Sen. Adlah "Foncie" Donastorg is again charging that Innovative Communication Corp. has moved workers from its subsidiary companies to the payroll of its tax-exempt V.I. Telephone Corp. – and this time he is naming names.
Pointing to a list of Vitelco employees, Donastorg singled out nearly a dozen who actually work for other companies including five longtime Daily News employees.
ICC owns Vitelco, Vitelcellular, Vitelcom, the Virgin Islands Daily News, St. Thomas-St. John Cable TV, St. Croix Cable TV, ICC TV and V.I. Powernet. ICC employs approximately 660 people and is owned by St. Croix businessman Jeffrey Prosser.
As an Industrial Development Commission tax beneficiary, Vitelco receives an almost across-the-board tax holiday in exchange for, among other things, employing 421 people.
Two weeks ago, ICC laid off 18 workers from several of its companies, including 12 from Vitelco. After the layoffs, Donastorg relaunched his campaign to have ICC investigated in light of anonymous complaints by some of the fired employees that they were on Vitelco's payroll even though they worked for one of ICC’s subsidiaries. Documents show that the same employees had to sign confidentiality agreements in order to receive their separation packages.
On Wednesday, Donastorg said he received a list of Vitelco employees in order to determine whether the phone company was complying with the IDC workforce mandates. According to Donastorg, at least 11 of those listed as Vitelco employees actually work for one of the other ICC subsidiaries. Those include Daily News employees Deborah McDonald, Yvrose Odlum, Verdelle Parsons, Cleo Hobson and Steve Caines; VitelCellular Marketing Director Victoria Squires; and VitleCom’s Sarah Hart, who was laid off two weeks ago.
McDonald is listed on the Daily News masthead as its controller. Caines is the newspaper's systems manager. Hobson is administrative assistant to the newspaper's top officials. Odlum and Parsons are longtime Daily News business office employees.
"Many of the people being paid by Vitelco are career cable TV and Daily News employees," Donastorg said. "This is blatant abuse both of the IDC tax-benefit program and of Vitelco’s status as a regulated public utility."
In a letter last week to V.I. Attorney General Iver Stridiron, Donastorg said ICC must be scrutinized because of its tax benefits. He said the lateral transfers of subsidiary employees onto the phone company’s books are an attempt to take advantage of Vitelco’s tax breaks and force telephone ratepayers to subsidize ICC’s other enterprises.
"This is an organized effort to falsify compliance with its IDC agreement and to take advantage of Vitelco’s tax- exempt status by paying employees from (ICC subsidiaries) through Vitelco," Donastorg said.
ICC REMAINS SILENT
One of those listed as a Vitelco employee is former Sen. Holland Redfield.
When Redfield, who carries the title of director of corporate affairs for ICC, was asked by the Source to respond to Donastorg’s allegations last week. he adamantly denied that ICC subsidiary workers were being placed on the Vitelco payroll.
"It’s absolutely not true," said Redfield, who as a senator initiated IDC reform legislation.
After that statement, Redfield refused to answer further questions unless they were submitted in writing, which was done last Thursday afternoon. Neither Redfield nor any other ICC official has since responded.
However, Redfield’s claim that no ICC subsidiary employees have been placed on the Vitelco payroll runs counter to what ICC lawyers have said in court documents. In a lawsuit filed last year against ICC by St. Croix attorney Lee Rohn on behalf of former St. Croix Cable TV employee Larry Nyfield, Rohn alleged that her client was fired for complaining that he had been placed on Vitelco’s payroll and that his 401K retirement plan wasn’t transferred when he was.
In court documents, ICC attorneys admitted that Nyfield was "transferred to Vitelco as part of the consolidation of the marketing functions of all the ICC companies."
But Rohn alleges that ICC’s transferring of employees has more to do with tax benefits than consolidation.
"The IDC benefits require a certain number of employees and a certain percentage to be local," she said, "and they fell below that number."
A VIEW FROM THE IDC
The executive director of the IDC, Frandelle Gerard, said she is fully aware of the allegations forwarded by Donastorg and Rohn. But she said her job is "not rocket science."
"From where I sit, my area of concern is quite simple: (Vitelco) is supposed to provide ‘X’ number of full-time jobs. If they consolidated payroll that’s OK," she said. "Ideally we would want direct employees but we understand the shifting."
That’s because the telecommunications industry is merging and ICC subsidiary employees working in the cellular phone, cable TV and telephone
fields need to be cross-trained to cut costs and better serve customers. If employees from Vitelco’s sister companies are doing 35 hours or more of work a week for the phone company. they can be counted toward meeting the IDC mandates, Gerard said.
Still, she emphasized that it is Vitelco’s responsibility to separate the functions of the subsidiary employees working for the phone company and then charge the sister companies accordingly.
"For the purpose of Vitelco, what we have to look at is if the people are doing Vitelco work," Gerard said. "If a cable (TV) employee is doing Vitelco work, that person can count. It’s like leasing employees.
"They can’t load up costs that aren’t theirs, nor do we have indication that they have. If there is an ICC employee being paid through Vitelco, then the charge is to the other company."
Because Vitelco is guaranteed an 11 percent rate of return on expenses by the V.I. Public Services Commission, critics claim that padding the phone company’s payroll affects its bottom line. But Gerard said the rate-of-return issue lands in the PSC’s court, not the IDC’s.
"They have to be vigilant in the costing of the service," she said.
DONASTORG VS. THE PSC
Over the last two years, Donastorg has made several calls for the PSC to investigate Vitelco's rates. Those requests have been continually rebuffed by both the phone company and the PSC. But the PSC can no longer avoid the issue, he said.
"If this isn’t compelling evidence that we need a rate investigation, I don’t know what is," Donastorg said. "Rate payers are being forced to subsidize ICC’s other businesses every single month. I pointed this out to the PSC some time ago but they did nothing."
But Keithly Joseph, executive director of the PSC, said he has never been formally requested to look into the issues raised by Donastorg.
"I’ve never heard anything about it. I’ve never seen a piece of correspondence," Joseph said. "I have no complaint."
He said the PSC has a procedure in place that allows an utility to respond to a complaint. If the complainant isn’t satisfied with the utility’s response, a formal grievance can be filed and the PSC becomes involved.
"If we drag our feet responding, the Federal Communications Commission comes into play," Joseph said. "The FCC can’t do anything to those companies if you haven’t followed that procedure."
Attorney Rohn, meanwhile, echoed Donastorg’s complaint about the non-action of the PSC and the Attorney General’s Office. But Rohn said she doesn’t put much faith in the PSC to regulate Vitelco, likening it to the "fox guarding the chicken coop."
"We don’t want to file a complaint at the PSC because it is so loaded for Prosser," Rohn said.
Donastorg,
meanwhile, said that in addition to the PSC and IDC, he plans to again contact the Attorney General’s Office, the FCC and the U.S. Department of Justice.
HE SAYS, SHE SAYS
Meanwhile, both the IDC’s Gerard and Donastorg sit on opposite ends of the spectrum when it comes to Vitelco’s business practices. Gerard contends that even if the subsidiary employees are removed from the phone company’s payroll, it still exceeds IDC employment mandates.
"We did request information and we met with the beneficiary," she said. "To date and with the information we’ve gathered, we are satisfied. They have not violated the IDC rules and regulations."
Donastorg, however, is anything but satisfied.
"The bottom line is that this company is in violation of its IDC agreement," he said. "If I could determine this, the IDC should be able to as well. This territory could be entitled to millions of dollars in lost tax revenue as a result of these violations, not to mention the millions we have been charged for phone service throughout the years."
