Sept. 30, 2004 – Public Service Commission board member Verne David referred to the presentations given by attorneys Thursday morning representing Innovative Communication Corp. and the Rural Telephone Finance Cooperative as "nicey, nicey," but he wanted to get to the meat of the matter. Was the cooperative going to take over the Innovative Phone Company, which ICC owns, and what would that mean to employees and customers of the phone company?
Eric Cowan, an attorney for the cooperative, would say nothing more than, "As we sit here today, there is no such plan." However, he added, "Sitting here, tomorrow we might give you a different answer."
Joel Holt, representing ICC's position, told the commission before the cooperative could take over the phone company, it would have to get approval from the commission.
If David thought the morning proceeding was "nicey, nicey," events took an uglier turn in the afternoon.
Attorney Jonathan Siegfried, reached in New York where he had just landed Thursday evening after attending the morning meeting, said attorneys for his client, the cooperative, had filed suit in federal court in St. Thomas against the directors of Innovative Phone Company and the directors of ICC.
He said the lawsuit was aimed at making the directors personally responsible for financial damages they caused the phone company in connection with a sale of preferred stock, which he said had cost the phone company tens of millions of dollars. He said the money earned from the stock sale did the company no good: "It was shipped off to Belize."(See "Stop Spending Stock Proceeds, Phone Company Told").
Questions from David and commission member Alric Simmonds at the PSC meeting indicated that PSC members were concerned about how the litigation ICC was now involved in would affect the future of the phone company.
The cooperative had brought suit against ICC in Virginia's Eastern District in June alleging that ICC had defaulted on a loan to the cooperative and owed it $81 million. (See "Cooperative Sues ICC and Says It Owes $530 Million").
Commission members also questioned Holt about a suit filed in the state of Delaware, where Chancery Court Judge Jack B. Jacobs on May 5 ordered ICC owner Jeffery Prosser and two members of the ICC board of directors and Prosser's other V.I. companies to pay what could amount to more than $100 million to former stockholders of Emerging Communications. (See "Prosser Ordered to Pay Millions to Ex-shareholders").
Jacobs found that Prosser and the two board members knowingly undervalued the price of Emerging Communications stock when Prosser bought out the company's minority shareholders in 1998. The ruling was appealed.
Holt said that a memorandum of understanding had been signed in that case and he hoped it would be settled in the next 30 days.
Cowan disagreed with that assessment saying that a memorandum of understanding was a long way from a settlement. He said other affected parties would have to sign on to the agreement. One of the affected parties would be the cooperative.
Holt said the cooperative would be obligated to pay $13 million in that settlement because of contractual obligations it agreed to when it made the loan to Innovative.
Cowan said that once Innovative fell into default on its loan to the cooperative, the cooperative was no longer obligated to contractual agreements.
Desmond Maynard asked the lawyers what exactly the status was on the Virginia case and whether a trail date had been set.
Siegfried said a meeting to negotiate a settlement was held on Sept. 21 but proved fruitless. He said no more negotiation meetings had been set.(See "ICC Offer to Settle Refused by Telephone Cooperative").
ICC has filed a motion for a mediator to be appointed in the case. Holt pointed out the mediator could not mandate settlements or make recommendations to the court.
David said, "I hope that not getting lost in all this, is that it is the responsibility of the phone company to provide good reliable phone service to our residents."
One of the PSC agenda items referred to Innovative Phone Company by its former name – VITELCO.
Attorneys for ICC chose not to argue one motion that asked the cooperative not be a participant in the discussion. Holt said he "decided to eliminate arguments that were not necessary."
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