Nov. 18, 2008 — Jeffrey Prosser spent $6 million on wine from 1999 to 2006, putting it on a company credit card in his name that was then paid off by New ICC — and ultimately by Vitelco and Innovative Cablevision rate payers.
The value of bankrupt former telecom owner Prosser's wine collection has been estimated as low as $200,000 and as high as $3 million in court documents, but those estimates are of the value of any wine remaining, not what was purchased to begin with. (See "Prosser Takes the Stand in Bankruptcy Hearing on St. Thomas.")
"For the period from January of 1999, I believe, through about July of 2006, there were over $6 million in wine purchase from an entity called Park Avenue Liquors," testified Ingrid Christian, a forensic accountant hired by the Chapter 11 trustee overseeing ICC during the bankruptcy proceedings
The $6 million figure refers only to wine purchased only from that one vendor: Park Avenue Liquors, purchased specifically with Prosser's corporate American Express card. ICC paid more than $3 million in credit-card bills on that account, according to court papers. It does not include wine purchased in restaurants, with cash or other credit cards, that might have been paid out of the roughly $1.5 million annual salary Prosser paid himself. (See "Court Documents Reveal Prosser Still a Well-Paid 'Frequent Flyer.'")
The revelation came Tuesday on St. Thomas on the second day of what are called turnover-adversary hearings. The court is to decide whether tens of millions of dollars spent by Innovative on Prosser and his family members were improper, and if some of it can be retrieved and turned over to Prosser's creditors. (See "Court Gives Prosser 3 Setbacks as V.I. Hearings Open.")
Prosser is in involuntary Chapter 7 bankruptcy and his former company, ICC, the parent company of local telephone provider Vitelco, is in Chapter 11 bankruptcy. ICC owes the Rural Telephone Finance Cooperative alone more than half a billion dollars, a family of hedge funds called the Greenlight entities hundreds of millions more, for nearly $1 billion in debt. As ICC assets are being sold off to pay its debts, both the Chapter 11 and Chapter 7 trustees have asked the court to declare fraudulent millions of dollars transferred to an array of family members and other places, and have the money or the valuables purchased turned over to the trustees for sale.
To that end, James Lee, lead attorney for the Chapter 11 trustee, tried to make the case the wine had no business purpose.
"Were you ever able to determine if any of these purchases from Park Avenue were for business functions or sponsored by New ICC business events?" Lee asked Christian.
"No," she replied.
Park Avenue has wines for as low as $25 and as high as $25,000 per bottle. The $6 million is enough to buy every man, woman and child counted in the last census in the Virgin Islands four bottles of moderate but not cheap wine, at $25 a bottle. That's at least a case of wine for every family with one child or more. But you only get 50 cases of 1989 Chateau Petrus at $4,500 per bottle.
For comparison purposes, Vitelco, the largest and by far most profitable former Prosser company, could purchase five new bucket trucks and hire 10 people at $50,000 a year to operate them for a decade. Vitelco's infrastructure is crumbling. (See "Analysis: Prosser Partied While Vitelco Crumbled.")
None of Prosser's seven attorneys offered any positive evidence the wine was used for some specific purpose that would be considered a normal business expense. Karen Bentz, attorney for Prosser's wife Dawn, made the negative argument that Christian could not prove the wine had no legitimate business purpose.
"I don't know how she could know what the company was purchasing wine for in 1999 or 2000," Bentz said, suggesting it would take more expertise and more information to make that determination.
U.S. Bankruptcy Court Judge Judith Fitzgerald allowed the testimony into the record not as proof of the purpose of the wine, but as a statement of what the company books reflect.
"I think she can answer yes or no, the books do or don't reflect a business purpose," she said.
The wine expenses were the largest single item among a cornucopia that attorneys for Prosser's estate, former companies and creditors sought to portray as improper personal use of corporate funds. Also at issue were half a million dollars in credit card bills for Prosser's wife and children and hundreds of thousands of ICC dollars in direct cash payments to family members who were not employed by the company, hundreds of thousands of dollars in men's jewelry, hundreds of thousands of dollars worth of fine art and tens of thousands in insurance payments covering Prosser's personal collection of art, among other claims.
Many have been previously discussed in the Source. (See "Almost $1 Million Credit-Card Rebate Asked in Prosser Case" and "ICC Funds Spent on Prosser's Family Include Tuition and Rent in Paris.") Turnover proceedings will continue all week, and more hearings are scheduled on the same subject in December.
Back Talk Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.
