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HomeNewsArchivesAnalysis: Can GERS, On Its Own, Buy Vitelco?

Analysis: Can GERS, On Its Own, Buy Vitelco?

Feb. 8, 2006 — Setting aside whether it is a good idea or not, can the Government Employees Retirement System (GERS) legally buy Vitelco without the approval of the governor and the Legislature?
GERS Administrator Willis C. Todmann thinks it can.
On Tuesday, Todmann told the Source: "We are a separate entity of the government. Once the board of trustees votes on the matter, that decision does not require the consent of the Legislature or the governor" (See "GERS Moving Ahead With Plans to Purchase Vitelco, Lawyers Say").
GERS is clearly an independent entity, with its seven trustees serving three-year terms after being named by the governor. Further, one clause in its authorizing statute says that the trustees can "authorize the purchase and sale of investments by the system as may be proposed by the administrator."
But another, more nuanced opinion was voiced in Pittsburgh on Jan. 24 by one of the lawyers appearing in one of the long list of bankruptcy hearings involving Jeffrey Prosser, the owner of Innovative Communication Corp., parent to Vitelco.
The speaker was William Greendyke, attorney for the Rural Telephone Finance Cooperative, formerly Prosser's longtime banker. His statement was an unusual one for a lawyer arguing a case before a judge:
"One of the last sections of the (V.I) statute was a section that I did not argue to you, because it honestly doesn't support my case and I didn't recall that it existed. But as indicated by the debtor (Prosser's camp) it does exist, and the court needs to be aware of it in terms of thoroughness and completeness … Section 20 of the statute, and I'm referring to 3 V.I.C (V.I. Code), Sec. 717 (provides for) "alternative investment programs … for … all kinds of stuff."
The alternatives were to investments in stocks listed on a "a nationally recognized exchange." (None of Prosser's companies are so listed, as they all are privately held – in other words, he owns all the stock.)
Greendyke said that the statutory cap for such alternative investments was 5 percent. "My understanding," he continued, "is that the total portfolio or size, if you will, capitalization of the GERS is in the 1.3 billion [range]. Five percent of that is going to be in the $65 million range. That's nowhere near – that's one-tenth of the money we're talking about in terms of the debtors and the letters that have been presented or argued to the court."
Presumably the statute could be changed to lift or eliminate the 5-percent cap, but such statutory changes require action by both the Legislature and the governor.
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