Nov. 19, 2007 — Stan Springel, Chapter 11 bankruptcy trustee overseeing Vitelco parent Innovative Communications Corp., met with the Public Services Commission in St. Thomas Monday, and they pledged to work together to safeguard PSC-regulated cable and telephone utilities owned by ICC during the acrimonious ongoing bankruptcy proceedings involving ICC and its former owner, Jeffrey Prosser.
Monday's hearing was the first meeting between Springel and the PSC since Springel's appointment by the Office of the U.S. Trustee in March at the request of U.S. Bankruptcy Judge Judith Fitzgerald. (See "U.S. Justice Department Wants Trustee Appointed in Prosser Bankruptcy Proceedings.")
The meeting was cordial and short, with Springel briefing the PSC on the trustee's role and answering questions from the PSC commissioners. The PSC presented Springel with a formal protocol for how they would work together. The protocol directs Springel to seek prior consent from the PSC for the sale of Vitelco and Innovative Cablevision, the ICC-owned utilities regulated by the PSC. It also pledges the PSC will not "unreasonably" withhold approval of a sale, and would approve or make a decision on a transfer of ownership within 90 days of a formal application.
As a trustee his role is to be a disinterested arbiter, Springel said.
"It important that everyone understand I am here to represent the interests of all the parties," he said.
Springel took direct control of ICC in October. (See "Prosser Fired by Court-Appointed Trustee.") ICC's failure to pay many millions into the company pension funds for hundreds of Vitelco and Innovative employees was a major factor in his decision to directly take over ICC, he said.
"That (pension shortage) was of grave concern," Springel said.
The pensions are insured by the federal Pension Benefit Guarantee Corporation (PBGC), so are not at risk. But the payments are ICC's legal responsibility, and the PBGC has filed liens on ICC, demanding ICC pay tens of millions due to the funds.
Looking at the company's condition more closely, Springel said he has found serious problems and begun correcting them.
"We found, unfortunately — once we got in and were able to see what was there and understand what was going on — we clearly have liquidity issues," he said. "We clearly have a situation of bloated costs at the (ICC) level."
Commissioner Verne C. David asked Springel what stress the Chapter 11 proceedings were putting on the utilities owned by ICC.
"The businesses are really stressed right now, and I hope that will be clear," Springel said. "I would not represent to you that these businesses are stable right now. There are some vendors who are not being paid on time, and other creditors who are unhappy."
Since taking control, he said, they have trimmed what would come to $12 million a year from funds siphoned up from Vitelco to ICC and been working to insulate Vitelco from ICC. "With cooperation, we can work through this situation and in fact improve things."
Vitelco's employees are not at risk from any actions by him, Springel said.
"I've been asked about levels of service and employment," he said. "I certainly have no intention of running these entities, nor any intention of laying off people who work for them, though I reserve to myself the right of replacing management."
ICC's assets — which include Vitelco, Innovative Cablevision, the V.I. Daily News and TV Channel 2 — will likely be auctioned, Springel said.
"There is probably going to be a sale process," he said. "But I cannot say when that will take place. I think working cooperatively we will find the right solutions."
Several commissioners said they would like to see any sale happen quickly.
"The sooner this situation is over with, the sooner we can get back to some normalcy," Commissioner Donald "Ducks" Cole said. "I look forward to you working as fast as you can."
For his part, Springel said he would be available to the PSC to answer questions on reasonable notice and he would work together with the PSC going forward.
"Judge Fitzgerald made it clear on more than one occasion that I must work with the PSC as we take on the process of the bankruptcy," Springel said.
Monday's meeting of the PSC was called on an emergency basis because St. John-St. Thomas ferry franchise operators Varlak Enterprises and Transportation Services of St. John had announced they are losing money and may cut back service without government subsidies. No one representing the ferry companies came to the hearing.
The franchised ferry service between St. John and St. Thomas is at a crossroads brought on by a steep increase in ridership that necessitates a government subsidy, said Claudette Ferron, attorney for the ferry companies, on Friday. The companies will probably start running only during rush hours in about a week, she said.
Shortly thereafter service will be halted entirely unless the local government comes up with funding, Ferron said. The companies have long used their own funds to operate the company when, by law, that job belongs to the government, she said.
"We'll run until the money runs out, and then there's no service," Ferron said Friday. The companies can no longer borrow money or have family members mortgage their houses to keep the ferry service going, she said.
"They don't have any more money to donate to the people of the Virgin Islands," Ferron said Friday. "They lose money every run." (See "Possible Ferry Shutdown Looms as Companies, Government Officials Disagree.")
A letter from Ferron to the PSC was read aloud. Ferron said in the letter she could not appear because of insufficient notice, citing V.I. law requiring five days notice.
Boschulte asked PSC Attorney Tanisha Bailey-Roka to read aloud for the record the text of the law. Bailey-Roka read the law, which requires five days notice for most meetings but a minimum of three days notice for an emergency meeting. The announcement that ferry transportation between the islands might stop prompted the call for an emergency meeting, Boschulte said.
"Is there any way we can order that no untoward action be taken prior to this appearance with the PSC?" asked Commissioner Alecia Wells.
"That won't be necessary," Bailey-Roka said. "The terms of the franchise are clear: The franchisee is not to cease or deviate from normal services."
The franchise can be revoked and given to another company if the franchisee breaks the terms, Bailey-Roka said.
"Attorney Ferron took to the airwaves and sent this letter to every Tom, Dick and Harry," Cole said. "To not appear this morning seems as just a power play. If you're so concerned and the issues are that grave, why aren't you here?"
Because no one from the ferry companies came to the hearing, the issue will be put on the agenda again at a meeting to be announced for some time next week, said PSC Chairman Joseph Boschulte.
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