Feb. 11, 2009 — A partial listing of the billings of the middle people in the bankruptcy trials of Jeffrey Prosser, former owner and CEO of Innovative Telephone, totals close to $34 million.
This compares with the Source's calculation that the completed sales of one-time Prosser properties over the last three years totaled $43 million, and that the estimated value of the as-yet-unsold properties is about $61 million. (See "Prosser Creditors Face Half a Billion Loss.")
The billings are those of the three court-appointed officers (two trustees and one examiner of Prosser's books), and their lawyers, financial consultants and accountants. A related table shows $33,984,941 in billings from these entities. (To see the table, click here.)
Not shown in the table, and not included in the $34 million total, are billings from the numerous lawyers for Prosser and his family, and for the creditors, and for government agencies following the bankruptcy process. It is safe to presume that many millions — probably tens of millions of dollars — are being paid to these other professionals.
To backtrack, it became clear early in the Prosser bankruptcy that the normal course of a bankruptcy would not be followed in this case. There would be no relatively peaceful pause in operations while the bankrupt party would have a chance to catch his breath, preparatory to a negotiated settlement and the paying off of all or many of the debts. Instead there was hostility all around. For months Prosser's people refused to provide requested information, or they did so in a delayed manner. They, in turn, said that they had been harassed.
In that climate, the U.S. Department of Justice recommended to the presiding judge, Judith Fitzgerald, that she appoint a trustee for Prosser's corporate entities (Stan Springel), another trustee for Prosser's personal properties (James Carroll), and a third official, the examiner, to try to untangle Prosser's personal finances. That task was turned over to a former U.S. chief bankruptcy judge, Steven A. Felsenthal of Dallas.
Bankruptcy experts say the appointment of one such official in a case is unusual, and the appointment of three of them is quite rare.
Among the causes for the large billings, observers say, are the appointment of the three officials; the underlying complexities and secrecy of Prosser's multi-corporation, multi-island financial empire; and Prosser's occasional resistance to the process. So is the tendency of all concerned to draw up another lawsuit at the drop of a hat, according to a suit filed by Felsenthal. (See "Retired Federal Judge Lashes Out at Everyone Else in Prosser Trial.")
The three court-appointed officials have different tasks of differing sizes. Springel, the Chapter 11 trustee working with Prosser's former corporations, had to take control of all of them, seek to run them profitably, and seek to sell them. Carroll's Chapter 7 assignment was to find, gain control of, and sell those of Prosser's properties that were part of the creditors' estate. Felsenthal was to untangle Prosser's complex and often secretive financial affairs.
The Source counted $29,903,892 in billings for the Chapter 11 operation, $2,855,916, from the Chapter 7 work, and $1,225,133 for the examiner and his helpers.
The approximately $34 million in billings that the Source has identified is not the complete set. Bills for these services are scattered, under different labels, among some 5,234 legal documents filed so far in the case. Some of the billings from professional firms who had dropped out case in its early years have probably been omitted from our tabulations.
Nowhere — or nowhere known to the Source, at least — are they neatly summarized.
It should also be noted that these are billings — not payments. Many of the bills have not been paid. Felsenthal, who at $700 an hour has the highest billing rate in the case, has been the most articulate of the court-appointed officials on this point.
Those bills that have been paid have been funded from three different sources. Some bills have been paid from loans from the Rural Telephone Finance Cooperative, some have been paid out of Vitelco's profits on behalf of the creditors' estate, and some have been paid from the sales of assets.
Springel's most recent operations report indicates that $4,179,702 in fees have been paid by Vitelco to five of the organizations noted in the Chapter 11 part of the table. Vitelco funds are no longer used for that purpose, Springel has since announced.
He has also reported that RTFC has lent the estate $2,839,590 to help meet administrative costs. There is no published information on the extent to which asset sales have been used to pay the professionals' bills.
A close review of the table shows that only three firms, each billing in the $20,000 to $30,000 range, have V.I. addresses. As the Source has reported before, mainland firms have received a very high percentage of the billings in the case; this is apparently true of the parties' lawyers, as well as those of the court-appointed officials.
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