Aug. 30, 2007 — Jeffrey Prosser, owner of Innovative Telephone, and one of his major creditors, the Greenlight Companies, have finally agreed on something in the long, drawn-out bankruptcy case: The examiner of Prosser's finances appointed by the court is too expensive.
The two adversaries, separately, have filed complaints with the U.S. Bankruptcy Court about the bills filed by Steven A. Felsenthal, who has been retained by the court to sort out Prosser's complex finances. The examiner is a Dallas lawyer and is a former chief judge of the U.S. Bankruptcy Court in the Northern District of Texas.
First, there is Judge Felsenthal's personal bill (at $700 an hour) for $163,870 for the period March 12 to July 30. Then there are bills for the same period from two law firms retained by the examiner to help him with his work (a total of $274,033); the accountants' bill, $312,160; and finally some $46,000 in expenses incurred by all those listed earlier. The total comes close to $800,000.
In addition, and not counted above, are the fees and the expenses generated by Prosser's lawyers, Prosser's firms' lawyers, as well as the fees for another court-appointed official, the case trustee, and his collection of lawyers and accountants.
Lawyers' hourly fees cover more than the individual lawyer's wages; they also include the attorney's fringe benefits, wages and fringe benefits for clerical staff, rent, utilities, and the law firm's overhead and profits.
Both Prosser and Greenlight (which consists of the former minority stockholders in the predecessor company to Prosser's Innovative Communications Co.,) have focused on the examiner's fee structure because, among other things, it is subject to review by the bankruptcy court. The debtor in cases like this is expected to pay the costs of both the examiner and the case trustee, whose task is to manage the debtor's properties until the bankruptcy process is over. To the extent that the debtor uses money to pay these court-appointed officials, there is less money to pay the creditors later.
Given the large number of words these competing lawyers use against each other in other filings, the arguments in the case of the examiner are relatively spare. Prosser's lawyers say: "None of these applicants [i.e. those submitting the bills] provides more than a one-paragraph description regarding the activities [examiner investigation] which are general in nature compared to the excessive amount of time billed."
Greenlight's lawyers say: "…the scope and length of the Examiner's examination exceeded what was necessary and, thus, the compensation and fees sought by the Applicants is excessive in the context of Mr. Prosser's individual Chapter 11 case."
Prosser's lawyers urge the court to reduce fees "to a reasonable amount" and Greenlight's suggest that they be cut in half.
On Felsenthal's resume (found on Google), he is listed as a "stockholder" in the Dallas law firm of Stutzman, Bromberg, Esserman & Plifka. Stutzman also happens to be the law firm that has billed the most for services to the examiner — $216,858.
Then there is the question of the what part of this legal pie goes to Virgin Islands firms, bearing in mind that the examiner, the Stutzman law firm, and the accounting firm (which billed $312,160) are all based in Dallas. The total from the examiner's operations to the Texas individual and firms comes to about 92 percent of these professional fees, with the remaining 8 percent (some $57,175) going to Nichols, Newman, Logan & Grey of St. Croix.
There is a similar mainland tilt to the distribution of legal fees paid by Prosser's Innovative Communications Co., according to the June 30 report to the court filed by Stan Springel, the court-appointed case trustee. The "cumulative petition to June 30, 2007" amount according to Springel's report was $1.5 million to Shearman & Sterling of New York (or 87 percent of the total), $154,345 to Richards, Layton & Finger of Wilmington, Delaware (or 9 percent), and $74,837 to Dudley Clark & Chan of St. Thomas (or 4 percent).
Other fees paid by other players in this case may have different geographical distribution patterns.
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.