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Prosser Agrees to Open Books Under Pressure from Judge

July 26, 2007 — Jeffrey Prosser, owner of Innovative Telephone, agreed to open his books to court-appointed officials rather than be forced into Chapter 7 bankruptcy, which would see his assets removed from his control and sold.
This concession came after both the court-appointed case trustee, West Coast businessman Stan Springel, and the court-appointed financial examiner, retired U.S. Bankruptcy Judge Steven Felsenthal, complained that Prosser had repeatedly refused to give them full access to his and his companies' financial records.
Judge Judith K. Fitzgerald, sitting in Pittsburgh, said that if total cooperation were not forthcoming she would convert the case from Title 11 to Title 7 of the U.S. Bankruptcy Law.
Title 7 proceedings, which Prosser opposes, would strip him of any control over his holdings and initiate rapid sales of his properties.
"I am not fooling around with this any longer," Fitzgerald said, according to a transcript of the hearing that took place last Thursday.
After handing down her ultimatum, Fitzgerald granted a 10-minute recess for Prosser's attorney, Robert Craig of Omaha, to confer with his client. When the recess was over, Craig told the judge, "Let me start off by saying that we agree that the trustee's or that the examiner's request should be honored and that complete access will be provided."
The judge then told the assembled attorneys she wanted an order written to that effect, adding, "What I mean by immediate is starting right this minute. It is to be full and complete access to every book and every record and every document that exists to every personnel, every employee, every staff member of every enterprise, every company, every partnership, every business, organization of whatever designation. … I don't care whether it's a formal organization, an information organization, a corporation."
Any refusal will have immediate consequences, Fitzgerald added.
"And if I get an affidavit of default (from the trustee or the examiner) once this order is entered, meaning that Mr. Prosser or anybody on his behalf has refused access … then there will be entered by this Court an immediate order of conversion (to Title 7),” she said.
Before the curtain went down on the hearing, a couple of other pertinent statements were made.
Fitzgerald said the time was rapidly arriving when there would be no need for secrecy and that all, or certainly most, of the documents and hearings currently under seal would be made public.
"At some point I am going to unseal these documents, and, frankly, it's getting to be close to the time when these matters should be going public," she said.
Meanwhile, Craig told the court "we have $620 million committed to pay claims." Lawyers for the creditors, however, expressed disbelief that this much money was available. "They do not have a deal that comes anywhere near satisfying RTFC and Greenlight, and that strikes us as why it's so important that if we're ever going to get to a deal, we'll need the ruling on assumeability," said Toby Gerber, attorney for Rural Telephone Finance Cooperative.
Meanwhile, Prosser?s lawyers have filed an appeal with the Federal District Court on St. Thomas regarding Fitzgerald?s earlier decision setting the amount owed by Prosser and his companies at $650 million plus interest instead of the $402 million plus interest, a figure favored by Prosser. (See "Judge Settles on $650 Million Figure for Prosser?s Debts.")
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