July 5, 2008 — The lawyer for Dawn Prosser, the wife of former owner and CEO of Innovative Telephone Jeffrey Prosser, has tried to raise another roadblock to the proposed sale of Prosser mansions in the Virgin Islands, West Palm Beach, and upstate New York by claiming that U.S. Bankruptcy Courts do not have the power to decide property-ownership disputes.
Christopher A. Kroblin of the Law Offices of Karin A. Bentz of St. Thomas, has thus moved to dismiss all the creditors' claims against properties in which Dawn Prosser has a claimed interest. Dawn Prosser is not regarded as a debtor in the 2-1/2-year-old bankruptcy case of Jeffrey Prosser.
A legal motion arguing that questions of property ownership must be settled in territorial, state, or other federal courts was filed by Kroblin with the U.S. Bankruptcy Court on July 2; at press time neither the chapter 11 trustee, Stan Springel, nor any of the creditors have filed a reply.
The latest move will likely not impact the forthcoming sales of assets that clearly belong to the former Prosser corporations, such as the local phone company and various other telecommunications properties throughout the Carribean and in France.
The motion cites various legal precedents to claim that "a [bankruptcy judge's] turnover order cannot require turnover of property whose ownership is in dispute." The motion does not list the properties in question, but in earlier filings Dawn Prosser's lawyers have said she had a complete or partial claim to all three Prosser residences, as well as to some other real estate and some valuable artwork.
In earlier filings, lawyers for Prosser's creditors, and for the trustee, have argued that these properties really belong to Prosser or to the Prosser corporations and that Dawn Prosser had no independent income that would have allowed her to purchase them.
In other matters regarding the case:
– Jeffrey and Dawn Prosser and their lawyers, the two trustees and their lawyers, the creditors and their lawyers, and the adult Prosser children and their lawyers, have all signed a 14-page agreement called a stipulation in which they agreed to define the limits to which Jeffrey and Dawn Prosser can use the Fifth Amendment protection against self-incrimination while answering bankruptcy court questions about their finances. (The second trustee is James P. Carroll, the chapter 7 trustee dealing with Prosser's personal finances.)
The list of things that the Prossers can be asked about is much longer than the list of off-limits questions. The former includes the couple's tax returns, the "contra/equity account" which was used to transfer millions from the corporations to the Prosser family, gifts to or by Dawn Prosser, the acquisition of various pieces of valuable real estate, and the like.
The one exception reads: "The parties agree that the June 17, 2008 [bankruptcy court] Order's statement with regard to certain areas of inquiry concerning the Virgin Islands Community Bank [once owned by Prosser] that are subject to the Fifth Amendment privilege asserted previously concerns an investigation by the Grand Jury in St. Croix of the Virgin Islands Community Bank and that Jeffrey Prosser and Dawn Prosser will continue to assert a Fifth Amendment privilege with regard to that issue."
Judge Judith Fitzgerald, who has presided over the case from its inception, had been pressing the parties to come up with an agreement so that Prosser could be questioned about various aspects of his finances. He had used the Fifth Amendment in the past to refuse to answer a long list of questions on a variety of subjects.
– Fitzgerald handed the Prosser camp a procedural victory when she denied the motion of Springel's lawyers to disqualify two of Prosser's lawyers in the bankruptcy case. Springel had argued that Lawrence H. Schoenbach, a New York attorney specializing in white-collar criminal cases, and his Virgin Islands colleague, A. Jeffrey Weiss, should be barred from the bankruptcy case on the grounds that they had inside knowledge of the operations of Prosser's former companies, now controlled by Springel. Schoenbach is, among other things, handling Prosser's case before the grand jury.
– The question of what will happen to Prosser's extensive wardrobe has finally been settled, as Carroll reported to the court. (See "Brief: Legal Wrangling Over Prosser's Wardrobe Provides Spirited Sideshow.")
Carroll's filing said that there was a sale to Prosser of those parts of his wardrobe that the court had decided were subject to seizure to help pay down his debts; Prosser paid $5,000 for 132 items of clothing, including 17 suits, 46 ties, 36 sport shirts and 12 pairs of shoes. An exhibit to the report carried a chart showing the total number of clothing items in possession of the debtor, the number of items the judge had ruled exempt from the sale, and the number of items included in the sale.
Prosser formerly had, and now apparently still has, 31 suits, 30 dress shirts, 60 ties, 27 sports jackets and 40 pairs of shoes plus lots of sport clothes.
Carroll's report does not discuss how the sale came about, whether there was an auction, whether anyone other than Prosser was interested in buying his clothes, or any breakdown of prices for specific articles of clothing.
The only description was in a footnote attached to the date of July 1: "This is the date chosen for consummation purposes because it is the date following the objection deadline for the notice of sale. The purchaser had already paid the purchase price prior to notice being filed and circulated."
Several matters, including the Dawn Prosser motion, will be argued before Fitzgerald on Aug. 19 in her home courtroom in Pittsburgh. Then there will be four days of hearings on a series of other bankruptcy matters in the St. Thomas federal courthouse on Aug. 25 through 29.
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