Nov. 11, 2008 — While Jeffrey Prosser siphoned tens of millions dollars out of Vitelco to fund his lavish lifestyle, buy multi-million dollar houses, millions of dollars in wine and liquor, $50,000-dollar wristwatches and political influence in the Virgin Islands, the public telephone company he owned rotted from neglect, its quality and value declining.
Two sets of hearings going on right now, in different places and forums, document both halves of this equation. Vitelco is going through a rate hearing at the Public Services Commission, while the U.S. Bankruptcy Court is holding hearings to decide whether or not tens of millions of dollars spent by Innovative and Prosser personally were improper and if some of it can be retrieved.
Prosser is in involuntary Chapter 7 bankruptcy and ICC, the parent company of Vitelco, which he owns, is in Chapter 11 bankruptcy. ICC owes the Rural Telephone Finance Cooperative alone more than half a billion dollars, and hundreds of millions more to a family of hedge funds called the Greenlight entities, for nearly a billion in debt on his company. As ICC assets are being sold off to pay its debts, both the Chapter 11 and Chapter 7 trustees have asked the court to declare “fraudulent” millions of dollars transferred to an array of family members and elsewhere.
“Soon after the commencement of significant litigation against Jeff Prosser and his companies … Jeff Prosser began improperly and fraudulently liquidating the capital of New ICC for his own personal benefit and for the personal benefit of insiders, friends and family members,” attorneys for the Chapter 11 trustee Stan Springel’s wrote to the court.
A Lake Placid house has already been sold for $2.7 million. A Palm Beach house, valued at $8.7 million in documents filed with the court, is in dispute. Chapter 7 trustee James Carroll has filed a complaint to have $2.4 million in mortgage payments made by Vitelco returned.
Springel and Carroll both filed complaints contending more than half a million dollars given to Prosser’s adult children, Adrian, Sybil and Justin Prosser — including a downpayment on a home, tickets for Miami Dolphins football games and Miami Heat basketball games, and hundreds of thousands of dollars in cash payments — were fraudulent. If the court agrees, the recipients of Prosser’s largesse may have to scrape together a way to pay it back.
“These payments were made despite the fact that none of the defendants ever worked for any of the ICC debtors,” Springel’s complaint states, “Although Adrian Prosser worked for certain subsidiaries of the ICC debtors, the non-salary payments made to or for the benefit of Adrian Prosser were completely unrelated to any services provided to the ICC debtors or any of their subsidiaries.”
Also at issue is more than $3 million spent by ICC to purchase fine wine for Prosser’s several houses. While there are receipts for the wine, most of it is missing. Prosser testified in court that much of the wine was drunk at a large millennium party in 2000. (See “Prosser Takes the Stand in Bankruptcy Hearing on St. Thomas.”) There is no way to recover wine that has been consumed, but attorneys for the trustees want to be certain none is hidden anywhere, and cite it as a particularly flagrant example of spending millions in company cash on personal pleasure.
Prosser has told the Source he will not speak about specifics of the case while litigation continues. However, his attorneys have argued in court, and he has said to other news media, that none of his actions were improper because he owned New ICC outright, so he was only moving his own money around.
“Everybody, in my view, missed the point: I owned 100 percent of this company,” he is quoted as saying in a Jan. 6 Omaha World Herald article by Jake Thompson. “We weren’t public.”
Whether these millions in spending were legal is for the court to determine. It’s self-evident that tens of millions spent on homes and art and given to friends and family, or the $3 million spent on wine and liquor, were not spent to maintain or improve the phone company. But testimony at the PSC’s recent rate hearings drives home its real-world meaning.
“Vitelco’s network is in a serious state of disrepair,” said W. Keith Milner, an Atlanta-based telecommunications consultant hired by Vitelco, at one of the recent PSC hearings. (See “Consultants Paint Grim Picture of Vitelco’s Infrastructure.”)
Milner inspected 25 of Vitelco’s 29 facilities on all three islands. Two-thirds were in poor condition and one-third in fair condition, he said.
“And those that are fair need some replacement,” he said.
Vitelco’s switching system has software that’s “woefully” out of date to the point the manufacturer no longer provides support, Milner said.
Instead of using the correct wiring, the company used what it had on hand when expanding service to new customers. Basic maintenance, brush clearing and replacement of weather cabinets have all been neglected.
Milner said most, though not all of Vitelco’s infrastructure needs replacing.
“But upgrading the network will not be easy or quick, given the degradation and age,” Milner said.
And if repairs are made to improve service in the meantime, customers will pay twice: first for the repairs, and a second time for the sorely needed replacements. All of the money will ultimately come from V.I. ratepayers.
Prosser — and his defenders — have argued that Prosser may have lived well, but it was his own company and he was generous to his friends.
“What harm did Prosser ever do?” former Sen. Adelbert Bryan said recently in the halls of the Legislature, responding to a question about whether Prosser improperly influenced V.I. politics.
The decrepit state of the phone company and the lavish lifestyle of its owner are part and parcel of the same package. Instead of using Vitelco’s ratepayer’s money to build a successful, state-of-the-art telephone company, Prosser bought houses, art, jewelry, liquor and favors. The financial information made public in court and the readily observable state of Vitelco’s infrastructure, taken together, document this fact.
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