Oct. 23, 2004 Jeffrey Prosser and his Innovative business interests have come out swinging against the Rural Telephone Finance Cooperative, and, to a lesser degree, against its local attorneys and the Public Services Commission.
In late September, the RTFC sued Prosser, the Innovative Communication Corporation, its subsidiary, the Virgin Islands Telephone Corporation (doing business as Innovative Telephone) and the board members of both entities. The action was filed in the District Court in the Virgin Islands. (See "ICC Hit With Additional Lawsuit").
RTFC says it has loaned ICC and Vitelco more than $550 million over the years, and that money has been "the primary source for Prosser's ever-expanding group of companies." Prosser is sole owner of ICC.
The RTFC charges that earlier this year ICC improperly siphoned millions of dollars from Vitelco and used it to help Prosser with the purchase of a telephone company in Belize. The RTFC says the action puts ICC in default on its loan from the RTFC because it jeopardizes Vitelco's assets which are the collateral for the RTFC loans.
Not so, say ICC and Vitelco; the money was a legitimate loan and the RTFC is just trying to take over Vitelco.
In a recent court filing responding to the suit, ICC and Vitelco have denied virtually all of RTFC's charges. Further, ICC has filed a counterclaim, alleging that the RTFC is trying to take over Vitelco and is using the allegations of improper transfer of money as its excuse.
"RTFC's Bad Faith Scheme is a classic case of predatory behavior by a lender," according to the counterclaim. "This case is, simply put, about a lender – RTFC – taking actions and making private and public statements in order to implement such a bad faith and tortuous interference scheme against its borrower."
That scheme, the counterclaim alleges, also involves the Virgin Islands Public Services Commission which regulates Vitelco, and a prominent V.I. law firm, Dudley Topper.
The counterclaim charges that RTFC undermined ICC and Vitelco in part by refusing to provide ICC another loan of up to $13.3 million to help fund a settlement of another case. It cites an announcement by an RTFC representative at a September PSC meeting "that it did not intend to contribute monies to the imminent Greenlight Litigation settlement. As a result, the imminent settlement has been or may be, jeopardized, potentially exposing ICC and related entities to the full amount of the Delaware judgment."
The "Delaware judgment," which came last May, was that Prosser and two board members knowingly undervalued the price of stock in another Prosser entity, Emerging Communications Inc., when Prosser bought out the minority shareholders in 1998, resulting in a loss to those minority shareholders of tens of millions of dollars.
Not only has the RTFC jeopardized a settlement of the Delaware case, according to ICC, it has undermined Vitelco's efforts to borrow money elsewhere and damaged its credibility with the PSC.
The counterclaim states that RTFC also "improperly interfered with Vitelco's negotiations with the Rural Utilities Service to refinance Vitelco's loans with RTFC and thereby take out RTFC's loan position." Instead, RTFC "raised improper and baseless objections to the refinancing" and refused to remove its own liens against Vitelco assets.
ICC also charges that RTFC influenced the PSC against Vitelco. It cites "ex parte" meetings in July and August in the offices of PSC attorneys in which RTFC representatives explained how it handles foreclosures against utilities and said there would likely be a foreclosure of Vitelco's stock. It also states RTFC representatives told some Vitelco employees and a union representative that it intends to foreclose.
The meetings were arranged for RTFC by the St. Thomas law firm of Dudley Topper.
That firm, the counterclaim states "served as local counsel for Vitelco and ATN Co. (a forerunner to ICC) with respect to two financings in which the firm provided opinion letters to lenders." The loans in question were in 1987 and 1990. ICC charges that RTFC retained Dudley Topper because the firm had previously represented ATN "on substantially similar matters," and did so "in order to obtain an unfair advantage in its current dispute with Vitelco and to implement the Bad Faith Scheme."
ICC/Vitelco argue that the Innovative companies are not in default of loans from RTFC and that RTFC has no grounds for foreclosing against Vitelco. According to their response, ICC currently owes RTFC $490 million and is current in its loan payments.
Further, ICC/Vitelco describes the transfer of funds from Vitelco to the Belize venture, which triggered RTFC's suit, as nothing but a legitimate loan that will be repaid to Vitelco at a rate of 10 percent or possibly 12 percent. The response and counterclaim state that neither RTFC nor the PSC has authority to prevent such a transaction.
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