July 31, 2008 — A summary of appeals from U.S. Bankruptcy Court rulings shows that Jeffrey Prosser, former owner and CEO of Innovative Telephone, has lost 11 bankruptcy court decisions and appealed them, while his opponents have lost no cases along those lines.
This listing shows Jeffrey Prosser and his wife, Dawn Prosser, appealing eight cases to the U.S. district court in St. Thomas and another three they lost at that level to the U.S. Circuit Court of Appeals. Those on the winning side of these issues include his creditors and bankruptcy case trustees taking positions unfavorable to Prosser.
While not structured along these lines, the data above was contained in a status report filed by Stan Springel, the Chapter 11 Trustee who handles what had been Prosser's corporate interests. Springel filed the report July 23 with the bankruptcy court.
Far from being a complete summary of all the complex litigation involved in the case, part of Springel's document was a listing of cases decided at the bankruptcy court level and subsequently appealed by the litigants. All but two of these cases remain open.
In some other decisions, now closed, the courts have ruled in Prosser's favor, such as the bankruptcy court decision that the appropriate jurisdiction for the litigation was the Virgin Islands, as Prosser had argued, and not Delaware, as his creditors had claimed.
The most important of the cases on appeal are two before the U.S. Circuit Court of Appeals in Philadelphia.
In one of these, both the bankruptcy judge, Judith Fitzgerald, and the District Court judge, Curtis Gomez, ruled that a draft agreement among the parties setting the amount owed at $402 million was no longer valid, and that the debt was in excess of $650 million. (See "Judge Settles on $650 Million Figure for Prosser's Debts.")
In another case before the appeals court, both judges listed above ruled that Prosser, personally, was to be covered by the less debtor-friendly Chapter 7 of the bankruptcy law, rather than the more debtor-friendly Chapter 11.
Among the cases now at the District Court level, there are bankruptcy-court decisions against Dawn Prosser's demand for a jury trial, and against the standing in court of two pro-Prosser lawyers, John Raynor and Adam Hoover. Fitzgerald decided that neither of them had a right to join the already-complex bankruptcy proceedings on the grounds that they did not represent legitimate parties in the dispute.
Virtually all of the action in the Prosser bankruptcy cases, to date, has been in the federal courts, but the Springel filing reported what may be the first action in the territorial courts.
"Vitelco has filed suit against Dawn Prosser in the Superior Court of the Virgin Islands, Division of St. Croix, for the recovery and return of $223,000 of funds wired by Vitelco to Dawn Prosser between March 29, 2007, and Sept. 7, 2007, for no consideration to Vitelco," Springel reported.
The "no consideration" reference reflects the argument that the transfer of the money was of no benefit to the phone company.
Springel did not report on the status of this suit beyond the fact that it had been filed.
In the past, Prosser's attorneys have said similar transfers of money from Prosser's corporations to Prosser, his wife and his children were appropriate, on the dual grounds that Prosser was the sole owner of the companies in question and that he was a "highly compensated employee."
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