Nov. 1, 2007 — Judge Judith Fitzgerald has issued a temporary restraining order on the family of Jeffrey Prosser, former CEO of Innovative Telephone, regarding $9 million worth of artwork and jewelry.
The family is to "keep the property fully insured, in a secure location" and has been ordered not "to transfer (it) in any form whatsoever" without court approval, according to the U.S. Bankruptcy Court judge.
The TRO expires at the end of a hearing on a proposed longer-lived judicial status, that of a preliminary injunction, which is scheduled to take place Nov. 15 in a St. Thomas courtroom.
The court-appointed trustee, Stan Springel, has argued that the art and jewelry were purchased with corporate funds and should be held to meet the corporate debts. Dawn Prosser, in an earlier brief, argued that at least one of the pieces was her personal property, and that she wanted and needed to sell it. (See "Dawn Prosser Wants to Sell Seized $650,000 Sculpture.")
The future of the Prossers' art, jewelry and a set of luxury cars will be thrashed out later this month in a comparatively rare — in this case — Virgin Islands hearing. The temporary restraining order, and a flock of other orders, were issued earlier this week in Fitzgerald's Pittsburgh hearing room.
In granting the order, the judge ruled that without such an order, "the debtor's estate will likely suffer immediate and irreparable injury," and that the trustee was likely to prevail in his motion for a preliminary injunction. The Prosser family lawyers had argued that, "Springel asserts that he is entitled to tie up not only the assets of Prosser's bankruptcy estate, but also those of his spouse and children, a proposition bordering on specious."
The Nov. 15 hearing in St. Thomas will also deal with one of the issues involving pro-Prosser attorneys with frayed or severed relations with their corporate clients. (See "Analysis: Prosser Bankruptcy Case Complicated by Disowned Lawyers.") Springel had petitioned the court to bar Adam Hoover, the V.I. lawyer, from appearing in court on behalf of New ICC, one of Prosser's holding companies. Springel argued that he, as trustee, had been placed in charge of the corporation by the court, and that he had not ordered Hoover's activities.
Hoover argued that he was hired by the previous board of New ICC, and since it had not been replaced by another board of directors, his role should continue as before.
The bankruptcy court took care of a third matter this week, as well. John Ellis, a St. Croix resident, resigned as the Chapter 7 court-appointed trustee. He was to handle the disposition of Prosser's assets to help pay off his debts. The creditors held a meeting Oct. 30 on St. Thomas to choose a new trustee. Over the objections of Prosser's lawyer, they elected James P. Carroll of Marlboro, Mass. The U.S. Trustee, an arm of the U.S. Justice Department, confirmed Carroll's selection, and on Oct. 31, the court agreed.
Carroll, apparently a long-time ally of Skadden, Arp, the law firm representing the Greenlight Companies (former minority shareholders in another Prosser holding company), appeared in the proceedings earlier.
In his earlier appearance, Carroll was introduced as a CPA and as an expert witness. Prosser's attorneys objected, saying he was too close to Skadden, Arp to be regarded as a neutral witness. The court accepted Carroll's presence, and he proceeded to discuss with the court the unusual concept of contra-equity, which Prosser's people had used to describe the "up-streaming" of revenues from Prosser's operating companies (such as Vitelco) to his holding companies. These payments had also been described as loans that did not require repayment.
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