Feb. 22, 2004 — Before considering the Belizean reporting on how much money is involved in the three-way battle for control of the nation's phone company, Belize Telecommunications Ltd., it would be helpful to note the sequence of events in the controversies between the Government of Belize (GOB), Jeffrey Prosser's Innovative Communication Corporation, and Lord Michael Ashcroft's Carlisle Holdings, Ltd.
ICC, one of the largest employers in the V.I., is the parent corporation of Vitelco, the V.I. phone company, now called Innovative Telephone.
Most of the information that follows was gathered from the joint Belizean press Web site www.belizenews.com:
– Jan. 1, 1987: BTL is incorporated; it obtains a 15-year monopoly license from GOB.
– Early in 1998: Lord Ashcroft buys 25 percent of BTL's stock, then the legal maximum for a single holding; later he increases his stake to more than 52 percent. George Price is the then-prime minister.
– Later in 1998: a new prime minister, Said Musa, comes to office.
– Dec. 29, 2002: BTL's license becomes a nonexclusive one.
– Dec. 11, 2003: Ashcroft's firm announces the sale of its stock to GOB, citing the prospect of telecom competition in the Carlisle press release.
–Feb. 17, 2004: Carlisle announces "it has completed the sale of its 52.46 percent interest in BTL for $57 million." GOB borrows $57 million from the International Bank of Miami for this purpose.
– March 31, 2004: GOB announces that it has sold the Carlisle shares in BTL and its own shares (belonging to the Social Security Board and another GOB agency) to ICC for $89 million, of this $57 million is in an ICC promissory note for the shares formerly belonging to Carlisle.
– April 1, 2004: ICC replaces Carlisle as the manager of BTL; Carlisle is paid BZ$2.4 million because of the prematurely-terminated management contract. (The Belizean dollar is worth about half the U.S. dollar.)
– Later in 2004: ICC secures a management contract set at 6 percent of BTL gross, which was BZ$123,702,000 in the year ended March 31, 2004.
– Feb.7, 2005: the last of several deadlines set for the payment of the $57 million passes, without the payment being made. ICC claims that GOB has not done what it had agreed to do in efforts to make BTL more profitable; much of the Belizean press objects to what it calls "a secret agreement" between GOB and ICC. The government argues it had agreed to make these regulatory changes after the stock purchase had been completed, not before.
– Feb. 10, 2005: GOB, noting the lack of the expected $57 million payment, seizes the company, and installs its own board of directors.
– Feb. 18: 2005: the chief justice of Belize issues an injunction barring GOB from doing anything with the Carlisle shares, an action which 7NewsBelize, a television news operation, characterizes as a victory for Ashcroft.
– Feb. 22, 2005: ICC is scheduled to have a day in U.S. District Court, Miami, to press its case against the seizure of BTL by GOB.
The Issues
GOB's position is the government has done what it is supposed to do, and it wants the remaining $57 million from Prosser; since it does not have the money, it has installed its own board of directors at BTL, though Harry Lawrence, publisher of "The Reporter," a Belizean newspaper, wonders how it can do that if, as he believes, ICC has possession of a majority of the stock in the company.
Ashcroft's position, never reported in detail, is that the lack of the $57 million payment by Prosser means that the sale has not been completed and that he has grounds for repurchasing the stock he sold. Ashcroft has issued no press releases on the subject, and the account by 7NewsBelize on the chief justice's action does not include the text of any Ashcroft arguments.
Prosser's position is that he wants to resolve matters quietly with GOB but that the government has "failed to meet conditions vital to ICC's investment" and that Ashcroft "has filed threatening lawsuits causing further delays" (to quote the "V.I. Daily News" article of Feb. 18 – a newspaper owned by Prosser). Prosser has asked that a mediator be appointed by March 5 to work on the dispute, and hopefully resolve matters before the judges do. But in the meantime he has initiated the suit in Miami.
The position of much of the Belize media is, to paraphrase Shakespeare "a pox on all of your houses." For example, News5 said on Feb. 8: "The Government now finds itself firmly stuck between the competing interest of two powerful cutthroat businessmen and a bank that wants its fifty-seven million."
Similarly, 7NewsBelize on Feb. 18, said: "…we note that this tangle all started under the convenient rhetoric of lower rates and telecom competition, two distant promises and now remote possibilities."
