Prosser Raises Bribery Issues in Bankruptcy Proceedings

Jeffrey Prosser, former owner and CEO of Innovative Telephone, indirectly raised a charge of bribery in the protracted bankruptcy proceedings relating to Prosser and his former corporate empire.

The Prosser attorneys are asking the courts to look into what they regard as a conflict of interest in the proceedings because they say that opposing lawyers "…have been paying the legal fees for a lay witness [former Prosser valet Arthur Stelzer]"—in return for Stelzer’s testimony in the case.

Prosser’s attorneys filed a complaint "seeking evidentiary hearings to determine whether an order should be entered imposing sanctions, disqualifications and/or referral for further disciplinary proceedings" against most of the non-Prosser forces in the bankruptcy case.

Prosser’s lead attorney, Norman A. Abood of Toledo, Ohio, has noted that legal fees for Stelzer had been paid by three different firms: Vinson & Elkins, attorneys for the Chapter 11 Trustee Stan Springel; Fulbright & Jaworski, attorneys for the non-profit bank that lent Prosser over half a billion dollars, and Alvarez & Marsal, which employs Springel.

The content of Stelzer’s testimony has been very damaging to Prosser in the bankruptcy, prompting Prosser’s lawyers to threaten lawsuits and various charges against Stelzer, which in turn prompted him to acquire legal representation.

A lawyer familiar with the case suggested that Stelzer would never have a need for a lawyer, had he not provided the testimony. The attorney commenting on the case made a distinction between simply paying the legal fees of a witness on hand, or doing so following an agreement as to the nature of his or her testimony, the first act being legal and ethical, and the second act neither.

After Stelzer testified, a Prosser attorney reportedly confronted Stelzer in the courthouse hallway, prompting Bankruptcy Court Judge Judith Fitzgerald to order Prosser’s attorneys to leave Stelzer alone following his testimony.

Prosser’s lawyers equate the payment of the legal fees with the thrust of the testimony, generally, saying "…it appears that the witness and those attorneys may have engaged in criminal activity (i.e. bribery) in connection with the agreement to pay the witness’s legal fees."

Prosser’s lawyers filed their complaint with U.S. District Court Judge Curtis Gomez, who in turn passed the matter over to Judge Fitzgerald. Fulbright & Jaworski subsequently filed a motion with Judge Fitzgerald asking that she strike the complaint on several grounds, one of which was that Prosser’s attorneys had filed the complaint, initially, with the wrong court.

Prosser’s lawyers have also filed objections with the Bankruptcy Court to the payment of fees to the court-appointed trustees and their lawyers on the grounds of the bribery controversy.

A telephone call from the Source to the lead Vinson & Elkins attorney, Dan Stewart, regarding Prosser’s charges, had not been returned at this writing.

Judge Fitzgerald will hold a hearing on this dispute, plus other Prosser-related matters, in her home courtroom in Pittsburgh, Penn., on Feb. 26.

Stelzer’s arrangement for legal counsel is also coming under fire in a separate civil suit Prosser filed against Stelzer personally last fall. Prosser is claiming Stelzer’s assistance to Prosser’s courtroom adversaries amounts to fraud against Prosser because the information Stelzer provided was private and giving it out caused Prosser harm.

In that case, Prosser’s attorney Jeffrey Moorhead is trying to get Stelzer’s legal counsel disqualified from defending Stelzer against Prosser’s lawsuit.

According to Prosser’s motion to the court, after testifying, Stelzer spoke with Vinson & Elkins attorneys, expressing "concern about the private investigator and a process server" sent by Prosser’s attorneys to serve Stelzer. After Vinson & Elkins reportedly said they would "get back" to him, an attorney called Stelzer offering to represent him free of charge.

Prosser is claiming because Stelzer did not expressly ask for a lawyer before one was offered free of charge, the offer amounts to illegally soliciting clients. He is moving they be dismissed from defending Stelzer and referred for disciplinary action.

Another visiting judge from Pennsylvania, U.S. District Court Judge Timothy Savage, has scheduled a Feb. 16 evidentiary hearing in Philadelphia on the motion to disqualify and another motion to force Stelzer’s attorneys to declare a conflict of interest.

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