,000 in annual property taxes on the Palm Beach property and has paid to insure the house and its contents, all at Prosser's direction. In each of these transaction, Springel says, Prosser gained financially, "to the detriment of New ICC and its creditors."
Prosser has told the Source he will not speak about specifics of the case while litigation continues, and at a recent deposition he invoked his Fifth Amendment right against self-incrimination in response to all questions. (See "Prosser Pleads the Fifth Countless Times in Bankruptcy Hearing.") However, his attorneys have argued in court — and Prosser has said to other news media — that none of his actions were improper because he owned New ICC outright, so he was only moving his own money around.
"Everybody, in my view, missed the point," Prosser is quoted as saying in a Jan. 6 Omaha Work Herald article by Jake Thompson. "I owned 100 percent of this company. We weren't public."
In this instance, however, that argument may not matter. Springel argues the transaction giving Prosser title to the house is a sham partly because it amounted to fraud against New ICC's creditors.
"Undeniably, the transfer of the Palm Beach Property to the Prossers was made with an actual intent to hinder, delay or defraud present or future creditors of New ICC," Springel's court motion says.
Under U.S. bankruptcy laws, a Chapter 11 trustee can nullify a transfer of title to property if the court determines the transfer was self-serving to company insiders and effectively moved the assets out of reach of creditors who would otherwise have a legitimate claim to them.
It will be up to Fitzgerald to decide whether the Prossers' Palm Beach house fits that bill and should be transferred back to New ICC.
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