With the clock ticking down to transfer-of-control hearings by the V.I. Public Services Commission, ex-Vitelco CEO and owner Jeffrey Prosser returned to St. Croix for a final media blitz. He appeared for interviews on the Roger Morgan talk-radio show on WVVI Paradise 93.5 FM and the Mario Moorhead "In the Afternoon" talk show on WDHP AM 1620, and did a sit-down interview transcribed by the St. Croix Avis.
The PSC will hold public hearings this week on whether to approve transfer of control of Vitelco phone and Innovative Cable TV from its court-appointed Chapter 11 trustee to National Rural Utilities Cooperative Finance Corporation, the parent company’s biggest creditor.
Vitelco is one of several subsidiaries of ICC, formerly the property of Prosser, an ex-telecoms magnate. ICC has been in bankruptcy since July 2006. National Rural’s affiliate, Rural Telephone Finance Cooperative, is the largest single lender to ICC and holds a $525 million judgment against it, as well as a separate $100 million judgment against Prosser personally. Efforts to auction the component companies were hampered by the global financial crisis and, in January, National Rural announced its intent to credit bid for the properties.
A credit bid is when a creditor bids for a property at auction, offering not cash, but part or all of the value of the debt owed it.
The telephone and cable-television operations are regulated by the PSC which, by V.I. statute, must grant approval before a sale or transfer of control over a utility.
National Rural, the presumptive incoming owner, is a not-for-profit finance cooperative with more than $20 billion in assets that serves the nation’s rural utility systems. Its affiliate RTFC finances the rural telecommunications industry and has approximately $1.7 billion in credit outstanding. ICC alone accounts for almost a third of that. Both National Rural and RTFC are headquartered in Herndon, Va.
Prosser’s tenure at the helm of Vitelco and Innovative parent company ICC has been filled with drama. In 2000, Prosser tried to persuade the V.I. government to grant ICC a 30-year tax exemption, worth several hundred million dollars, in exchange for land at Carambola Beach Resort. Prosser did not own the land, but had an option to purchase for $30 million. He claimed he would also give $10 million for public-works projects as part of the exchange, which would have helped the V.I. government out of a financial bind, but at the cost of a ten-fold larger long-term loss in tax revenue than the immediate benefit.
While the land deal was being considered, Prosser hired the daughter of then-Sen. Adelbert Bryan to be a security guard at a salary of $65,000 — far more than other guards made — at the same time Prosser’s company was negotiating the land deal. Bryan, who to this day frequently speaks publicly and vociferously about the dangers of stateside people who are not of African descent interfering in V.I. affairs, supported Prosser — a white corporate CEO from Nebraska — in his bid to trade $40 million in cash and land for hundreds of millions in corporate tax breaks.
Moorhead, as it happens, was already a radio host at this time, and was then, as now, a close associate of Bryan. And though Moorhead frequently uses his radio microphone to warn of the dangers of wealthy people from the states interfering in local politics, he too was paid by Prosser during this time period. According to ICC records, Prosser wrote unexplained checks to Moorhead totaling $60,000 between May 1999 and April 2000.
With Bryan’s support, the deal for Prosser to trade someone else’s land for tax breaks was approved by the Legislature, but vetoed by then -Gov. Charles Turnbull. Shortly after the land deal fell through, then-Sen. Allie-Allison Petrus told police Prosser lobbyist John Tutein attempted to bribe him with an envelope of cash in exchange for voting in favor of the land-for-tax-breaks bill. Tutein was later acquitted of the bribery charge. The court-appointed Chapter 11 trustee now controlling ICC is currently suing Tutein to try to claw back $1.5 million paid him by ICC, for which there is no record of any service being performed, and which ICC claims were not spent for the company’s benefit.
The PSC’s statutory authority over transfers of control has been at issue previously in the bankruptcy, first when former PSC Chairwoman Alecia Wells signed a letter drafted by then- PSC attorney Jeffrey Moorhead asserting the PSC would approve and support a plan for use of phone company assets to fund a bankruptcy settlement for the parent companies owned by Jeffery Prosser. The PSC members never voted on the question — nor, apparently, were they informed of it — so the Wells letter became a matter of controversy.
A second controversial incident occurred with attorney Moorhead during Wells’ tenure. When the bankruptcy court appointed a Chapter 11 trustee to oversee ICC, attorney Moorhead issued an order on behalf of the PSC ordering Prosser not to cooperate with the trustee. Again, no vote was taken by the PSC authorizing the order, which was ultimately nullified by a court order giving the trustee emergency powers to take complete, immediate control of the company. Facing a contempt-of-court citation, attorney Moorhead was first ordered to cease acting on behalf of the PSC by Attorney General Vincent Frazer, and then replaced by the PSC after he failed to appear at several PSC meetings.
In the wake of these controversies, the PSC removed Wells from the position of chair and when her term was up, she was not reappointed..
At each stop on his recent media tour, Prosser averred he would ultimately be vindicated in court and return to take control of his former companies. While that is for the courts to determine, Prosser made several non-factual assertions that went unchallenged during these friendly interviews.
When a caller to Morgan’s show asked about liens for tens of millions of dollars due to the employee and management pension funds that Prosser chose not to pay, Prosser initially said the pension plan’s requirements ballooned up and they were trying to find a way to pay the increased amount, but were always paying in something.
"It is not accurate to say we were not contributing to the pension fund," Prosser said. In May 2008, when ICC paid $525,000 into the pension plans, it was the first corporate contribution of any amount to the plans in two years, according to both ICC and the Pension Benefit Guarantee Corporation, the federal corporation that guarantees pensions and which sued ICC for the pension shortfalls. While Prosser declared bankruptcy in 2006, he continued to run the company until 2007, but he made no pension payments whatsoever during that time. Shortfalls date back to at least 2004, according to court documents.
To the Avis, Prosser said he was never in default on the payments on his companies’ loans.
Or, more precisely, he said, "I was never served by RTFC for payment defaults."
RTFC told the court, however, "ICC has not made debt-service payments to RTFC since June 2005," and that interest payments stopped earlier.
These factual questions are before the court rather than the PSC, however. The PSC’s role is to determine whether granting or denying this particular transfer of control is in the interest of the ratepayers of the territory. Should the transfer be denied, the bankruptcy court would still have to resolve the company’s outstanding debt in some yet-to-be-determined fashion, so one immediate effect would be to prolong the bankruptcy proceedings.
The commission will meet first on St. Thomas, starting at 11 a.m. Tuesday in the PSC conference room at Barbel Plaza. On Wednesday the PSC comes to St. Croix, convening at 3 p.m. in the Department of Education’s Curriculum Center. And on Thursday St. John residents get a chance to weigh in at a meeting in the Legislature’s conference room there.
Time will be allotted for the public to offer comments during the hearings at the discretion of the hearing examiner. Comments may also be submitted in advance of the hearings to Michael S. Moore, PSC legal assistant, at msmvi@hotmail.com or via fax at 340-774-4971 on St. Thomas or 340-778-0302 on St. Croix. All comments submitted in writing will be provided to the parties and hearing examiner in these matters.
