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Oct. 5, 2001 – Jeffrey Prosser, owner of the Virgin Islands Community Bank, filed a $50 million lawsuit against Chase Manhattan Bank on Thursday, effectively scuttling his bid to purchase Chase’s assets in the territory.
Before filing the lawsuit on Thursday in St. Croix District Court alleging that Chase acted fraudulently and had misrepresented itself, Prosser wrote JPMorgan Chase in New York on Aug. 29, informing leaders of the parent company that owns Virgin Islands Chase Bank of his intention to sue for $50 million.
Prosser said Chase "attempted to sell assets that were otherwise unmarketable to avoid the Virgin Islands Plant Closing Act causing VICB to invest in excess of $5 million in the aborted transaction, and to forego opportunities to expand its business to the islands of St. Thomas and St. John."
The deal between the two banks "can be considered to be dead at this point," VICB President Michael Dow said late Thursday.
No representatives from Chase in the Virgin Islands or in New York could be reached Thursday night. The Source could not confirm whether Chase had filed a counter suit in New York on Thursday. Dow said he was unaware of such a move, but said it wouldn’t be unusual in a "matter of this kind."
The VICB lawsuit alleges that Chase misrepresented itself in the deal when it initially failed to disclose information about a pending $25 million class-action lawsuit. In his August letter to Chase, Prosser said that after entering into a contract with the New York-based company, VICB uncovered information regarding Chase’s operations in the Virgin Islands that were "contrary to representations made by Chase which were material to the transaction…"
Chase, Prosser wrote, caused him to "expend millions of dollars in good faith pursuit of the transaction that could not be closed," including paying $2 million upon signing the contract.
The main problem, according to Dow, was the multi-million dollar class-action lawsuit against Chase and Chase Agency Services, a Chase subsidiary that sells mortgage insurance. Had the deal been completed, VICB would have been liable for any damages awarded in the case.
"It would be downright foolish for us to close on a deal when the seller is being sued in a class-action suit," Dow said. "That really is the crux of the whole thing; that class-action lawsuit."
In an a story in early August about the delay in the deal between the two banks, The Source reported that if VICB had to assume Chase Agency Service liabilities, meaning the potential $25 million lawsuit, it could become a basis for Prosser to pull out of the planned deal without being
forced to pay Chase a substantial penalty for negotiating in bad faith.
Dow, however, said VICB was "ready and willing to close."
In his Aug. 29 letter to Chase, Prosser alleged that the company was illegally selling insurance through Chase Agency Services. That in turn negatively effected Chase’s local branches current and future earnings; the valuation of loans to be acquired in the deal; and the "value and goodwill" of Chase Agency Services, he said.
Even after VICB learned of the class-action suit, Prosser said Chase failed to provide requested information.
"The Chase Acts demonstrate an ongoing deceptive pattern of conduct that persisted from the negotiations through this day with the intent of drawing the purchaser into a precarious position," Prosser wrote Chase officials in August. "That may have been part of the plan, scheme and design of Chase’s undisclosed motive."
A little less than a month ago, VICB received an extension to Dec. 7 from the Federal Deposit Insurance Corp. to complete the purchase of the territory's Chase Bank assets. It was the second such extension granted by the FDIC to acquire the seven V.I. branches of the New York-based Chase Bank. The initial deadline was May 7.
At VICB's request, that date was extended four months to Sept. 7. Chase and VICB entered into negotiations in 1999.
Prosser founded V.I. Community Bank on Dec. 30, 1994. The bank operates only on St. Croix, where it has three branches with some $78 million in assets. Chase in the Virgin Islands has four branches on St. Thomas, two on St. Croix and one on St. John. According to the FDIC, if the Chase acquisition goes through, VICB will have assets of about $500 million.
Prosser also claimed that Chase failed to disclose that another Chase subsidiary, Chase Trade, was adversely affected by a World Trade Organization decision that effectively outlawed foreign sales corporations in the territory. The WTO action, Prosser said, negative affected the value of the deal.

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