The "San Pedro Sun," under the headline "Competition Unlikely" lists a series of conditions demanded by Prosser and apparently not provided by GOB:
"A guaranteed 15 percent rate of return . . .
He will not pay the 15 percent tax on dividends
He will not pay the stamp duty of $5.4 million on the sale . . .
A tax-free management contract for ICC executives . . . "
The position of the "Guardian," a paper owned by the Opposition, is rather more vehement.
Even the pro-government "Belize Times" in an editorial headline asserted: "SELL B.T.L. TO BELIZEANS".
The Level of Prosser's Investment in Belize
How much has ICC invested in Belize, and for what? The press accounts vary, but relying on statements made in the USVI by Lanny Davis, lawyer to ICC, and in Belize by Rene Henry, spokesman for ICC, it looks like a total of US$60 million.
A "V.I. Daily News" article of Feb. 18, said, "ICC planned to pay the Belize government a total of $89 million for the majority of shares in the telephone company – $32 million for a portion owned by the Belize Social Security Board and $57 million for the portion [previously] owned by Ashcroft."
Later in the same article, that used Davis as a source, it said, "The ongoing standoff between ICC and the Belize government has left unpaid a $28.5 million loan that ICC subsidiary Innovative Telephone [formerly Vitelco] made last year to Belize Telecom [another ICC subsidiary]."
"Amandala," a Belizean publication, on Feb. 10 said that ICC had "paid $28.5 million for 28 percent of BTL" and "settled a $27 million debt to purchase its [Intelco's] assets, which it says, it has still not received."
Later in the same article we find: "Henry said that ICC had spent close to US$60 million, because it has settled Intelco's debt with the Royal Bank of Trinidad and Tobago and paid US$28.5 million for the BTL shares. He also said that ICC has not received the Intelco assets, some of which we understand are also being claimed by an international company."
How ICC's Belize Finances Interact with Other Legal Matters
How do these Belizean investments play out vis-a-vis ICC's other corporate relations?
In the first place, the decision to float a preferred stock issue by Vitelco in order to enter the Belizean phone market was one of the reasons why ICC's longtime banker, the Virginia-based Rural Telephone Finance Cooperative sued ICC in the federal courts seeking the return of all the moneys lent to ICC.
Secondly, the V.I. Public Service Commission, when it learned of the use of ICC money in Belize told ICC not to do any more of that without clearing it first with the PSC.
But in a third, somewhat puzzling facet, the Belize deal seems to have provided ICC with a tool that helped it reach a proposed agreement with the minority stockholders that had sued ICC in the Delaw
are Courts. A Delaware judge has issued a decision, not yet a judgement, that ICC's predecessor firm had undervalued itself when compensating minority stockholders when ICC became a privately-held firm years ago. This is the so-called Greenlight case.
The proposed settlement, to be subject of a settlement hearing in the Delaware Courts, probably in April, according to one source, calls for the payment, over time, of $85,875,001 to the minority stockholders. A major element in the settlement is the provision of two separate flows of cash, one following the other, from ICC to the minority holders of $500,000 a month; in one case for 24 months and in another for 25 months. The total pledged comes to $24.5 million and is spread over four years and one month.
While under the terms of the settlement the parties obligated to pay are ICC and Prosser, the two flows of money are secured by a lease described as follows in section 4 (a) (iii) of the proposed settlement, a document on file with the Court of Chancery in Wilmington, Del.
"As security for said payments, ICC LLC will assign the rights it has under a certain lease agreement with Belize Telecommunication Ltd. pursuant to which assignment BTL will pay directly to [the minority stockholders] $500,000 per month for 24 months . . . "
In section 4 (b) (iii) of the agreement there is a similar description of a similar assignment of a lease, again for $500,000 a month, but for 25 months, with these payments to begin when the first series ends.
The press in Belize has not yet focused on these provisions. The payments, at US$6 million per year can be compared with the gross operating revenues of the Belize phone company, in the year ended March 31, 2004 of about US$62 million and with the net earnings in that year of about US$9 million.
The actual value of the lease is not shown in the proposed settlement agreement and the annual income from it may be more or less than the obligations against which it has been pledged. Further, it is not known what ICC has leased to BTL.
Another issue not addressed by the Belizean press, nor will it likely be, is the $30 million or so that has gone to Belize, which came from the sale of preferred stock in the Virgin Islands only telephone company. ICC had promised to pay back the loan at 12 percent interest by November. That has not happened.
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