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Falling Real Estate Prices Impact Prosser Case

Oct. 26, 2008 — The national trend in falling real-estate prices has had an impact on the bankruptcy case of Jeffrey Prosser, former owner and CEO of Innovative Telephone.
Meanwhile, in a totally unrelated development, the non-Prosser forces in the litigation are feuding over what law firm should be used to defend the creditors' claims in Belize, with a former Bill Clinton lawyer playing a role in the dispute.
On the real-estate front, James P. Carroll, the court-appointed Chapter 7 trustee in the case, filed papers with the bankruptcy court Oct. 23 that show a reduction of $850,000 in the price proposed for the Prosser property on Lake Placid in upstate New York.
In his filing, Carroll asked the court to issue an order approving the property's sale for $2.7 million to Robert D. Clark and Toni R. Miles (not further identified).
Earlier court documents showed a planned sale of the same property to a different purchaser for $3.55 million. None of the filings shed any light on why that sale had not happened, though a court order had been filed June 17 allowing it to go forward. Prices of stocks and real estate, however, have fallen generally in recent months.
Off in the Central American nation of Belize, in yet another development in the convoluted Prosser-related litigation, the Court of Appeals took action that supported the now-joined position of Prosser and his creditors. Both sides are aligned against the monopoly phone company in that country, which Prosser sought to buy but could not because he failed to meet a scheduled payment.
The former regime in Belize then — to make a long story short — recaptured the phone company, sold it to another entrepreneur, and then passed legislation regarded as harmful to Prosser and favorable to the new purchaser, Lord Michael Ashcroft. Prosser then sued over the legislation, called the vesting bill, lost a round in the local courts, then appealed. Now the Belize Court of Appeals has ruled that the case has to be reheard at the trial level. Since Prosser's creditors now own his claims in Belize, the decision is favorable to them, as well.
Other aspects of the conflict between Prosser and the Belize government are also being played out in a federal district court in Miami, and before the ultimate British court, the Law Lords, in London, Belize being a former colony of the United Kingdom.
A further complication in the Belize situation reared its head Oct. 24, when the Greenlight Companies, one of the major creditors suing Prosser, filed an objection with the court regarding what law firm should represent the Chapter 11 trustee, Stan Springel, in the Belize litigation.
Springel proposed to hire the Washington, D.C., firm of Orrick, Herrington & Sutcliffe to handle the estate's interests in the Belize matter, and to do so retroactively (nunc pro tunc in legal language) to July 15, 2007. He needs court permission to do so.
Greenlight objected, because Orrick in the past had been used to defend Prosser's interests in Belize and in the United States, and the firm had taken a vigorous position against Greenlight on several matters. The Greenlight attack singled out an Orrick partner, Lanny Davis, once attorney to President Clinton during his impeachment battles.
"Mr. Davis accused Greenlight and the RTFC [Rural Telephone Finance Cooperative, the other major creditor] of conspiring to ambush Mr. Prosser's attempts to secure financing needed for the settlement agreement and prevent the sale of the Virgin Islands Telephone Company to the Virgin Islands government," Greenlight said. "Furthermore, when Mr. Davis was scheduled to appear before [the bankruptcy court] in the Virgin Islands and testify regarding these baseless allegations, he failed to appear …."
Greenlight also objected to the fact that the extent of the retroactive legal fees has not been disclosed.
In Springel's proposal to the court regarding Orrick's role, he cited that firm's extensive previous involvement with the matter in Belize. U.S. Bankruptcy Judge Judith Fitzgerald is scheduled to hold a hearing Nov. 10 on this and other Prosser-related subjects.
Greenlight represents the former minority shareholders in an earlier, Prosser-controlled holding company. RTFC is a Virginia-based nonprofit bank that lent Prosser and his firms more than half a billion dollars over the years.
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