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Slavery museum due back in court

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The embattled and bankrupt U.S. National Slavery Museum is expected to learn this week whether it can move forward with reorganization, or will be pushed into liquidation.

The museum’s bankruptcy case is scheduled for a hearing in Richmond on Wednesday afternoon.

Judge Douglas O. Tice Jr. could decide then whether to listen to Celebrate Virginia and the city of Fredericksburg, both of which want the case moved to liquidation, or to allow the museum to try to restructure its debt.

The hearing has been preceded by a flurry of court filings from various parties.

Celebrate Virginia, which donated 38 acres to the museum a decade ago, wants the court to force the museum into Chapter 7, or liquidation.

The museum says Celebrate Virginia has no standing in the case since it has no financial stake in the outcome.

The city of Fredericksburg is backing Celebrate Virginia’s motion for liquidation.

The museum’s largest creditor, Pei Partnership Architects, opposes liquidation.

Pei is the only creditor that actually gets to vote on the museum’s plan to reorganize.

According to Pei attorney Milton Johns, the company initially voted against the reorganization plan, but expects to support a revised plan in court this week.

That’s because the revised plan makes provisions for interest payments on the more than $5 million owed to Pei, and gives more priority to those payments.

“My expectation is that we would support going forward with the amended reorganization plan,” Johns said.

Given that, Johns expects that at Wednesday’s hearing Tice is likely to give the museum a chance to make its reorganization plan work. Under the plan, the museum would be due to make its first payments to creditors in October.

“We’re going to know pretty quickly whether or not the slavery museum is able to do the fundraising they’ve represented they’re able to do,” Johns said. “Allowing the museum at least to take a shot at going forward and raising funds is going to be the best way at the lowest cost to all of our clients to get repaid.”

The museum’s proposed a reorganization plan predicts it can raise $900,000 in the first full year of soliciting donations, and more in subsequent years.

Museum attorney Sandra Robinson said in court documents that the museum’s state and federal authority to solicit donations—both of which it lost due to inactivity and not filing tax returns for several years—have been restored.

The museum plans to use that money to repay creditors—mainly Pei and the city of Fredericksburg, which is owed nearly $300,000 in unpaid real-estate taxes—over several years.

Fredericksburg’s lawyer in the case, Jeffrey Scharf of Taxing Authority Consulting Services, has expressed doubts about the feasibility of that plan, as has Celebrate Virginia.

Both say in court documents that given the museum’s past difficulties raising money, which is why it is bankrupt in the first place, they doubt it can meet those fundraising goals.

Last week the museum’s attorney filed a revised reorganization plan—the one Pei is likely to support—that proposes selling part of the 38 acres to raise money and lessen its future real-estate-tax debt.

But the land comes with covenants requiring it to be used for an African–American history project. Robinson said in court documents that she hopes those can be severed; Celebrate Virginia opposes removing the covenants.

The museum, founded by former Gov. Doug Wilder, filed for bankruptcy last fall after Fredericksburg threatened to auction its land for the unpaid taxes.

The museum had about $7 million in debt, and its only real asset was the land, valued at about $7.6 million.

Prior to filing for bankruptcy protection, the museum had been dormant for several years. Its director left, fundraising ceased and its authority to solicit donations was revoked.

Chelyen Davis: 540/368-5028