Feb. 14, 2007 — The Bankruptcy Court judge hearing the ICC-Jeffrey Prosser cases handed Innovative Communication Corp. (ICC) owner Prossser and his camp two major setbacks and some less significant victories earlier this Monday.
ICC is the parent of Vitelco, the local phone company.
In the very near future, control over Prosser's corporate properties will be in the hands of a case trustee, a U.S. Justice Department appointee who will decide the extent of Prosser's sway, if any, over what had previously been his private property.
In addition, Prosser's personal finances will be scrutinized by an examiner, another court-appointed official.
Judge Judith Fitzgerald also ruled:
–that her previous decision placing the venue of the cases in the Virgin Islands, and not Delaware, should not be reversed, as Prosser's creditors had requested; and
–that the creditors' request to move the case from debtor-friendly Chapter 11 of the Bankruptcy Code to the less-friendly Chapter 7 was not yet appropriate, but might be in the future.
The appointment of the case trustee, however, provides a legal environment approaching that of Chapter 7, in the sense that the Chapter 11 trustee will limit the powers of the bankrupt party.
The Justice Department, through the office of the U.S. Trustee and both major creditors (the Rural Telephone Finance Cooperative and Greenlight Companies, both mainland investors in Prosser's operations), had asked for a court-appointed case trustee. Such an officer could take over decision making from Prosser and his people should the case trustee decide that was in everyone's best interests.
The role of the examiner – the appointment of which had not been requested by any of the parties – is more limited than that of case trustee. That person is to be nominated by the U.S. Trustee before March 13, after consultation with the parties, and then once appointed by Fitzgerald, would have 45 days to file a preliminary written report on Prosser's finances.
The U.S. Trustee was told by Fitzgerald to confer with all the parties in interest, including the V.I. Public Service Commission, and to "present the court with an order designating a Chapter 11 trustee …."
The pattern is that the U.S. Trustee nominates the case trustee, subject to the approval of the judge in the case.
The trustee will have jurisdiction over two of Prosser corporations now in bankruptcy, Emerging Communications, Inc., and Innovative Communications Company, LLC. Both are corporate parents to the local telephone company and to a series of other telecommunications firms in the Caribbean and in France. Prosser is also personally in bankruptcy proceedings, and the examiner will look at his finances.
The appointment of a case trustee in a Chapter 11 bankruptcy case is the exception, and not the rule; Prosser's lawyers had fought the idea for months.
During an interview with Radio One's Judi Shimel, ICC Vice President Holland Redfield said late Wednesday afternoon that he considered the appointment of a trustee to be "premature, because we (ICC) are in the process of dealing with our financing issues and selling some of the assets. The ruling may hinder our ability to continue exploring these areas."
He also said that ICC is planning to "challenge the appointment of a trustee by filing an appeal."
Redfield added, "We are also asking for an emergency stay– which means that everything in the case will stay just as it is until a determination is made on the appeal."
The Role of the Trustee and Examiner
In bankruptcy proceedings, case trustees have wide discretion and can preside lightly or make detailed day-to-day decisions on the operations of the properties in question.
For example, the case trustee could, were it deemed to be in the interest of all concerned, seek lower or higher telephone rates from the PSC. Similarly, the case trustee could decide whether or not to pursue ICC's claims to the Belize telephone company in various court cases in the United States, Belize, and Canada.
Towards the end of a 36-page order, the judge outlined some of the financial puzzles that the examiner is to unravel.
A key question is what is the exact role of the "advances" made to Prosser and his holding companies from Innovative Communication Corp. In prior hearings, the creditors asked if these were nonrepayable loans (and thus taxable income to Prosser) or are they, as Prosser described them, "contra-equity" payments, a sort of return of capital.
The hearings indicated that these advances are significant because Prosser's holding companies have no other income; the advances are used to pay Prosser's lawyers and to supply Prosser, personally, with $120,000 a month.
"Another mystery," according to the court, is the "status of the stock ownership in the Virgin Islands Community Bank stock." According to the court, the stock mystery is "illustrating yet again the inconsistency and incompleteness of information in Prosser's schedules with respect to his assets and liabilities."
The judge also cited an interest in Prosser's continued mortgage payments on his residences, apparently owned by his wife, when he is not making payments to the creditors in the bankruptcy case. The judge indicated that there is some question as to whether Prosser is legally required to make the mortgage payments.
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