A Chattanooga auto group whose owner has filed for bankruptcy and also is charged with federal wire fraud will be allowed to continue operating for now, U.S. Bankruptcy Court Judge John Cook ruled here Tuesday.
Prebul AutoGroup owes at least $10 million to one of its creditors, documents show, and had to put 250 employees on notice last week that their jobs were in jeopardy. The group is caught in legal troubles that began with a federal criminal indictment against company president Joseph Prebul.
Jerrold Farinash, the company’s appointed bankruptcy trustee, said Tuesday after a court hearing that allowing the company to operate with cash collateral will ensure that it doesn’t drown completely as buyers are sought to rescue the business.
Operations at Prebul dealerships halted last week, but some employees continued working.
“I had promised to pay workers who kept working last week out of my own pocket if this didn’t happen,” Mr. Farinash said after the ruling.
He noted that the auto group’s operations now will run on a limited basis and that not all 250 employees will recover their jobs. Cars will continue to be sold, Mr. Farinash said, and service centers will reopen possibly by today.
Mr. Farinash said there has been “a lot of interest” from people wanting to take over the auto group, including one potential purchaser who would like to buy every dealership bearing the Prebul name. He declined to give further details, but he said that offers to buy all or parts of the company are due by March 2.
Chattanooga attorney Cara Alday, who represents Chrysler Financial Services Americas, LLC, the firm that financed much of Prebul’s inventory, said Chrysler and other creditors at first opposed the auto group’s use of cash collateral to continue operations. A last-minute agreement, however, facilitated the judge’s temporary ruling Tuesday.
“The alternative would have been that Prebul shuts down completely, and that doesn’t help anybody,” Ms. Alday said Tuesday.
A hearing March 5 will determine if Prebul AutoGroup can continue operating with its cash collateral, which amounts to about $270,000.
Federal authorities arrested Mr. Prebul on Feb. 10, charging that he had swindled a relative in New York out of $7 million. Charged with 11 counts of wire fraud, Mr. Prebul is to be arraigned in U.S. District Court in New York. The arraignment date has not yet been set, and Mr. Prebul has promised to appear at all mandatory court hearings or risk owing the government $2 million.
Mr. Prebul’s bankruptcy filing followed on Feb. 11, and a civil lawsuit filed in Hamilton County Circuit Court on Feb. 12 added to the businessman’s legal woes.
The plaintiff in the $32 million civil lawsuit is Mr. Prebul’s brother-in-law Danny Bensusan, the relative in New York who also is the victim in the criminal case against the auto dealer.
The civil suit alleges that Mr. Prebul promised to invest millions of dollars for Mr. Bensusan in an interest-bearing Chrysler cash management account. Instead, the money was used for Mr. Prebul’s personal expenses and to prop up his auto dealerships, which lost about $1.5 million between 2006 and 2008, the lawsuit states.
Dealerships to remain openJerrold Farinash, bankruptcy trustee for Prebul entities, said local Prebul auto dealerships will remain open while bids to buy the properties are being considered.