Feb. 12, 2006 — An effort to force Jeffrey J. Prosser and his firms into involuntary bankruptcy was launched Friday morning when attorneys for the Greenlight companies filed papers to that effect in the U.S. Bankruptcy Court in Wilmington, Del.
The papers were filed by the one-time minority stockholders in the predecessor firm to Innovative Communication Company (ICC), against Prosser, Innovative Communication Company LLC, and Emerging Communications Inc.
Later that day, according to unconfirmed reports in the Virgin Islands, Prosser filed for voluntary bankruptcy. It is unknown in what jurisdiction the bankruptcy proceeding was allegedly filed.
Prosser reportedly did so after Judge Curtis Gomez, late Friday afternoon, rejected a temporary restraining order (TRO) sought by Prosser to fend off the involuntary bankruptcy filing, sources said.
The involuntary bankruptcy filing in Delaware was an effort to force payment of an estimated $134 million judgment that Greenlight had won against Prosser and ICC in that state's Chancery Court. The minority stockholders had argued, successfully, that they had been under-compensated when Prosser took the company private in 1998. (See ).
Last month Prosser and ICC, apparently seeing the writing on the wall, had quietly sought a TRO from the U.S. District Court in St.
Thomas to head off any involuntary bankruptcy filing. As of 4:30 p.m.
Friday, no TRO had been issued by that court, but it is reported that the ruling denying the TRO was issued around 6:30 p.m., after the court's normal office hours.
Prosser's lawyers had argued in the TRO filings that the effort to force an involuntary bankruptcy on ICC would involve its subsidiary Vitelco, and that there could be no change in the control of Vitelco without the consent of the V.I. Public Service Commission.
The opposing lawyers in the case disagreed, arguing that there is no need for an emergency TRO on the grounds that things were not moving that quickly, and furthermore that the suits were aimed at Prosser and ICC, and not at Vitelco.
Greenlight's lawyers added that there should be no court order barring creditors like Greenlight from going into federal bankruptcy court.
For the last couple of years, ICC has been fighting a series of separate legal battles with Greenlight on one hand, and with ICC's banker, Rural Telephone Financial Cooperative (RTFC), on the other.
The two ICC adversaries had appeared to be at odds with each other, as each sought to secure judgments from the same pool of assets.
Late last week it became apparent, in the TRO filings and counterfilings, that RTFC and Greenlight had worked out a deal, an "inter-creditor agreement," that set up a division of money between the two parties, should ICC and Prosser be forced to make payments.
The two outfits suing ICC are RTFC, a specialized nonprofit bank in Northern Virginia, and the three associated Greenlight companies, described in the TRO request as New York-based hedge funds. In October 2005, according to court papers, the two parties agreed to work together.
Their agreement runs 19 pages and describes in great and sometimes hard-to-follow detail how the parties want to divide the assets of Prosser and ICC.
For these purposes all the assets of ICC and Prosser are divided into three parts:
1) Innovative assets: These include ICC holdings in the Virgin Islands, Guadeloupe and elsewhere. Greenlight is to receive $27.5 million, plus 10 percent of anything over $327.5 million, with RTFC getting the rest, presumably most of the money.
2) Prosser collections: Greenlight is to get the first $35 million and two-thirds of the remains, with RTFC getting the final third, a smaller sum. This would involve collecting money from Prosser personally, as opposed to getting it from his companies.
3) Belize collections: RTFC and Greenlight are to split any receipts in this area 50-50. Prosser and ICC are suing the government of this Central American nation for damages in connection with Prosser's failed attempt to purchase the country's monopoly telephone system.
The sums involved in the earlier law suits by the two current allies are larger than those mentioned in the creditor agreement; these were the $134 million in the Greenlight case and more than $500 million in the RTFC case, which has been pending, first in Virginia, and later in the Virgin Islands, for well over a year.
As one observer noted, Greenlight had a lesser claim on ICC's funds (its debt was nonsecured) while RTFC's claim involved secured debt (similar to a mortgage agreement). However, Greenlight was doing better in court than RTFC, so the two parties merged their interests.
ICC's third major courtroom adversary, the government of Belize, is not involved in the alliance, as any court or arbitration award against Belize would be an asset of ICC, and thus something to be divided between the two allies, were they able to win against ICC in court. In other words, this is one courtroom battle (being waged in Miami) that Greenlight and RTFC want Prosser to win, as it would give the allies a possibility of a larger settlement.
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