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Wednesday, June 19, 2024
HomeNewsLocal newsV.I. Settles One of Two Tax Lawsuits Involving Prosser Adversaries

V.I. Settles One of Two Tax Lawsuits Involving Prosser Adversaries

The V.I. government has negotiated a settlement with a law firm connected to former Innovative owner Jeffrey Prosser’s bankruptcy, which sued the V.I. Internal Revenue Bureau, claiming it tried to assess taxes it did not owe and is improperly assessing taxes they do not owe. Terms of the settlement have not been disclosed to date.

A second case remains before the court.

At stake are potentially millions of dollars in back taxes and claims IRB improperly divulged confidential taxpayer information.

In 2014, IRB sent two companies connected to Prosser’s bankruptcy notices claiming they owe millions in back taxes and that their incomes were derived from V.I. sources: Philadelphia law firm Fox Rothschild LLP, which represented the court appointed bankruptcy trustee for Prosser’s personal, Chapter 7 bankruptcy; and Prosser’s largest creditor, the Rural Telephone Finance Cooperative, which lent Prosser and Innovative more than half a billion dollars. The V.I. government was in the midst of a budget crisis and, during budget hearings that year, senators urged IRB officials to push hard to collect more revenues.

IRB was seeking $2.5 million in corporate income tax and $398,000 in gross receipts tax from Fox, the company it recently settled with. It is seeking much more from RTFC — about $92 million in corporate income tax, according to court documents.

Both companies sued to stop the tax assessments on the grounds that they paid federal taxes already, do not have offices and did not do substantial work within the territory.

Philadelphia law firm Fox Rothschild LLP, which represented the court appointed bankruptcy trustee for Prosser’s personal, Chapter 7 bankruptcy, filed suit in U.S. District Court for the Eastern District of Pennsylvania in August 2015, claiming IRB was targeting Prosser’s enemies. [Fox Prosser IRB Complaint] This suit was settled, according to an April 6 court order. 

Prosser’s largest creditor, the Rural Telephone Finance Cooperative, filed suit in U.S. District Court in the Virgin Islands about three weeks later. [RTFC Sues VI] This suit, concerning much more money, remains open.

Prosser personally entangled himself in the Fox case when on Sept. 21, 2014, Fox received a letter from Prosser attorney Norman Abood curiously gloating that "we have reason to believe that the Virgin Islands Internal Revenue Bureau has recently served Trustee Carroll and Fox Rothschild LLP amongst others with significant tax assessments." Fox charged IRB with illegally disclosing confidential taxpayer information, saying Abood sent the letter, "although IRB had not yet informed Fox of this," and the information was not publicly available.

Abood later said V.I. Senators divulged the information in a V.I. Senate hearing.

Those claims have been dropped as part of a negotiated settlement.

The Pennsylvania court issued an order, dated April 6, saying the case was dismissed with prejudice, under a court rule governing cases where the parties had negotiated a settlement. While the terms of the settlement have not been disclosed to date, because the case was dismissed "with prejudice," they cannot be brought before the court again.

Sen. Nereida “Nellie” Rivera-O’Reilly disclosed the particular taxpayers during a 2014 V.I. Senate hearing. Asked in 2015 why she mentioned specific Prosser adversaries and no other potential taxpayers, Rivera-O’Reilly said in emails and a phone conversation that she was thinking about potential sources of tax revenue.

"I have followed the Innovative bankruptcy closely after the online Daily Beast ran a story alleging pay outs," she said in an email. "I have been tracking companies who surface at one point or another to ensure they have local legal credentials and are paying taxes. I became aware that companies without a brick and mortar facility who provide services here are not required to have business license, etc. When I saw the names of the consultants who were paid in the Innovative matter I suspected they too were under the radar. I reached out to a contact that will remain anonymous and became aware of a whistleblower matter that was pending.”

In an email, Rivera-O’Reilly said she got the names from court documents in the bankruptcy proceedings.

In a phone call, Rivera-O’Reilly said she did not "recall if it was the bankruptcy documents or somewhere else. Sometimes information makes it to my desk and it is always anonymous. I cannot give specific names."

Asked if anyone involved with the Prosser case was in contact with her, she said in an email that yes, "after the hearing when I inquired of the director I received a call from a person.”

The second suit appears to be moving more slowly. No trial date has been set. There was a status conference in February and the V.I. government and the RTFC have until July 2017 to file motions in the case.

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