Chattanooga: Prebul dispute embittered by attorney barbs

Chattanooga: Prebul dispute embittered by attorney barbs

March 17th, 2009 by Lauren Gregory in Local Regional News

The financial dispute between Chattanooga auto dealer Joseph Prebul and his brother-in-law, New York jazz club owner Danny Bensusan, is becoming increasingly contentious as their lawyers trade barbs in and out of court.

Following a Hamilton County Circuit Court filing last week in which Mr. Prebul alleged that Mr. Bensusan had maliciously changed the terms of a long-standing business agreement, New York attorney Gerald McMahon is firing back through the media on behalf of Mr. Bensusan.

Mr. Prebul's attorneys have "knowingly filed a false pleading in court, for ulterior motives," Mr. McMahon wrote in an e-mail to the Times Free Press, announcing his desire to file ethics complaints against Chattanooga lawyers Christopher Varner and Wayne Peters.

Mr. McMahon did not return calls seeking additional comment Monday. It was not immediately clear whether he had actually filed a complaint, since the case manager for the Board of Professional Responsibility of the Supreme Court of Tennessee could not be reached, either.

Mr. Varner responded to Mr. McMahon's allegations in a written statement that indicated he and Mr. Peters plan to save their rebuttal arguments for court.

"We were shocked by what we consider to be reckless comments made by an out-of-state attorney who is not an attorney of record in the pending Hamilton County Circuit Court case, and we will respond to and address these comments in the appropriate legal forum at the appropriate time," he said.

Both sides have agreed that Mr. Bensusan wired $15 million to Mr. Prebul over more than a decade and was expecting the money returned. They do not dispute that Mr. Prebul failed to return some of the funds when asked, and that he signed a document promising repayment of the $7.6 million he still owed.

Federal authorities arrested Mr. Prebul last month on 11 counts of wire fraud. Mr. Bensusan was the alleged victim in that case.

According to court documents, Mr. Prebul had fooled his brother-in-law into thinking he was investing money in an interest-bearing Chrysler account for him when, in fact, Mr. Prebul was using it to cover personal and business expenses.

Attorneys now are squabbling over whether the money transfers were considered loans or investments.

Mr. McMahon - who is not representing Mr. Bensusan in the Circuit Court case but lists him as a client on his Web site - released to the Times Free Press a recording of a telephone call between Mr. Prebul, Mr. Peters and Mr. Bensusan's son, Steve Bensusan.

In the recording, Mr. Prebul tells Mr. Bensusan - who refers to his father by his first name throughout the conversation - that it was a former employee dipping into the money to help with cash-flow problems.

"It wasn't known to me ... what funds were there," Mr. Prebul said.

Mr. McMahon denounced that statement in his e-mail and said Mr. Varner and Mr. Peters both know that Mr. Prebul knew exactly how the money was being used, even though it wasn't meant to be touched at all.

In the recorded conversation, Mr. Peters made it clear that he knew Mr. Prebul owed the money, but explained that it probably wouldn't be possible for him to refund it immediately.

When Steve Bensusan informed him that Danny Bensusan needed $2 million immediately in order to avoid losses in a business deal, Mr. Peters responded by explaining that Mr. Prebul just didn't have it.

"Steven, I don't see a solution to it," Mr. Peters said. "I'm just being candid, because I don't want to mislead you all."

But Mr. Prebul was doing everything he could to repay Mr. Bensusan before his arrest, according to Mr. Prebul's personal attorney, Thomas Ray. Mr. Bensusan could have avoided the trouble of criminal and civil proceedings had he been more willing to compromise, Mr. Ray said.

Now, Mr. Prebul has filed a counter-claim asking for a jury to wipe the debt clean and order Mr. Bensusan to pay him damages for conspiring to have him arrested, according to Mr. Ray.

"Instead of continuing to work with my client, Mr. Bensusan chose a drastic course of action that sadly has the potential to cause additional losses to everyone," he said.