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Museum bankruptcy lawyer says it has filed past-due IRS tax returns

MORE: National Slavery Museum timeline and archives

By Chelyen Davis

RICHMOND— Fredericksburg’s lawyer agreed Wednesday to withdraw his motions to appoint an examiner or move the U.S. National Slavery Museum’s case to liquidation.

The Fredericksburg-based museum filed for bankruptcy last fall, with debts of $7 million, in part to stop Fredericksburg from auctioning the museum’s land for back taxes.

Late last year, the city’s lawyer in the case, Jeffrey Scharf of Taxing Authority Consulting Services, had asked the judge to either appoint an examiner to oversee the case, or move the case to Chapter 7, which is liquidation.

He did so because he distrusted the museum’s financial accounting and felt money had been unaccounted for.

Since then, however, the museum’s lawyer has hired an accountant, who analyzed the past tax returns and showed how the money had been spent.

At a hearing in bankruptcy court in Richmond Wednesday—attended by the museum’s founder, former Gov.  Doug Wilder—Scharf said the accountant’s report had satisfied his questions and he withdrew the motions.

“While there’s a long way to go in this case and it may come to that, we don’t feel it’s ripe at this time,” Scharf told Judge Douglas O. Tice Jr.

The hearing was a status report from museum attorney Sandra Robinson. Robinson said the museum has filed a reorganization plan, the tax analysis, and tax returns from 2008 through 2011, all of which she promised at the last status hearing.

Those tax returns were not available on the court’s document website Wednesday afternoon.

Robinson also gave Tice an overview of the reorganization plan filed by the museum.

That plan is based on an expectation that when the museum resumes fundraising, it could raise $900,000 in donations in the first year, and more in following years.

The plan calls for the city of Fredericksburg and Pei Partnership Architects—the two secured creditors—to be repaid over four years.

Milton Johns, Pei’s attorney, said he has issues with the reorganization plan, largely over its proposal to repay Pei only the amount the museum owed when Pei was awarded a court judgment in 2010—not interest that has accrued since then.

Paying the interest, Robinson said, “might make reorganization certainly difficult for my client.”

A hearing on the disclosure statement Robinson filed with the reorganization plan is scheduled for April 11. Scharf told reporters that hearing essentially starts the discussion over whether the reorganization plan is acceptable to creditors. He has doubts about the feasibility of the reorganization plan.

“From the past history of what they raised, I’m not sure,” Scharf said. “But that can change easily with one or two big donors.”

The museum owes Fredericksburg about $254,000 in back taxes, and Scharf said no tax payments have been made.

The IRS last week revoked the museum’s tax-exempt status, meaning it cannot receive tax-deductible donations. That was done because the museum hadn’t filed tax returns for at least three years; it can apply to have the status reinstated after filing the tax returns.

Wilder was in court Wednesday, but did not speak, and declined comment to reporters. Asked whether he might return artifacts donated for the museum’s use, Wilder referred reporters to Robinson, who also declined comment.


Chelyen Davis:  804/343-2245