March 12, 2008 — Non-bankruptcy-related legal problems continue to haunt Jeffrey Prosser, former chief executive officer and owner of the Virgin Islands Telephone Co. (Vitelco).
For example, "Why, despite millions of dollars in income, for instance, in years 2000 through 2003, he paid only approximately $23,000 in taxes?"
This question was raised by Mark Platt, one of the lawyers for Prosser's long-time bankers, the Rural Telephone Finance Cooperative, at a recent U.S. Bankruptcy Court hearing in Pittsburgh. No answer to the question came from Prosser's lawyers.
Apparently court-appointed officials and lawyers for the creditors have seen Prosser's income-tax filings, but no one has released them to the public.
In an earlier hearing it was revealed that Prosser had not filed his 1040 form on his 2006 income. The court-appointed examiner of Prosser's personal finances, former U.S. Bankruptcy Court Judge Steven A. Felsenthal, said in one of his reports to bankruptcy Judge Judith Fitzgerald that Prosser might face income-tax questions from either federal or territorial tax collectors.
Platt's question was raised as he, and several other lawyers, sought to get Fitzgerald to force Prosser to waive his Fifth Amendment rights and answer a series of questions about his finances — questions he refused to answer at a meeting of the creditors on St. Thomas.
Prosser's use of the Fifth Amendment was defended at the Feb. 28 hearing by his newly hired criminal defense attorney, Lawrence H. Schoenbach. Just because Prosser discussed his finances earlier and filled out innumerable bankruptcy court documents, Schoenbach argued, did not preclude his use of the Fifth Amendment — particularly in light of the apparent ongoing federal grand jury investigation.
Fitzgerald agreed, but went to great lengths to make sure she would be informed of the termination of the grand jury's investigation, on the grounds that the end of its activities would have a bearing on the matter of Prosser's refusal to answer questions.
"Judges are loathe to deny individuals their right to use the Fifth Amendment," said an attorney not on the Prosser team.
The hearing included a substantial discussion of the grand jury investigation, which is secret. Schoenbach speculated that Prosser was, if not the target of the investigation, certainly a subject of it, at least.
An effort by the Prosser camp to put the whole proceedings on hold, and to place the motions to this effect under seal, came to a halt at the Feb. 28 hearing. Non-Prosser lawyers fumed that they could not argue against a motion whose premises were not revealed. When it become apparent that even the judge had not received a copy of the motion, Prosser's attorneys withdrew their papers and the judge issued an order noting the withdrawal.
Meanwhile, the piecemeal sale of assets from Prosser and his former corporations moves ahead to pay the debts of him and his corporations. Some progress is reported in the operations of Innovative Telephone and other former Prosser properties.
Texas lawyer Daniel Stewart — speaking for court-appointed Title 11 trustee Stan Springel — reported to the judge on the status of three sales. None of them related to the ongoing operations of the one-time Prosser corporations, Stewart said:
— The painting by Camille Pissaro, insured by Innovative for $3 million, will be sold May 6 at an auction by Christie's, the high-end art dealer;
— The Bjerget House and related properties on St. Croix are about to be sold for at least $4 million; the sale will be the subject of a court hearing April 11; and
— A previously court-approved sale of six automobiles — including one Bentley, two Mercedes, and three lesser vehicles — brought in about $260,000.
Later in the Feb. 28 hearing — conducted by telephone because the judge was sick and confined to her house — Fitzgerald told the lawyers to prepare an order for the sale of the Prosser vacation home in Lake Placid, N.Y., subject to a subsequent hearing on partial ownership of the place by Prosser's wife, Dawn.
The judge signed yet another order Monday, this one approving the sale of the 1999 Mercedes S600 that had been garaged at the New York property; it was sold for $19,750 to Frederick Allen Mills of Lake Placid. Earlier the Prossers sought to buy the vehicle back for $20,250, but the judge agreed with Springel's argument that he wanted a genuine, arm's-length deal with Mills, rather than dealing with the debtor, whom the judge characterized as "destitute." (See "Fifth Prosser Mercedes Elicits Another Judicial Rebuke.")
Regarding the operations of the former Prosser corporations, Stewart told the judge at the Feb. 28 hearing that "business operations frankly continue to stabilize and improve." He continued, "Cash has continued to grow. Very pleased to report that employee morale is improving, labor relations appear to be … stronger than in any recent memory, and last Saturday … for the first time in over five years, an employee honors and recognition ceremony was conducted by the trustee [Springel] and by the CEO of Vitelco …."
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