Nov.10, 2004 Rural Telephone Finance Cooperative and Innovative Communications Corp. representatives made it clear Wednesday they are nowhere near a settlement of the disputes that have resulted in the filing of several lawsuits in recent months.
The sticking point of negotiations between the two companies is the removal of Innovative Communications Corp. officers and directors including board president Jeffery Prosser.
Though Prosser's name was not mentioned, Steven Lilly, chief financial officer of Innovative's primary lender, RTFC, said at a Public Services Commission meeting Wednesday that the cooperative was willing to continue its agreement or even settle with ICC – but "the people have to change."
When asked, a source close to the negotiations did not deny the assertion that Prosser would have to be dismissed for any pre-trial settlement to be reached.
Officials of the two companies had been called to the PSC to report on the status of the various lawsuits between them.
In June RTFC sued ICC in U.S. District Court for the Eastern District of Virginia, asserting that ICC breached its agreement with the lending institution by issuing $85 million in preferred stock, without the knowledge or permission of RTFC.(See "Cooperative Sues ICC and Says It Owes $530 Million").
The money was used to purchase a phone company in Belize, also in default of their agreement, RTFC contends.
ICC responded to the suit by citing a 1989 agreement, which the company says supercedes any of the subsequent loan agreements between ICC and RTFC and which allows ICC to borrow unimpeded. (See "ICC Cites '89 Agreement in Lender Lawsuit Response").
On Sept. 30, the same day as the last PSC meeting, RTFC filed a lawsuit in U.S. District Court on St. Thomas against ICC's directors, claiming they shirked their fiduciary responsibilities by "authorizing and/or acquiescing in Vitelco's sale of $81 million of Preferred Stock…which unnecessarily burdened Vitelco with redemption premiums and a ten percent interest rate on stock." (See "ICC Hit With Additional Lawsuit").
Joel Holt, attorney for ICC, said RTFC's initial suit, which called in $530 million worth of loans, was like a mortgage holder foreclosing on a homeowner who had built an addition on the house without the proper permits.
An attorney familiar with the case drew a different homeowner analogy when the case was first filed, saying it was like a homeowner with a mortgage "selling the house and not giving the money from the sale back to the bank that holds the lien on the house."
Commissioner Desmond Maynard said he appreciated the two sides trying to simplify their positions, but added that he thought none of it was as simple as the attorneys would like to make it seem.
"What constitutes a default?" Maynard asked. "If it were just a payment issue," he said, "it would be easy to rectify. But if it's other things, it may not be so simple."
Fred Watts, attorney for the PSC, said the lawsuits were not the commission's concern.
But it is possible the commissioners could become witnesses at the battle between the two entities.
Jonathan Siegfried, RTFC attorney, said Wednesday the venue for the original suit filed in Virginia had been changed to the V.I. because ICC told the Virginia judge that of 20 people listed as witnesses, 15 were past or present PSC commissioners. (See "RTFC Case Against ICC Moved to VI District Court").
Holt and RTFC attorney Eric Cowan traded barbs briefly after Holt claimed that RTFC was suing ICC because the cooperative had its own financial problems. "RTFC wants to liquidate Vitelco to solve their own financial problems," Holt said. On the other hand, Holt said ICC was "probably one of the most solvent companies in the Virgin Islands."
Cowan said RTFC's financial standing could be easily determined by examining Securities and Exchange Commission filings.
ICC went private in 1998, thus eliminating the requirement to file financial information with the SEC.
However, a lawsuit arose out of the privatization, and in April a Delaware judge found on behalf of the shareholders. .(See "Prosser Ordered to Pay Millions to Ex-shareholders").
ICC recently reached a settlement agreement with stockholders of ICC's publicly held predecessor, Emerging Communications, according to Holt. The stipulation of settlement has not yet been filed with the Delaware Chancery Court, where the suit originated, but Holt said he expected what is known as the "Greenlight" matter to be resolved by Thanksgiving.
RTFC's suit may not be settled that expeditiously due to the venue change.
Siegfried said Wednesday that before the Virginia judge ordered the change, RTFC was about three weeks away from having all of its depositions completed. He said RTFC is still anxious to settle as quickly as possible, but questioned whether ICC sought the same speedy resolution.
"Win, lose or draw," Siegfried said, "it's better to know."
Since none of the ICC representatives stated their opinion on moving the case along quickly, Siegfried said he expected the company to take a position of "delay, delay, delay."
David Sharp, president of Vitelco, now known as Innovative Telephone, was also present, as were all the members of the commission.
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