Although territorial banking regulators approved the Virgin Islands Community Bank’s bid to acquire Chase Manhattan’s local assets Tuesday, VICB officials said they won’t proceed with the deal under the government’s conditions.
After 10 months of deliberations with federal agencies, the V.I. Banking Board, which is chaired by Lt. Gov. Gerard Luz James II, approved the proposed acquisition, James said in a statement Tuesday afternoon. No details were given regarding the approval, such as whether VICB’s Industrial Development Commission tax breaks would roll over to the Chase acquisitions.
However, Michael Dow, VICB president and chief executive officer, said in a statement issued by his bank that the terms in the Banking Board’s approval were intended to "defeat the feasibility" of the transaction by "placing novel and intrusive conditions never before imposed on any other bank application."
One such condition is a $300,000 annual banking fee that Dow said was "arbitrarily" placed on VICB but no other banks in the territory. He also said the board is requiring government approval of 30 percent of VICB’s directors, despite it being a Federal Deposit Insurance Corp. bank.
"VICB will not close this transaction under these onerous terms," Dow said.
James, meanwhile, lauded the board’s work on the acquisition proposal, saying that the U.S. Treasury and Justice Departments and the FDIC all contributed to the decisions made.
"With the assistance of these agencies," James said, the board was able to scrutinize the proposal effectively and "determine the impact it would have" on the Virgin Islands economy. He added, "We have lived up to our fiduciary responsibility, and I can unequivocally say that the best interest of the people of the Virgin Islands has been met."
Dow blasted the local government for being anti-business. He cited remarks made by his boss, VICB and Innovative Communication Corp. owner Jeffrey Prosser, last week at a business function. Speaking to the St. Thomas-St. John Chamber of Commerce in a rare public address, Prosser criticized the government for impeding the growth of the private sector.
The Banking Board’s conditional approval is "indicative" of the V.I. government’s effort to "overtax and over-regulate the private sector," Dow said. He added, "The conditions imposed by the Banking Board have created a situation whereby this transaction is no longer feasible."
It was not clear whether the tax benefits enjoyed by VICB would automatically extend to the Chase acquisitions — worth much more than VICB's own assets. VICB is the only bank in the territory that receives IDC benefits. It is exempt from all real property, gross receipts and excise taxes, and from 90 percent of income taxes.
VICB proposed to buy the four Chase branches on St. Thomas, the sole branch on St. John and the two on St. Croix. Also included is Chase Trade Inc., a management company for foreign sales corporations, which are subsidiaries of U.S. export companies.
According to VICB’s application to the FDIC, Chase’s deposits were at $357.9 million as of June 30, 1998, making Chase "second in the USVI behind Banco Popular." Of that amount, $72.4 million was in government deposits and $285.5 million consisted of individual, partnership and corporation deposits. Of the $285.5 million, $14.4 million was attributable to Chase Trade FSC accounts, meaning the money was not from V.I. sources.
Chase's Eastern Caribbean Regional Banking Group had a total of $314.8 million in loans outstanding as of June 30, 1999, according to the report. Of that sum, $254.7 million was booked to the USVI branches.
Chase’s local work force as of Feb. 23, 1999, is listed in the report as 210 on St. Thomas, 26 on St. Croix and 10 on St. John.
The VICB board members who signed a unanimous resolution last July approving the deal are Prosser and his wife, Dawn Prosser; his long-time St. Croix business associate Ann E. Abramson; another long-time associate, Nebraska attorney John P. Raynor; J'Ada Finch-Sheen, ICC vice president for legal and human resources; and Dow.
As part of the agreement, both individually and on behalf of his company Innovative Communications Subsidiary Company LLC, Prosser agreed to guarantee that VICB would fulfill its obligations under the agreement. Those included keeping all the branches open for at least 90 days and offering "comparable employment" to all existing employees for at least one year after the purchase.
