Judge gives slavery museum time to bolster plan

MORE: National Slavery Museum timeline and archives

BY CHELYEN DAVIS

RICHMOND—A judge has postponed to August a hearing on the bankrupt U.S. National Slavery Museum’s reorganization proposal and is urging museum officials to use that time to garner support from creditors.

Chief U.S. Bankruptcy Judge Douglas O. Tice Jr. will also rule then on whether Celebrate Virginia, which donated 38 acres in Fredericksburg to the museum a decade ago, has  standing to oppose the museum’s reorganization plan. Both Celebrate Virginia and the city of Fredericksburg want the judge to order the museum to liquidate instead.

At a hearing in Richmond bankruptcy court Wednesday, Tice did rule that law firm Hirschler Fleischer can represent Celebrate Virginia, even though it represented the museum in 2008 when the museum was seeking tax-exempt status from the city of Fredericksburg.

For that reason, museum attorney Sandra Robinson had opposed Hirschler Fleischer’s representation of Celebrate Virginia now.

Tice’s ruling came after about an hour and a half of arguments, including testimony from former Gov. L. Douglas Wilder, who founded the museum and remains chairman of its board.

This was the first time Wilder has testified in the museum’s bankruptcy case. His testimony, however, was primarily limited to his dealings with Hirschler Fleischer attorney Charles Payne in the summer of 2008.

Wilder said he had given, or told then-Director Vonita Foster to give, Payne any documents he needed, including confidential lists of donors or potential donors. At one point, Wilder said, the museum was hoping to raise up to $200 million. Payne was trying to show city officials that the museum could be a successful asset to the city and deserved a tax exemption, Wilder said. The city denied that exemption, which Robinson blames for the museum’s burgeoning tax debt and eventual bankruptcy. The museum owes Fredericksburg close to $300,000 in  real-estate taxes, and it was the city’s plan to auction the land to collect the debt that prompted Wilder to file for bankruptcy.

Hirschler Fleischer attorney Robert Westermann said it was “beyond comprehension” that the museum would blame its bankruptcy on the lack of a tax exemption. “It was their decision not to pay taxes,” he said.

Tice ruled that regardless of what information Wilder had given the Hirschler Fleischer attorney in 2008, it did not constitute a conflict of interests in this case.  He did not rule on whether Celebrate Virginia has standing to participate in the case.

Within the past month, Celebrate Virginia has filed motions to push the museum into Chapter 7 liquidation, arguing that the museum’s inability over the past decade to actually build a museum has harmed Celebrate Virginia’s plans to develop property around it. “This slavery museum was part of a large overall development plan,” said Westermann.

Getting other parties to participate in the development, he said, “was absolutely contingent on that museum getting off the ground.” That impact, he said, gives Celebrate Virginia legal standing in the case.

Robinson argued that it does not, because the land was given to the museum with no strings and no requirement that the land might revert to Celebrate Virginia if the museum wasn’t built. Celebrate Virginia isn’t a creditor and won’t be affected by what happens with the museum, she said.

The land did come with covenants that restrict its use to an African–American heritage museum or similar use.  Robinson objects to those; in a new reorganization plan filed last week, she proposed severing the covenants and selling up to 20 acres of the land. Celebrate Virginia objects.

Milton Johns, an attorney for Pei Partnership Architects—the museum’s biggest creditor, which is owed more than $5 million from a court judgment over unpaid bills—also questioned whether the covenants are enforceable. That’s because while the covenants were part of the land transfer agreement in 2002, they weren’t filed in court by Celebrate Virginia until 2009.

Tice did not address those issues Wednesday. He told Robinson to re-file her new reorganization plan, send out notification to creditors, and come back Aug. 8.  “I’m going to give the debtor an opportunity to have the plan confirmed” by creditors.

An attorney for Hilldrup Cos., which had filed a claim against the museum for unpaid fees for storing artifacts and other items, told Tice the company has reached an agreement with the museum. Wilder himself will pay the monthly storage fee to keep items in Hilldrup’s facility, on behalf of the museum.

Chelyen Davis:  540/368-5028

cdavis@freelancestar.com

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