July 31, 2002 – After earlier requesting a federal audit and filing complaints with the Public Services Commission, Sen. Adlah "Foncie" Donastorg sued Innovative Telephone in District Court on Tuesday, charging that the company has failed to pass on to the V.I. government part of the money it has collected via a $1 monthly surcharge on phone bills.
And, Donastorg said in a release, he was notified by the Inspector General's Office "just a few days ago" that "there will be a federal audit of the Emergency Services Surcharge." He had made the request in April.
According to the release, the lawsuit was filed against the phone company under both its current name and its former acronym, Vitelco (for V.I. Telephone Corp.), as well as against its owner, Jeffrey Prosser. Donastorg said he "agreed to act as a plaintiff" on behalf of the people of the Virgin Islands.
In a release issued Wednesday, Holland Redfield II, vice president for corporate affairs of Innovative Communication Corp., Innovative Telephone's parent company, stated, "When this goes to court, Innovative will be absolved." He termed the suit "hurtful," "distasteful," "mean spirited and illogical," and "an affront to the 428 employees that work for Innovative Telephone." And he accused Donastorg of acting "to satisfy his personal political agenda."
At issue is the tax which then-Vitelco began collecting in April of 2000 in compliance with new legislation. The company was charged with turning the money collected over to the government on a monthly basis with no deductions for administrative costs. The money is intended for essential public safety programs including 911 emergency telephone operations and ambulance services.
Donastorg has been against the phone company collecting the tax from the start, contending that a private business should not be doing it — although that is commonly the practice among phone companies on the mainland.
On May 9, Redfield wrote to Gov. Charles W. Turnbull saying that ICC, the parent company of Innovative Telephone, had come to the same conclusion and wanted its subsidiary to be relieved of the responsibility. (See "Innovative wants to stop billing for 911 tax".) The governor has made no public response to that request.
The Wednesday ICC release stated, "It is Innovative's understanding that legislation is forthcoming" to transfer responsibility for collecting the tax to the Water and Power Authority, as both ICC and Donastorg have urged, "and we welcome it."
Donastorg's Tuesday release said he became concerned about the tax collection because it was apparent that "no one in the executive branch had clear knowledge of how or how much Vitelco was collecting each month on the government's behalf."
"I wrote dozens of letters and filed complaints with the Public Services Commission. No one could answer the simplest questions about this tax," he said. "I know it may not seem like a lot, but we are talking about what could be close to a million dollars each year — that is certainly more than enough to keep our emergency vehicles in tip-top shape."
The senator has repeatedly accused the phone company of illegally retaining part of the tax money and of illegally overbilling customers who have more than one phone line. His view is that the $1 surcharge is supposed to be per customer, not per line, whereas Innovative has billed some customers with multiple lines — including himself — separately for each line.
The legislation specifies neither "per customer" nor "per line." As Wednesday's ICC release noted, it calls for the tax is "to be added to all telephone bills."
On June 21, at a PSC hearing, Innovative Telephone chief executive Samuel Ebbesen insisted that "not one dime is being paid out for any other purpose" than the 911 services.
In his May 9 letter to the governor, Redfield termed Donastorg's allegations "attacks, misrepresentations and outright lies regarding the role we play as merely a conduit to collect these monies for the government."
Donastorg contended then that the approximately $60,000 a month that Innovative has been turning over to the government does not represent anywhere near the total amount collected. The amount corresponds roughly to the number of customers, he said, and not the number of phone lines, "which is, by informed estimates, well over 90,000."
At the June PSC hearing, Ebbesen also disputed that claim. Innovative had 70,461 telephone lines in service at the end of May, he said, and was billing 61,337 customers, with some having requested consolidated bills for multiple lines. Because of certain exemptions, he said, 61,227 customer accounts actually were billed the tax.
Ebbesen said Innovative submits monthly reports to the Finance Department and the Office of Management and Budget detailing the amounts billed and payable, and that the company pays the government the amount indicated on the 15th of the following month
. At the end of the hearing, the PSC directed Innovative to produce its financial records showing how the 911 tax is collected and how it is disbursed.
Donastorg's suit, filed in the District Court on St. Croix by attorney Lee J. Rohn, alleges violations of federal fraud and racketeering statutes. It alleges mail fraud because the phone company uses the U.S. Postal Service to send out the 911 tax billings. It charges that Innovative Telephone has "refused to correctly account for the funds received" and accuses the company of "a conspiracy to falsely state what funds have been collected" and of "the filing of false reports as to the funds collected, and the diverting of funds collected."
The suit asks the court to order the phone company to "account for all said funds" and to award unspecified actual and punitive damages.
Redfield, noting his own background as a six-term senator, also charged that action such as Donastorg's "sends a clear message to the business sector that business is open game for irresponsible accusations on the part of a single senator, and without question this has a chilling effect on any potential investors." He further claimed of Donastorg, "Through his anti-development postures and reckless approach to business, he has single-handedly caused more damage than any other negative impact that may exist in the St. Thomas and St. John district."
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