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Stop Spending Stock Proceeds, Phone Company Told

Aug. 25, 2004 – Innovative Telephone, formerly known as Vitelco – the V.I. Telephone Corp., has been ordered not to spend any more money from its recent $84 million preferred stock issue, including making its next payment of a reported $32.5 million to purchase Belize Telecommunications Ltd., until further order from the Public Services Commission.
Steven Lilly, chief financial officer of Rural Telephone Finance Corp., created a stir at Wednesday's PSC meeting when he stood up toward the end of the morning session and asked David Sharp, president of Innovative Telephone, whether its parent company, Innovative Communication Corp., would take more money from the stock sale proceeds to fund the purchase of Belize Communications. Lilly noted that the next payment is due Aug. 31.
Jeffrey Prosser, sole owner of ICC, cut a deal earlier this year to buy Belize Telecommunications Ltd. for $57 million. (See "Innovative to Buy Belize Communications Firm".)
Sharp refused to answer the question, as did J'ada Finch Sheen, legal representative for the phone company. Sharp noted that the PSC has scheduled another meeting on Sept. 10 to address matters relating to the stock sale.
Sheen said the issue should not have been brought up until the Sept. 10 hearing because it was not on Wednesday's agenda, and that it showed "disrespect" to Innovative to bring it up on Wednesday. She said neither she nor Sharp knew anything about the payment to Belize, that it was a matter for the parent company, and hence they were unable to answer.
"We were not prepared to discuss this because it's not on the agenda," Sharp said. However, the matter had been on the initial agenda sent out to the media on Aug. 13. Four days later, a revised agenda was sent out with the docket addressing the financial viability of Innovative Telephone removed. (See "PSC Defers Item on Phone Company Financial Viability".)
Eric Cowan, attorney for RTFC, which is ICC's primary lender, also was at the meeting. Cowan came on even stronger than Lilly, saying he wanted assurance that another $32.5 million would not be leaving the V.I. phone company to support a purchase in another country.
Sharp and Sheen continued to refuse to answer the question even after Valencio Jackson, PSC chair, and Frederick Watts, PSC counsel, repeated it. Then Maria Tankenson Hodge, acting as a private citizen but having once been legal counsel to the PSC, suggested that the commission order Innovative not to expend any of the stock sale proceeds without PSC approval.
At that point Jackson called for a break, during which Sharp made a phone call, reportedly to ICC executives, which apparently caused Sheen to change her tune. "In fairness to the commission and to the people of the Virgin Islands, I was directed to address the PSC," she said when the commission reconvened. "Not a penny of the Vitelco money will go to the Belize government."
Unmoved by Sheen's statement, the commission voted 3-2 to make the order official. Voting in favor of the motion were Jerris T. Browne, Yvette Canegata-Jones and Desmond Maynard. Jackson and Alric Simmonds abstained.
RTFC in its lawsuit filed earlier this summer against ICC says Innovative has more than $550 million in outstanding loans from the cooperative. RTFC has taken the position that under a formal agreement ICC must obtain approval from the cooperative before taking on further debt or acquiring other companies. (See "Suit Seeks More from ICC; Loan Details Made Known".)
Jackson said that under a 1989 agreement, Innovative Telephone also is required to get PSC approval before issuing stock.
In its complaint against the phone company RTFC alleges that Innovative Telephone has already loaned ICC $28 million to make the Belize acquisition.
In making her suggestion that the PSC order Innovative not to spend any more of the phone company's money until the whole issue can be reviewed, Hodge said she wanted to be assured that "no more Virgin Islands phone company money goes to Belize."
She added, "Vitelco's capital serves the Virgin Islands, not some other country."
It remains to be seen whether the PSC will take any action relating to the order in time for Innovative Telephone to make the scheduled payment to Belize on Aug. 31.
Commission members attending the hearing were Browne, Canegata-Jones, Jackson, Maynard, Simmonds and Sen. Luther Renee, one of two non-voting Senate representatives. Verne David, Alecia Wells and the other non-voting member, Sen. Shawn-Michael Malone, were not present.

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