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Vitelco Still Unable to Account for Money from Stock Issuance

July 17, 2005 – If it had been a trial and the audience at the Public Services Commission on Friday a jury, Vitelco, now commonly known as Innovative Telephone Company, would have won the case hands down over Rural Telephone Financial Cooperative (RTFC), which primarily alleges that Vitelco has defaulted on loan payments worth millions of dollars.
Vitelco attorney Joel Holt went over many of the 31 counts raised in lawsuits by RTFC. Holt then proceeded to explain each count away and waved documents that he said substantiated his claims.
He said not only would Vitelco win its case against RTFC, but that there were going to be substantial demands in a counterclaim that Vitelco would win.
He said that RTFC had severely hurt Vitelco's reputation and hampered its ability to do business by filing its lawsuits.
But Friday was not a trial. What the commissioners wanted instead was an overview of five lawsuits, and more importantly, to know where money from a stock issuance, that the PSC had not approved, had gone.
Here, Holt did not fare so well.
He told the commissioners that the $28 million that had been loaned to Innovative Communication Corp. to buy a telephone company in Belize had not come back to the Virgin Islands, as a Vitelco attorney had promised last November. Holt said the difficulty was that the Belize deal "had gone sour." (See "ICC in Three-way Battle for Belize Phone Company".)
He also gave no indication that he knew where the other $57 million from the stock sale went.
Holt said that Innovative was resolving the Belize matter and that it had a favorable ruling from a Florida judge.
However, Jonathon Siegfried, representing RTFC, said the Belize Supreme Court has ruled that the Florida judge has no jurisdiction.
The Belize troubles have also stalled a proposed settlement in what is commonly called the Greenlight case, in which Vitelco is being sued by stockholders in a Delaware court. (See "ICC Agrees to Pay More than $85 Million in Stockholder Suit".)
In all its litigious entanglements between ICC and RTFC, one small suit, concerning $4 million, was settled in a Virginia Court this month.
There remain three suits in the V.I. District Court – one concerns the stock sale, the second concerns loan defaults, and the third concerns the directors of ICC as guarantors of the loan. (See "Various Lawsuits Remain Unsettled for ICC ".)
Judge Curtis Gomez scheduled a September hearing in the first case.
At Friday's Public Services Commission meeting, Siegfried kept trying to get back to the money. He said he was not going to argue the merits of the cases, saying "That is a matter for the courts to decide."
He contended that what should be of concern to the PSC is the money from the stock sale and also monthly payments that Vitelco has ceased making to RTFC. The payments are $3.5 million a month.
Siegfried said that money should be staying with Vitelco.
While Holt said he was willing to talk about the case all day, he had little answer for where the loan payment money was now going since it was no longer being paid to RTFC.
He did say the cash probably went "into the normal cash flow of ICC."
Siegfried said, "That is exactly the problem."
According to informed sources, Vitelco's 1986 loan agreement with RTFC does not allow Vitelco to pay dividends to ICC other than for the express purpose of paying its loans.
Holt said ICC was no longer making loan payments because RTFC had "seized $61 million in our assets."
Siegfried described a complicated loan process and said that the assets that RTFC had taken control of were part of the loan package and would go to ICC when the loan was paid off.
He said he was worried all this money was leaving Vitelco and going through ICC and "being used for other purposes."
After the lawyers left the meeting, the PSC then heard a report from Vitelco concerning a prolonged service outage in La Grand Princess on St. Croix. The outage started on May 23 and impacted hundreds of residents and businesses in Hermon Hill and Orange Rock estates. (See "Telephones Out For a Week, Cause Business Problems".)
David Sharpe, president of Innovative Telephone, said that essentially all customers were now back in service, but there might be about 25 who have so much static on their lines that they can't hear voices.
PSC staff said residents were complaining because they were billed even though they did not have phone service.
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