June 12, 2008 — Former CEO of Innovative Communications Corp. (ICC) Jeffrey Prosser confirmed under oath Wednesday he gave U.S. Bankruptcy court false and wildly low price estimates for hundreds of thousands of dollars worth of jewelry on his court-ordered financial statements.
Both Prosser and ICC are in the midst of protracted bankruptcy proceedings. Wednesday's hearing was the third of four this week called to determine whether Prosser's houses and other property normally exempt from seizure under bankruptcy law should lose that exemption, and to begin looking into whether some property belonging to Prosser's wife and children should be turned over to the bankrupt estate.
William Stassen, an attorney for the court-appointed trustee in charge of Prosser's estate, asked Prosser what he estimated under oath on his financial statements to the court to be the total value of his personal jewelry.
"Twenty thousand," Prosser said.
Stassen asked him about the prices of several luxury timepieces. Regarding a rose gold Chopard watch, Prosser said, "It cost $83,723 with tax, or $78,984 without tax."
"That is not the same as the total of $20,000 you gave on your statement?" Stassen asked.
"Correct," Prosser said.
"How about your Patek Phillipe watch?" Stassen asked.
Prosser said he didn't recall the price, and Stassen presented him with the invoice for the watch.
"Yes, this shows, I believe, the cost was $53,000," Prosser said.
Prosser and other witnesses differed over whether he owned some luxury watches and other jewelry not mentioned on Prosser's financial statements. Stassen asked Prosser if he owned four other luxury watches: a Breguet, a Parmigiani Fleurier, a Rolex and a Franck Muller.
"No," and "No I don't," Prosser said about each item in turn.
Prosser's sworn testimony contradicted Tuesday's sworn testimony by his long-time personal valet, Arthur Stelzer, who testified to personally purchasing a Chopard watch and knowing about a Breguet, a Parmigiani Fleurier, a Rolex and a Franck Muller from his duties selecting and arranging outfits and jewelry for Prosser to wear on a daily basis.
Prosser also confirmed that since 2000 he has lived rent- and mortgage-free in a multi-million dollar Palm Beach, Fla., house. ICC paid $5.1 million for the house in 1999, then deeded it over to him and his wife Dawn in 2001. In 2002, Dawn signed a promissory note to ICC for $5.6 million for the house, but no payments have been recorded.
"You never paid rent?" asked Duston McFaul, an attorney for ICC's court-appointed trustee, Stan Springel.
"No, I did not," Prosser said.
"But you lived in it and enjoyed (the Palm Beach House)?" McFaul asked.
"Yes," Prosser said.
"You didn't pay off that loan, did you?" McFaul asked.
"That $5.6 million was run through the inter-company account and would have ultimately ended up on the LLC account," Prosser said.
"The loan still has not been paid off?" McFaul asked.
Prosser repeated his previous answer, making no mention of paying any portion of the loan.
McFaul asked a third time and again got no answer saying whether any payments toward the loan were made. Springel is asking the court to seize the Palm Beach house and turn it over to ICC to be sold, on the grounds that ICC paid for the house.
In other matters, Elaine Joseph, Prosser's executive secretary of 19 years, and Ingrid Christian, a forensic accountant working for Springel, both testified that Prosser had ICC spend tens of millions of dollars on sporting-event tickets, airline travel, hotel stays, jewelry, clothing, fine dining and cash payments for Prosser's wife, children, personal friends, personal servants and others, all without any discernible legitimate business reason.
Prosser's attorney, Robert Craig, argued there was no evidence the expenses were not business-related, asking Christian if she knew who went to each sporting event and whether it was possible business clients were entertained. Springel wants ICC to get reimbursed for some of these expenses. The court only took testimony and made no findings Wednesday.
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