The News Desk is a collection of news, notes and breaking items affecting the Fredericksburg community.
Judge dismisses slavery museum’s bankruptcy case
By Chelyen Davis
RICHMOND—In an unexpected change of course, a federal judge has dismissed former Gov. Doug Wilder’s U.S. National Slavery Museum’s bankruptcy case.
Museum attorney Sandra Robinson asked for the dismissal, and Judge Douglas O. Tice Jr. agreed, saying that converting the case to liquidation—as some parties have sought—would not be a good solution to the case.
Wilder was not present at the hearing.
Over the past year of bankruptcy proceedings, Robinson said, the museum has regained its tax exemptions to solicit donations, and worked to be in a position to move forward with reorganization.
She also announced that the museum has an anonymous donor willing to pay, within days, the museum’s $250,000 tax debt to the city of Fredericksburg, which is where the museum was to be built.
Robinson said she could not reveal who that donor is, or whether it’s one person. Other donations will be used to cover additional city taxes accrued since the bankruptcy case started.
The museum will not be allowed to re-file a new bankruptcy case for at least a year.
The dismissal of the case allows the museum to try to reorganize itself, pay off its debt and resume efforts to actually build a museum, without oversight by the court. Whether it can sell part of the 38 acres of its donated land to do so is still up in the air.
Robinson said reorganizing is what the museum intends to do; she said payment arrangements with the museum’s largest creditor, Pei Partnership Architects—owed about $5 million—will be worked out. With that and the potential payment of the city’s tax debt, the museum’s enforceable debts would be handled, she said. Robinson said other debts are outside the statute of limitations.
Robinson also said the museum has about $100,000 in pledge donations that the donors will release now that the case is resolved.
Friday’s hearing was originally scheduled to deal with Celebrate Virginia’s motion to dismiss or convert the case to liquidation.
Tice had ruled on Wednesday that Celebrate Virginia was a party in interest in the case, after Scott Little—director of development for the Celebrate Virginia project—testified that Celebrate Virginia had lost several large development deals on the project because the museum was supposed to be an anchor for the development and construction never began.
The Celebrate Virginia development now has tax debts of its own.
The Silver Cos. had donated the 38 acres of land in the Celebrate Virginia development to the museum a decade ago, with the intention of building a tourism district around it.
But years went by and no construction ever began. Donations tapered off through and by 2009, the museum’s director had left—after telling Little that Wilder wouldn’t return her calls or give her money to pay the museum’s bills.
Wilder appeared at a city council meeting to ask for a tax exemption, which wasn’t granted. After that, the city’s tax bills went unpaid, and city officials’ contact with Wilder ceased.
By last summer, the project’s architect, Pei Partnership Architects, had a court judgment against the museum for unpaid bills. And the city was moving to auction off the museum’s 38 acres—now overgrown with briars and weeds, Little said Wednesday—to recoup the tax debt. That’s why the museum filed for bankruptcy protection nearly a year ago.
Tice’s ruling to let Celebrate Virginia participate in the case fueled Robinson’s decision to push for a dismissal, she said.
Robinson said that Celebrate Virginia’s participation in the case—when it’s not a creditor—was counter to the museum’s interests.
In her motion to dismiss the case, filed just an hour before Friday morning’s hearing, Robinson wrote that Celebrate Virginia was “only interested in the viability of its own development.”
Robert Westermann, attorney for Celebrate Virginia, told Tice that Robinson’s motion to dismiss the case was “yet another hail-mary effort of the debtor to try to retain possession of the property.”
But afterwards, Little said Celebrate Virginia is “delighted that something is finally moving on the project.”
Mark Amos, an attorney representing the city of Fredericksburg, said if the city tax bill is paid in full as Robinson promised, that satisfies the city’s involvement in the case.
Milton Johns, representing Pei, said the company still has the protection of the earlier court judgement on the debt owed to Pei, and that judgment is protected by a lien on the land.
While Celebrate Virginia wanted the case converted to liquidation, U.S. Trustee Robert van Arsdale told Tice that it wouldn’t be a “trustee-friendly” conversion, because a trustee would have to sort through all the artifacts donated to the museum, some of which must go back to the donors if the museum isn’t built. Some of those donors have spoken publicly about their concern about their artifacts and their inability to reach Wilder to talk about getting them back.
“It’s not a bad result to dismiss the case,” van Arsdale said.
The question of the restrictive use covenants placed on the land is also an outstanding issue and one likely to be litigated in state court going forward.
As part of the museum’s plan to reorganize, Robinson had proposed selling off about half of the museum’s 38 acres.
But to do so, the museum would have to get the restrictive use covenants removed. Those covenants, put in place when Celebrate Virginia donated the land a decade ago, restrict the land’s use to an African American history museum or educational use.
Robinson says the museum thinks the use covenants are invalid, because while they were agreed to by both parties in 2002, they were not formally filed with a court until 2009.
The museum argues—and Johns agreed in a filing with the court—that those covenants were thus not properly recorded, and that they can’t be enforced.
Celebrate Virginia argues that the restrictions are valid, and Little said the company is prepared to “defend that every day.” Celebrate Virginia doesn’t want the land parcelled off to someone who might build things counter to Celebrate Virginia’s own development plans.
The issue will come up again, as the museum pushes to sell off part of its land.
“That’s going to be a natural part of our reorganization,” Robinson said.
Chelyen Davis: 540/368-5028