Feb. 14, 2008 — Jeffrey Prosser, former owner and CEO of Innovative Telephone, has confirmed — in a backhanded way — that there is a grand jury investigation related to his bankruptcy case.
This occurred when Prosser's lawyers mentioned a grand jury investigation as they filed yet another plea for secrecy in the case — or, in the court's terms, "a motion to seal," a move stoutly resisted by the court-appointed trustees and the debtors.
The reference to the grand jury came when Robert Craig, the Nebraska lawyer for Prosser, filed a document Feb. 8 saying, in part, "The Prossers' motion to stay is being filed under seal for the reasons identified in the attached affirmation as Exhibit B (a secret document in itself) so that its filing does not compromise the grand jury investigation and so that it does not jeopardize the persons and entities that are or may be involved."
The attorney for Chapter 11 trustee Stan Springel, Dan Stewart of the Dallas firm Vinson and Elkins, speculated about the specifics of the grand jury in his filing: "What grand jury investigation? Is Prosser a target of that investigation? Has he been subpoenaed to testify before the grand jury? What is the status and the scope of the alleged grand jury investigation?"
A grand jury is part of the criminal-justice process at both the federal and territorial levels. The bankruptcy court, on the other hand, is solely a federal agency, handling civil matters involving bankruptcy. All the filings noted above have been with the latter system.
Just exactly what Prosser wants to be kept secret is a bit of a mystery itself, in that the rationale for his motion has also been kept secret. The reaction of opposing attorneys was vehement. Springel's lawyer wrote, "In other words, Prosser seeks to have his motion… filed under seal without having to disclose the justification for such sealing."
The response of the lawyers for the Rural Telephone Finance Corporation, the non-profit specialized bank that has lent Prosser and his companies half a billion dollars over the years, was equally vigorous: "In a tactical maneuver that is unprecedented even in these unique cases, Prosser has filed a motion to stay this adversary proceeding, yet he has gone to such lengths to conceal the motion to say that he will not even provide a copy of that motion to RTFC, the party that sued him." (Emphasis in the original.)
Meanwhile, in other developments in the case:
— Springel has asked the court for permission to retain John Foster Real Estate to handle the sale of "several parcels of real estate located in downtown Christiansted, St. Croix … which are not necessary to the continued operation of the estate's business or that of its operating subsidiaries." The estate refers to Prosser's former properties now being sold to pay off the debts. The location and nature of the real estate mentioned was not further described.
— In a reminder that all the non-Prosser entities in the case are not necessarily allies, Greenlight Companies — former minority stockholders in the corporation that later became Innovative Communications Corporation — has filed a motion objecting to Springel's proposed acquisition of a second law firm, in this case Hunton and Williams of Richmond, Va. This would only complicate matters and lead to more expenses, Greenlight contends.
— And in a non-confrontational moment during the last hearing in Pittsburgh Feb. 1, U.S. Bankruptcy Judge Judith Fitzgerald talked by phone with St. Croix attorney Mark Eckard. He had been with the firm of Hamm and Barry, and he and the firm represented Prosser's wife, Dawn, for a short period. Then Eckard got another job and both he and his former employers asked the court's permission to withdraw from the case. After granting the requested permission, the judge congratulated the lawyer, saying, "You managed to escape before the rest of us."
The next scheduled hearing in the case will take place Feb. 28 in Pittsburgh.
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