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ICC Offer to Settle Refused by Telephone Cooperative

Sept. 21, 2004 – The Rural Telephone Finance Cooperative firmly rejected an offer from Innovative Telephone Co. attorneys Tuesday to reach a settlement for millions of dollars for which RTFC says Innovative is in default.
Speaking from his New York office Wednesday, RTFC attorney Jonathan Siegfried said, "A proposal was made by Innovative Telephone that was rejected by RTFC. There are no further negotiations scheduled."
Talks between the attorneys for both companies were held Tuesday in Washington, D.C. Siegfried further said RTFC plans to continue with its current lawsuit against Innovative Telephone's parent company, Innovative Communication Corp.
"We are proceeding full speed ahead with the litigation in the District of Virginia, and we expect to prevail in trial in December or January," he said Wednesday.
The negotiations stem from a lawsuit RTFC filed in federal District Court in Virginia on June 1 claiming that ICC and its subsidiaries had violated a 2001 agreement for a loan of $163.9 million from the cooperative to ICC, that ICC was therefore in default of the loan and that RTFC was therefore entitled to call in the loan and prior loans. (See "Cooperative Sues ICC and Says It Owes $530 Million").
The RFTC is a member-owned, not-for-profit, lending cooperative created in 1987 to serve the financial needs of the rural telecommunications industry.
Attorneys for the two entities clashed in a Sept. 10 meeting before the Public Services Commission. As part of its loan agreement, RTFC holds 100 percent of the common voting stock of Innovative Telephone.
Eric Cowan, RFTC legal counsel, told the commission, "We believe we will be back in January in our new role as the owners of the telephone company."
Siegfried said at that meeting, RFTC was "tired" of ICC's "half-truths" and "after-the-fact" notices of actions ICC had taken and so it had filed suit against the phone company in June.
Specifically at issue was an $85 million preferred stock issuance that RTFC says violated loan agreements between RTFC and Innovative Communications Corp. Siegfried said at the meeting that 31 breaches of the loan agreement were RTFC's reason for calling in the entire loan. The breach that appears to have brought on the action, however, was the telephone company's stock issuance. To add to RTFC's annoyance, Siegfried said, $30 million of the proceeds were loaned by the phone company to another ICC entity that RTFC didn't know about, to purchase a telephone company in Belize.
Lanny Davis, ICC's attorney, said, "There is a threat of RTFC taking over the company before we have our day in court." Davis said, "They can do this tomorrow morning."
The PSC is scheduled to hear further from Innovative and the RTFC in a Sept. 30 meeting in Frederiksted.
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