June 9, 2007 — A report filed recently by the bankruptcy-court examiner contained bad news for Innovative Telephone owner Jeffrey Prosser: In restrained, judicious prose, the examiner indicated that Prosser had refused to provide certain requested pieces of financial information and had more liens on his properties than previously disclosed.
Additionally, Examiner Steven A. Felsenthal, a retired U.S. bankruptcy judge, suggested further examination by the courts of Prosser's claims that certain property is exempt. The property in question is connected with Prosser's wife, and thus arguably exempt from the bankruptcy filings. The property may well be non-exempt, Felsenthal indicated. (Prosser's wife, Dawn, is not part of the bankruptcy case. Thus property she owns in her own right would be excluded from court action.)
If the debts owed by Prosser and his companies are not reduced, then the net value of Prosser's corporate holdings appears to be zero, Felsenthal says in a section of the 59-page report.
This is the text on p. 37 of Felsenthal's report on the value of Prosser's holdings for Innovative Communications Corp. LLC:
"The debtor (Prosser) values his interest in ICC-LLC (Innovative Communications Corp.) at approximately $750 million to $800 million. The debtor contends that he received offers to purchase Vitelco, the cable company and the wireless holdings in the USVI for $650 million to $700 million in 2006. He further contends that the Martinique and Guadalupe holdings may be sold for $70 million…. The debtor stated that the remaining holdings make up the balance of the value. If the debtor is correct, the market value of these holdings would pay the outstanding debt, but that debt, without settlement or reduction, equals approximately $80 (800; see note below) million. Therefore, the examiner does not see a net value to the debtor's estate."
(The last sentence only makes sense in terms of internal consistency if the $80 million figure is corrected to $800 million, a rounded number used many times in prior court hearings as the total of Prosser's debts, providing no reduction is agreed to by the creditors or ordered by a court.)
The examiner listed four different occasions when he was unable to secure what he regarded as needed financial information from the Prosser camp. His comments follow:
(1) "The examiner sent formal letters to Jeffrey J. Prosser … requesting access to books, records and other documents … the debtor did not return those letters with written consent.
(2) "On May 4, 2007, the examiner agreed … to reschedule his accountant's access to the debtor's and New ICC's books and records in Florida to May 21 and May 22, 2007, with the review of books and records in the Virgin Islands during the week of May 29, 2007. The reviews did not occur as requested ….
(3) "Throughout the month of May, the examiner unsuccessfully attempted to arrange for a consensual review of work papers prepared by Grant Thornton and Deloitte Touche (Prosser's auditors).
(4) "The examiner has requested that the debtor agree to a firm commitment of June 18, 2007, for an examination of New ICC's books and records. However, to date, no commitment has been forthcoming from the debtor. The examiner anticipates seeking relief from the court."
Prosser has argued that his small financial staff is too busy with negotiations with Rothschild, Inc. — which is trying to arrange financing for Prosser — to meet with the examiner.
As for the liens, two new ones appeared. On Nov. 24, 2006, Addison Construction and Maintenance Inc. of Frederiksted filed a lien for $89,904.94 on several plots of St. Croix land owned by the Prossers. Prosser said he was not aware of the lien and would look into it, the examiner said.
Meanwhile, in upstate New York, the Haselton Lumber Company has filed a lien of $26,373.69 against Prosser's Lake Placid summer place. Prosser said he did not believe he owes any money to the lumber firm, the examiner reports.
Neither of these liens had been reported in Prosser's bankruptcy filings, the examiner said.
Without making a decision about the issue, the examiner spent a considerable amount of time discussing the question of who owned the three Prosser residences, in New York, Florida and the Virgin Islands: Was it Mr. or Mrs. Prosser? He also explored the question of to what extent the homestead exemption in the bankruptcy law applied to each of these three houses — all priced in the millions, all heavily mortgaged and all subject to different state laws on the size of the exemption for residences.
His advice: That the courts conduct adversary hearings on the proposed exemption of the New York property and on a motion that the exemption in the Virgin Islands be limited to $30,000. The examiner further recommended that the limit on all three properties' exemption be held to a total of $125,000, in keeping with a provision in the federal law.
In "lawyer speak" he recommended, for instance, that "an objection to the Lake Placid Property exemption be filed." However it was not readily apparent in the report just who would file it, and in what court.
The examiner was appointed by the presiding bankruptcy judge, Judith K. Fitzgerald, on a motion by the U.S. Department of Justice, with the support of the creditors and over the objections of Prosser's lawyers. The examiner's second interim report, discussed above, was filed with the U.S. Bankruptcy Court in the Division of St. Thomas and St. John, on June 7, and is available to subscribers on PACER, the U.S. courts' electronic-filing system. The charge for downloading the 59-page document is $2.40.
Another interim report from the examiner is expected about a month from now. The examiner, who deals with the personal bankruptcy case of Prosser, is not to be confused with another court-appointed official: the case trustee, who now manages the ICC properties for the court.
Back Talk
Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.
