Judge Judith Fitzgerald has denied former U.S. Virgin Islands businessman Jeffrey Prosser protection from his major creditors under Chapter 7 Bankruptcy. The action leaves Prosser personally vulnerable to two creditors for $100 million: Greenlight Group and Rural Telephone Finance Cooperative (RTFC).
Greenlight, a group of former stockholders in the phone company before Prosser transferred it to a private corporation, was awarded a judgment of $56 million by a court in Delaware in 2006.
Though Prosser and his solely owned companies owed more than $600 million to these two creditors, the amount for which he could be held personally responsible had been capped in earlier bankruptcy proceedings at $100 million.
At one time, Prosser owned the only land line phone company in the U.S. Virgin Islands, the cable television company, a television news station within the cable network, the major print newspaper in the territory and a bank on St. Croix. He also tried to buy (but failed) dozens of the Chase Manhattan bank branches.
Prosser borrowed hundreds of millions of dollars from a then-public rural telephone cooperative and used the money in a corporate shell game, buying up the communications companies and using assets of the phone company to buy phone companies elsewhere – including in Belize.
The U.S. Virgin Islands corporate holdings were sold off for a fraction of what Prosser had bought them for and for a fraction of what he owed RTFC. Vitelco, the phone company, went to RTFC – which has so far invested $75 million in bringing the phone company infrastructure up to modern standards. The cable television system and the news channel also went to RTFC.
Accusing Prosser of lying and attempting to defraud his creditors repeatedly over the protracted bankruptcy proceedings that have been strung out mostly by Prosser and his lawyers since 2006, Fitzgerald said in her opinion filed Dec. 20, “Mr. Prosser has repeatedly failed to honor his obligations as a debtor and has shown a complete disregard for the orders of this Court. As such, we shall deny the Debtor’s discharge.”
Lawyers.com – a free website providing substantive legal definitions, referrals and solutions – explains several of the reasons for a denial of discharge. They include hiding property, destroying financial records, failing to turn over tax records, making false claims about assets, not explaining or accounting for the loss of property or money – all of which Fitzgerald explains in her 54-page opinion Prosser did.
In 2008, the court determined, Fitzgerald recalls, that Prosser failed to produce material documents, failed to provide necessary access and failed to cooperate with the court-appointed examiner, the Chapter 7 Trustee and the Chapter 11 Trustee for the ICC debtors.
Fitzgerald found that Prosser failed to disclose the existence of storage space in West Palm Beach, Fla., containing records and personal property relevant to his bankruptcy; that he ordered the destruction of computer hard drives located at Prosser’s Palm Beach property in an effort to conceal information, records and documents from the trustees; and that he failed to disclose and/or continuously delayed disclosure of various assets and liabilities, including hundreds of bottles of wine with an aggregate value in the millions of dollars, a cigar collection with an aggregate value in the thousands of dollars, a Bernard Passman black coral chalice, a life insurance policy costing $85,000 a year and paid for by one of his shell companies, New ICC.
Prosser also concealed a marital asset division agreement and a transfer of $480,000 to his wife, Dawn Prosser, on the day of and the day after the filing of his bankruptcy petition, Fitzgerald found. Prosser claimed, according to the Dec. 20 memorandum opinion, that he transferred the money to his wife because she was stressed out about the various pending lawsuits against her husband.
It took two years and lots of digging for the Chapter 11 trustee, who represented the corporate interests, to uncover the marital agreement – which he found in a box in the undisclosed West Palm Beach storage facility that Prosser claimed he didn’t know existed.
It took the trustee, Stan Springel, even longer to find and value the $3 million wine collection that Prosser claimed in his asset filings was worth $225,000. It was scattered between his two mansions, his Lake Placid home and “hundreds of bottles of wine stored for Mr. Prosser at Park Avenue Liquors in New York City.” The wine collection held in his Estate Shoys mansion on St. Croix was deliberately destroyed before it was seized.
Prosser also substantially undervalued expensive watches, jewelry, the Lake Placid property and even stock in V.I. Community Bank, which he owned, according to various court documents and hearings.
Further damning himself in the eyes of the law, Prosser directed his personal assistant at the time, Arthur Selzer, to erase the computer hard drives on both the desk top and lap top computers in Prosser’s Palm Beach mansion. But rather than destroying the hard drives, Selzer had them removed and replaced with new ones. He later turned the un-erased drive over to attorneys for the Chapter 11 trustee.
Chapter 7 Trustee James Carroll asked for the denial of debtor’s discharge years ago not long after being appointed trustee in 2007, citing Prosser’s complete disregard for Carroll’s requests for financial and other documents. Delaying tactics, legal maneuvers and at least three hearings and four years later, Fitzgerald found on behalf of Carroll.
“There is no question that Mr. Prosser’s schedules, which he amended five separate times (four of which are at issue), each time upon the discovery of an undisclosed asset by creditors or the trustees, are replete with inadequate, incomplete and false disclosures, and numerous inaccuracies,” Fitzgerald wrote, adding that Prosser’s filings were full of errors, mischaracterizations and blatant dishonesty.
Judge Fitzgerald has overseen these bankruptcy proceedings for the full six-and-a-half years since the first card fell in the house that Prosser built, and she said Prosser filed his asset schedules with the intention of deceiving and defrauding the trustees and any and all other involved parties.
Lawyer.com says, “A discharge is granted almost automatically in most Chapter 7 cases.” It suggests further that honesty in these matters is the best policy. “If you lie or take certain actions a discharge could be denied,” the free website states. If you do lie and get caught, “You lose your nonexempt property as well as your chance to discharge your debts. Even worse, if you lie to the trustee or creditors, fines or jail time are possible for fraud.”
