Nov. 16, 2008 — A retired federal judge with a $1 million stake in the matter has lashed out at everyone else in the bankruptcy trial of Jeffrey Prosser, former owner and CEO of Innovative Telephone.
"… money continues to pour out of these debtors' estates to fund the parties' insatiable appetite for brawling litigation," according to papers filed by Steven A. Felsenthal, the former chief U.S. Bankruptcy Court judge in Dallas. He was appointed by current U.S. Bankruptcy Judge Judith Fitzgerald to be the examiner of Prosser's convoluted and secretive financial affairs.
Felsenthal, who bills $700 an hour for his work and who retained accounting and legal firms to help him sort out the Prosser finances, has objected to the proposed distribution of funds from the sale of the Prossers' summer home on Lake Placid, N.Y. One of his complaints is that he and his team had incurred "$1,225,133.48 in [court] allowed fees and expenses" and have been paid only $175,000 so far. (Emphasis in the original.) The proposed distribution of funds from the Lake Placid sale made no provision for paying his bills.
Although he did not say so in this filing, according to his previous court filings Felsenthal's work had been seriously complicated by what he termed Prosser's unwilling, incomplete and slow responses to his requests for financial information.
As someone who has presided over many a complex bankruptcy trial, Felsenthal knows the turf and the ground rules. He does not like what he sees in this one, noting: "Unwilling to engage in any meaningful settlement discussions with Mr. Prosser, Mr. Prosser's major creditors unnecessarily litigate every issue raised in this case in order to exasperate and humble Mr. Prosser while extracting their pound of flesh. For his part, Mr. Prosser seems intent on incessantly pursuing futile litigation so that these bankruptcy estates, like the estate in Charles Dickens' fictional Jaundice v. Jaundice [in Bleak House] will be devoured by legal costs, leaving nothing for the creditors. Well over $17 million has left these estates to pay professional fees …."
What is at least as interesting as what the judge says is what he does not say. There is not a word, critical or otherwise, about the presiding judge who appointed him to the task; neither is there any discussion of the roles that Vitelco and its subscribers are playing in the partial funding of the litigation.
Meanwhile, in other Prosser bankruptcy matters:
— Fitzgerald has issued an order, requested by Stan Springel, the court-appointed Chapter 11 trustee in the case, directing Dawn Prosser, Jeffrey's spouse, to turn over various financial records that she had previously refused to disclose. This is the most recent of a string of court orders demanding that the Prossers make financial information available.
— Both Springel and the Chapter 7 trustee, James P. Carroll, have filed objections to an effort by A. Jeffrey Weiss, a St. Thomas lawyer, to withdraw from the case. (See "Prosser Loses Another V.I. Lawyer.") Carroll calls it "a ploy to delay the upcoming trial against the debtor and his family."
Springel's lawyers charged, on the same issue: "In addition, if Prosser is truly unable to pay Weiss's bills, as alleged in the motion, Trustee Springel questions why Prosser can still, among other things, continue to fly first class around the country, hire cross-country investigators to perform surveillance, purchase and bid on assets from the Chapter 7 estate, dine and lodge at luxury venues, and retain additional attorneys … when he claims he already lacks funds sufficient to pay his current counsel …."
— And, according to Belizean media, the government of that Central American nation is encouraging a Bermuda-based telecommunications firm, Digicel, to buy the local phone company in which Prosser (and thus his creditors) owns a minority interest. Whether the minority stake would be part of the deal was not mentioned. It would be a boon to the creditors if someone were to purchase this otherwise awkward holding — it is the subject of several lawsuits in several nations.
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