Feb. 11, 2005 – An attorney for Innovative Communications Corp. said Friday that ICC is "working with the government of Belize to find an amicable … solution," after the Belize government snatched control of Belize Telephone Ltd. back from ICC Thursday.
In a four-paragraph statement, Lanny J. Davis, Washington-based attorney for ICC, said, "It is Belize Telecom Ltd.'s legal position that the Government of Belize's actions have no legal basis, and are contrary to corporate governance rules, the company's articles of incorporation, and the principles of fundamental fairness that a court of equity would find."
On Wednesday, the government of Belize took back control of Belize Telecommunications Ltd. after ICC owner Jeffrey Prosser reportedly failed to pay $57 million plus interest owed on the purchase of the phone company. (See "Belize Takes Back Control of Phone Company After ICC Fails to Pay").
In the statement faxed and e-mailed from the Washington law firm of Orrick, Herrigton & Sutcliffe LLP, in which Davis is a partner, he said the Belize government had failed to fulfill commitments that were part of the purchase agreement between Prosser and the government.
"We must reiterate that the government made representations that were the basis for Belize Telecom Ltd.'s investment, and it is our position that these commitments have not been fulfilled."
Belize Telecom Ltd. is a company established by ICC to facilitate the purchase of the shares in the Belize telephone company, according to a story in "The Guardian," a Belizean newspaper.
Davis' representative did not return a call requesting clarification on what the commitments were that the government had not fulfilled.
However, the story of Prosser's purchase of the Belizean phone company has been chronicled in the Belize news media in detail.
A Feb. 10 article in "The Guardian" discloses several agreements made between ICC and the Belizean government, which may be what Davis was referring to, in quoting a letter sent from ICC to Prime Minister of Belize Said Musa.
The letter says that ICC suggested the issues surrounding the purchases be submitted for arbitration, according to the Guardian story.
One of the cited "issues" is: "Changes to legislation and the issuance of new restricted licenses to operating competitors, which would give BLT more control over the industry," the article says, adding that the purchase agreement calls for non-binding mediation before going on to an arbitral tribunal.
"Considering the commitments and concessions made to Prosser and ICC in a 'memorandum of commitment from the government to ICC' and signed by the prime minister," the article reads, "one can understand why Prosser would think this way." In the memorandum the prime minister commits the government to ensure by way of legislative changes and other arrangements, to:
– make communication by voice over the Internet unlawful within eight months of the conclusion of the purchase agreement.
– ban all competitors from providing wire line and/or fixed wireless service.
– grant no other mobile licenses for a period of seven years.
– cause BLT to be the sole negotiator for accounting rates with foreign carriers.
– establish a floor for international rates, taking into account BLT's cost, a fair return, and subsidies for rural service.
– allow the full book value of BTL at the date of purchase agreement along with any additions to be used to determine rates.
– approve no new interconnection rates until ICC has consummated the purchase of the shares.
According to the Guardian article, the memorandum further states the government "understands ICC is relying on these commitments to enter into the purchase agreement."
Closer to home ICC has been in hot water with the local Public Services Commission for using funds acquired in a controversial preferred stock sale to fund the Belize acquisition. In fact, at an Aug. 25, 2004, PSC meeting ICC was ordered not to spend any more of the stock proceeds without PSC's approval. (See "Stop Spending Stock Proceeds, Phone Company Told").
The preferred stock were issued by Vitelco, the Virgin Islands Phone Co., more recently called Innovative Telephone, in a move that caused a law suit to be filed by ICC's primary lender, the Rural Telephone Finance Cooperative. RTFC claims that ICC violated terms of its borrowing agreement when the telephone company issued the stock with out notifying it. ICC owes RTFC about $600 million. The cooperative holds all the common stock in Vitelco as part of the loan agreement.
Just 15 days after the Aug. 25 meeting Vitelco got into further trouble when it was brought to light that the telephone company loaned at least $30 million of the preferred stock issuance to a subsidiary of ICC set up specifically to make the Belize purchase. In that meeting, Davis assured the commissioners that the $30 million loan would be paid back in full, with interest and in advance of its November due date.
Given the secrecy and fluctuating numbers associated with the various entities, investments and issues, it is unclear if the $30 million loan was made before or after the Aug. 25 meeting.
What is clear is the loan had not been repaid, as verified Thursday by ICC spokesman Holland L. Redfield II, after the Source queried him on the Belize situation.
At the September PSC meeting, Jonathan Siegfried, attorney for RTFC, said, "Without the consent of RTFC or the PSC, they [ICC] saddled the company with $85 million stock obligations and transferred $30 million out of the Virgin Islands, to the government of Belize."
At the same meeting, RTFC attorney Eric Cowan said there was "no guarantee" that the money would ever be returned to the territory as the loan between the ICC subsidiaries was unsecured.
At stake for the Belizeans is the nation's social security system. According to John Avery, editor of "The Guardian," the Belize Social Security Board not only owns a substantial minority block of shares in BTL, it also had invested in Intelco, a now defunct, would-be rival telephone system controlled by a local politician, Glenn Godfrey. These investments, according to Avery, are not going well.
But Davis said Friday he was confident that the deal between ICC and the Belize government would be completed "in a reasonable period of time."
Davis said, "We are working with the government of Belize to find an amicable and mutually satisfactory solution that would result in the goal we both share: to provide the best telecommunications service possible for the people of Belize."
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