Slavery Museum Bankruptcy Dismissed
By Scott C. Boyd
(October 2012 Civil War News)

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RICHMOND, Va. – A federal judge dismissed the Chapter 11 bankruptcy case involving the U.S. National Slavery Museum of Fredericksburg, Va., after ruling against a motion to convert the case to a Chapter 7 liquidation.

The action came after it was revealed that pledges and an anonymous donor would pay delinquent real estate taxes owed to the city, one of the museum’s two secured creditors. The bankruptcy protection filing last year was intended to keep the city from selling the land.

The second secured creditor, architect Pei Partnership, is owed over $5.8 million. Pei attorney Milton Johns said negotiations have not been completed. He added he has not been told who the museum attorney will be. Sandra R. Robinson left the case after the Aug. 17 bankruptcy hearing.

U.S. Bankruptcy Judge Douglas O. Tice Jr. dismissed the case with prejudice, meaning the museum is prohibited from filing for any kind of bankruptcy for 12 months. The museum must try to get back on its feet, resume fundraising, and pay its secured creditors approximately $6 million owed.

Tice announced his bankruptcy dismissal decision at the Aug. 17 hearing and signed the order Aug. 23.

The hearing followed a hotly contested hearing two days earlier at which museum land donor Celebrate Virginia LLC successfully argued it should be a party to the bankruptcy case. The company wanted the case converted to Chapter 7 liquidation or dismissed.

The museum’s reorganization plan had proposed selling some of the land to raise money to pay its creditors. Silver Companies, which owns Celebrate Virginia, gave the museum 38.165 acres in 2002. Former Virginia Gov. L. Douglas Wilder Jr. founded the museum the year before.

Scott Little, director of development for the Celebrate Virginia South project, testified that the museum was intended to be an anchor for the 500-acre tract, which is a part of the larger 2,400-acre Celebrate Virginia.

A one-third-acre garden, which Little testified was “a small overgrown patch of briars and weeds,” is the only thing ever built on the property.

Little said the failure of the museum to be built and serve as the anchor for Celebrate Virginia South has caused pending deals to “go up in flames.”

In addition, “It has had tremendous negative fallout, not the least of which is our default on a $25 million bond [because of inability to pay taxes on the land].”

“We didn’t give Governor Wilder $19 million worth of land to later sell off pieces,” Little said.

Museum attorney Robinson said, “The key word is ‘gift.’” She noted there was no reversion clause or restrictive covenant in the land gift agreement recorded with the deed.

Tice ruled that the museum’s non-development had an adverse impact on Celebrate Virginia.

His inclusion of Celebrate Virginia as a party to the case was eclipsed by the last-minute filing Robinson made the morning of the Aug. 17 hearing.

She asked the court to dismiss the Chapter 11 case against the museum. She argued that administrative costs for any Chapter 7 liquidation of land and artifacts would significantly reduce the money available to pay creditors.

Her filing included the surprise announcement that since June the museum had received $100,000 in pledges and an unnamed donor would cover the difference between the $100,000 and the amount owed to the City of Fredericksburg.

“We believe what we have in place can satisfy our creditors and move forward with our mission,” Robinson told the judge, saying the museum does not plan to refile for bankruptcy.

Noting, “This is not appropriate for a Chapter 7 case,” Tice said he would enter an order of dismissal.

City Treasurer G.M. Haney told Civil War News that the museum owes the city approximately $320,000. The city’s tax lien had not been paid at presstime.

“It does appear that it’s going to happen within the next 30 days,” Haney said. “Some representative of Wilder’s organization has contacted a person. That person has contacted a lawyer, and it appears they are going to pay it now.”