Prebul AutoGroup owner Joe Prebul is fighting legal battles on three different fronts: U.S. District Court, U.S. Bankruptcy Court and Hamilton County Circuit Court.
Those battles technically are separate now, but bankruptcy trustee Jerrold Farinash believes the complex web of litigation should be considered intertwined.
"It is beyond me how anybody could question my ability to intervene in (Mr. Prebul's civil case)," Mr. Farinash told Circuit Court Judge L. Marie Williams on Thursday morning.
Mr. Farinash has been appointed to facilitate the Chapter 7 bankruptcy filings for several of Prebul AutoGroup's Chattanooga and Dalton, Ga., dealerships. He appeared before Judge Williams to ask that he also become a party in the $32 million civil lawsuit filed against Mr. Prebul by his brother-in-law, New York-based jazz club mogul Danny Bensusan.
Mr. Bensusan alleges that he sent more than $15 million to Mr. Prebul to invest in an interest-bearing Chrysler cash management account between 2005 and 2008. Instead, Mr. Prebul used the money for personal and business expenses and has failed to return $7.47 million of it, court documents state.
Those actions prompted Mr. Bensusan to request $32 million in damages and the U.S. attorney for the Southern District of New York to file 11 fraud charges against Mr. Prebul.
Mr. Prebul, in turn, has filed for bankruptcy protection for his failing businesses, which are set to be liquidated. Bids from potential buyers will be collected through March 2.
Mr. Farinash believes the bankruptcy case overlaps directly with the civil suit, arguing that some of the money disputed in the lawsuit was funneled through the dealerships he represents.
"The right to get that money back belongs to the trustee," he said.
Judge Williams denied Mr. Farinash's request to join the case, however, explaining that he had failed to file the proper paperwork indicating why he wanted to intervene.
Mr. Farinash said in an interview after the hearing that he would file another motion that follows the court's rules as soon as possible, because he believes he has direct interest in the case.
Mr. Bensusan's attorney Hugh Moore strongly disagreed.
Mr. Moore declined an interview, but during Thursday's hearing he was vocal in his argument that any and all financial interest in the case is his client's.
"The funds don't belong to Prebul Jeep Inc. The funds don't belong to Mr. Prebul. The funds belong to Mr. Bensusan," he said. "We think that your honor and this court can get at the truth better without the intervention of this trustee."
Mr. Moore further attacked Mr. Farinash by arguing that he shows "an appearance of bias" toward Mr. Prebul because he has asked for permission in bankruptcy court to hire James Hutcherson, Mr. Prebul's accountant, as a "special consultant" to help sell Mr. Prebul's dealerships.
Mr. Farinash confirmed after the hearing that Mr. Hutcherson already has signed on to help, and that the court's approval is just a "technical requirement."
There is no conflict of interest, he said, since the accountant is "just helping me market the dealerships. He has expertise that a lot of us don't have in managing these types of sales."
There is a 20-day window in which objections to Mr. Hutcherson's employment can be filed, Mr. Farinash said.
PREBUL'S PENDING CASES
* Criminal: The U.S. attorney for the Southern District of New York has filed 11 counts of wire fraud against Joseph Prebul in a criminal complaint that alleges he swindled $7 million from a family member. Mr. Prebul, who is free on a $2 million unsecured bond, will be arraigned in that case in New York after a grand jury returns a formal indictment against him.
* Bankruptcy: After the criminal charges against Mr. Prebul surfaced, the Prebul AutoGroup owner filed for bankruptcy protection for several of his Chattanooga and North Georgia dealerships. The Chapter 7 filings dictate total liquidation, and bankruptcy trustee Jerrold Farinash is accepting bids from potential buyers through March 2.
* Civil: New York-based jazz club owner Danny Bensusan - Mr. Prebul's brother-in-law - has filed a $32 million lawsuit against him in Hamilton County Circuit Court, asking for both compensatory and punitive damages. An injunction in the case prevents Mr. Prebul from selling off any assets not tied up in the bankruptcy case. In a hearing set for Monday morning, Mr. Bensusan's attorneys will ask the judge to lower a $5 million injunction bond, which Mr. Bensusan must post in case the injunction later is deemed unnecessary.