In the middle of a bankruptcy and a bum economy, Joseph Prebul's car dealerships still have managed to generate $225,000 in service revenue and another $3 million in vehicle sales.
"Since Feb. 12, which is when we took it over, we've had many consumer sales and many sales to dealers or dealer trades," said Jerrold Farinash, the trustee appointed to oversee the liquidation of six of Mr. Prebul's dealership operations in Chattanooga and Dalton, Ga.
Mr. Prebul filed for bankruptcy protection on Feb. 11 for his Chrysler, Jeep, Dodge and Kia operation on Chapman Road; his Infiniti store on Brainerd Road; his Volvo store on Brainerd Road; his Pontiac, Cadillac, GMC Truck and Buick dealership on East Walnut Avenue in Dalton; his Mazda franchise and his Kia franchise, both on Walnut Avenue in Dalton.
He was arrested the day before on federal fraud charges stemming from allegations he bilked $7 million from his brother-in-law, New York jazz club owner Danny Bensusan.
During a meeting Thursday of Mr. Prebul's creditors in U.S. Bankruptcy Court, Mr. Farinash announced that he has been using the sales revenue to repay several secured creditors. He said he plans to add the additional $225,000 in operational revenue to the $900,000 he expects to receive from the recent sales of Mr. Prebul's rights to nine of his franchises.
Mr. Farinash anticipates that pool of money to total $1.2 million to $1.3 million, depending on what happens with the sale of Mr. Prebul's Chrysler Jeep Dodge franchise - the only one that has failed to attract any bids. When the fate of the franchise is decided, he said, he'll deduct operating costs and split the remainder among Mr. Prebul's bankruptcy estate, FSG Bank, Regions Bank and Chrysler Financial, the primary creditors.
It's pretty much guaranteed that most of the millions that Mr. Prebul owes his creditors will never be repaid, according to Mr. Farinash. The trustee has filed a $9.1 million claim against Mr. Bensusan to recoup additional money for the estate, but anticipates that may not produce a huge amount of revenue, either.
"I expect the administrative expenses to be very consuming," he told attorneys and creditors gathered at the Thursday meeting. "When you sue someone for $9.1 million, you don't expect them to just go ahead and write you a check."
Bruce Bailey, one of Mr. Bensusan's Chattanooga-based attorneys, was present at the meeting and took the opportunity to grill Prebul AutoGroup's Chief Finance Officer Tim Walters about his background and involvement in the dealership sales.
Mr. Bailey declined an interview following the meeting.
He also represents Mr. Bensusan in a Hamilton County Circuit Court lawsuit that the New York businessman filed, asking for $32 million from Mr. Prebul, and then later asked to drop. Circuit Court Judge Marie Williams approved the dismissal but has allowed Mr. Prebul to pursue a counterclaim in the case.
In the counterclaim, Mr. Prebul alleges that Mr. Bensusan conspired to have him arrested because he couldn't immediately repay a loan. Mr. Bensusan's attorneys have said the "loan" was actually an investment and that Mr. Prebul used their client's money without permission.
Another hearing is scheduled in that case on April 13.