Aug. 21, 2008 — Over the past few months, millions of dollars have been emptied from the coffers of the V.I. Telephone Co., and it appears to be pushing the company toward bankruptcy, Public Services Commission board member Alecia Wells charged Thursday.
During a meeting held on St. Thomas, Vitelco head E. Clarke Garnett assured the commission that the company is not near bankruptcy and will be moving to re-initiate the sale of Vitelco and Innovative Cablevision by Dec. 19. The auction of the two companies — subsidiaries of Innovative Communication Corp., which is currently in the midst of Chapter 11 bankruptcy reorganization — was postponed after being scheduled for June 16.
A "ton of uncertainties" were generated throughout the sale process, the main one being an impending rate investigation by the PSC, Garnett said after the meeting. "These issues could have put pressure on the value of the company, and we needed to take some time to see what could be done to remedy that," he added.
A stipulation between the court-appointed bankruptcy trustee and Vitelco's preferred shareholders allowed for the use of the funds, which covered various legal, restructuring and accounting fees, Garnett said during the meeting. Since the agreement was up in June, the remaining payments could be taken care of through a variety of scenarios — including the final liquidation of ICC assets, he said.
"The current financial scenario is certainly tenuous," Garnett said in response to Wells' comments. "There were unreasonable debt obligations placed on the company by prior ownership. The dollars are now being spent to fight and recover assets that have been taken from Vitelco."
Wells said she hoped the payments to companies such as Alvarez and Marsal — which is helping to reconstruct Vitelco's finances — are not being made at the expense of the company's employees, whose "pension fund seems to be underpaid."
For a number of years the companies formerly owned by ICC principal Jeffrey Prosser failed to pay two pension funds, one for management and one for workers at both Vitelco and Innovative Cablevision. There is no risk of retirees losing their pensions, which are insured by the federal Pension Benefit Guaranty Corp., but the pension payments are required by law and the PBGC has filed liens for at least $15 million in past-due payments.
In May, ICC made its first corporate contributions to employee pension plans in nearly two years, presenting two checks totaling $525,000.
"My concern has always been the pension fund," Wells declared during Thursday's meeting. "A lot of these people are ready to retire, and they are good employees — their obligation and sincere work is to help Vitelco. The last we heard is that $525,000 was put toward the pension fund, but no money has been paid since then."
Two years ago, the Source published a letter signed by Wells — then PSC chairwoman — which assured former Vitelco president David Sharp of the PSC's full support to use phone company assets to fund a bankruptcy settlement for Prosser's upstream companies. In a subsequent Senate hearing, former PSC counsel Jeffery Moorhead said he had composed the letter and advised Wells to sign it.
The unfunded portion of the pension funds would be paid once the corporation's assets are sold, Garnett said during the meeting, adding that he could not give a specific date.
Discussion turned to the stability of Vitelco, and whether the company would actually be sold. Operations have stabilized over the past few months, but the company still needs "a tremendous amount of capital" to get it back to where it used to be, Garnett said. Still, any buyer that comes along would have to be prepared to make the investment, he added, saying that it could take between $60 million and $100 million over the next five years to get Vitelco up to snuff.
Garnett and PSC members also spoke about planned improvements to customer service, the need to hire more employees in technical positions and replacing the company's "antiquated" software systems.
Wrapping up the meeting, the board unanimously voted to open a docket for the rate investigation and appoint Judge Thomas K. Moore as the hearing examiner.
Present during Thursday's meeting were board members Joseph Boschulte, Donald "Ducks" Cole, Verne C. David and M. Thomas Jackson. Board member Sirri Hamad was absent.
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