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HomeNewsArchivesHeavy Legal Fees in Prosser Cases Becoming Cause for Concern

Heavy Legal Fees in Prosser Cases Becoming Cause for Concern

Jan. 5, 2007 — Nearly a million dollars worth of legal fees run up by Innovative Communications Corp. owner Jeffrey Prosser and his companies has become a source of controversy in the pending bankruptcy cases.
While the court has, so far, kept secret most financial data on Prosser's assets, there is no such veil over his legal expenses, which, according to a motion filed by one of his adversaries, are now well over $900,000. This consists of nearly $884,000 in lawyers' fees and some $28,000 in related expenses.
These fees relate only to Prosser's side of his bankruptcy suits – they do not include what are believed to be large fees owed and/or paid because of other Prosser legal activities, such as his proceedings against the Belize government conducted in courts in the United States, Belize, and Canada; and his defense against suits brought against Vitelco, the local phone company, by its preferred stock holders. (Prosser contends that as a result of a failed effort to buy the Belize phone company, Belize owes him money; the preferred stockholders want the $85 million they invested back.)
One of Prosser's main creditors, the Greenlight companies, has sued in the U.S. Bankruptcy Court, seeking to block Prosser and allies from paying the $900,000-plus in fees. Greenlight, representing the former minority stockholders in one of Prosser's companies (Emerging Communications, Inc.) said the fees should not be paid because of: a) fee-reporting irregularities and b) the apparent source of the funds used to pay the legal fees. (The Rural Telephone Finance Cooperative, Vitelco's longtime bankers, has taken a similar position vis-a-vis the legal fees.)
On the second point, Greenlight's brief, filed in the V.I. Bankruptcy Court on Dec. 15, argued that Prosser and his two companies in the bankruptcy proceedings (Emerging and Innovative Communication Company, LLC) " … have no such funds and upon information and belief, intend to pay the [lawyers] from Innovative Communication Corp. ('new ICC'), a non-Debtor entity."
Greenlight says that New ICC can't pay the legal bills of the other Prosser companies: New ICC is a parent to Vitelco.
Which begs the question: With Vitelco proceeds helping to pay Prosser's legal bills, will the costly ongoing suits affect V.I. phone customers in the form of higher rates or serve to diminish service even further?
Prosser's reply, entitled "Joint Omnibus Response of Debtors," dismisses the reporting problems and argues that it is appropriate for a non-debtor company to pay its corporate parent's legal bills.
Further, it states: "… First, New ICC has surplus cash from operations [presumably largely from Vitelco] to pay the professional fees. There is simply no basis for administrative insolvency when New ICC is generating positive cash flow that far exceeds the professional fees … The assertions of impending administrative insolvency are nothing more than self-serving statements intended to further the goal of cutting off the Debtors access to cash, to achieve a premature termination of these cases."
A hearing is to be held on these issues, and others, on Jan. 12 in Pittsburgh.
While $900,000-plus suggests a lot of legal activity, so do two other measures that can be gleaned from the legal briefs.
One is the sheer number of lawyers who are routinely listed in these filings. There were 35 different lawyers named on one of the service lists (i.e., of those who are served with the documents.) Of these two are public-sector attorneys, both with the U. S. Department of Justice. Only one lawyer (Adam Christian of the St. Thomas firm of Hodge & Francois) represents a Vitelco user. The other 32 represent either mainland investors or Prosser's camp.
The second measure is the number of documents filed with the bankruptcy courts on this case. As of Dec. 31, there were 209 of them listed by PACER, the electronic filing system maintained by the federal courts. Assuming (conservatively) that there are, on average, 10 pages per filing, this would mean 2,090 pages of motions, replies, and interim rulings. That would more than exhaust four reams of copy paper.
In terms of who is receiving the legal fees, the vast majority of the payments (often for lawyers receiving $300 to $400 an hour) goes to mainland firms.
The three principal law firms earning fees in the period were: Shearman & Sterling, New York, $590,016.25; Richards, Layton & Finger, Wilmington, Delaware, $142,660.50; and Dudley, Clark & Chan, St. Thomas, $65,970. Three other firms, representing Prosser as an individual, billed $85,330.50.
Since their fees will have no impact on the amount of money that can be used to pay debts that are at issue, the billings of the lawyers for the investors are not reported.
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