The brother-in-law and main unsecured creditor in the bankruptcy of local auto dealer Joseph Prebul has agreed to pay up to $700,000 and waive his claims to millions under dispute.
Danny Bensusan, Prebul's brother-in-law whose request for money back on an eight-year loan agreement triggered the auto dealer's downfall in 2009, agreed to pay the money in a settlement approved Friday by U.S. Bankruptcy Judge John C. Cook.
Jerrold Farinash, who was appointed by the U.S. courts to handle the case, said there are as many as 200 claims by creditors on the Prebul estate and, under bankruptcy law, any money recouped from the estate must be put into a pool with certain amounts paid to each creditor.
Bensusan was the main unsecured creditor and would get the largest share. Before Prebul filed bankruptcy, he had paid as much as $4.5 million to Bensusan, money that, under law, could be added to the pool for all creditors, Farinash said. In other words, Bensusan might have had to return the full $4.5 million before the money was handed back out to creditors, including Bensusan.
Bensusan argued "vigorously" against the alleged $4.5 million claim, Farinash said, and they settled on an amount of $2.5 million.
As the main creditor, Bensusan would have reclaimed 70 percent of the $2.5 million, but rather than move money into the pool then hand it back out, Farinash agreed to let Bensusan pay the money he would not have recouped - $700,000 - and walk away from the case with no further involvement or liability.
"Mr. Bensusan's the biggest loser in this," Farinash said Friday.
At the beginning of the case, Bensusan claimed he was owed as much as $25 million from Prebul's estate, but Farinash said the actual amount was between $8 million and $10 million.
Farinash estimated a total of $7 million will be paid out to all creditors by the end of the case, far less than what was owed. At this time, Farinash said he couldn't calculate an accurate amount of what was owed by the Prebul estate before the bankruptcy.
So far, $5.8 million has been paid to secured creditors and $416, 809 to accountants and attorneys handling the case, according to court records.
No unsecured creditors have been paid.
"There were not sufficient assets of the Prebul automobile empire with which to pay its creditors at any time prior to the bankruptcy," Farinash said.
Now that Bensusan's claim has been cleared, Farinash said he hopes the complicated case will be closed by the end of the year.
Prebul inherited two car dealerships from his father, Abe Prebul, in 1985. He merged, acquired other dealerships and grew the business until he owned 12 in Southeast Tennessee and North Georgia.
Police arrested Prebul in February 2009 and charged him with 11 counts of federal wire fraud. Bensusan alleged that Prebul had bilked him out of more than $7 million.
On Feb. 11, 2009, Prebul filed voluntary Chapter 7 bankruptcy, which is a basic liquidation of assets. In November 2009, Prebul pleaded guilty to misdemeanor larceny, admitting to withdrawing $750 Bensusan had given him to run his dealerships.