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Prosser Loses, Belize Wins in Miami Court

Aug. 16, 2005 — A federal judge in Miami ruled Tuesday that she had no objection to the Belize government's seizure earlier this year of Belize Telecommunications Ltd. (BTL) from Jeffrey Prosser’s Innovative Communications Corp.
The judge affirmed the seizure; lifted a temporary injunction against the government of Belize (GOB), which she had issued earlier at Prosser’s request; and awarded "nominal" damages to ICC on a minor issue in the complex case.
ICC–which owns Innovative Telephone, formerly Vitelco–is one of the largest corporate employers in the U.S. Virgin Islands. Funds borrowed from Vitelco had been used by ICC in the Belizean phone company deal.
Prosser’s control of BTL had been based on a $28.5 million payment, the assumption of the debts of a failed Belizean telecom firm, and the issuance of a promissory note for another $57 million. When the $57 million was not forthcoming, the Belize government seized the phone company and Prosser sued in the Miami courts. Earlier, the Belize government had agreed to submit itself to the jurisdiction of that court in order to secure a loan, financing the deal, from a Florida bank.
In 2003, the Belize government, unhappy with the previous owner of BTL, Lord Ashcroft, a prominent British political figure, had borrowed money from the Florida bank to buy out Ashcroft in the expectation that they could turn around and sell the shares to Prosser.
According to 7News, one of Belize’s two television channels, Tuesday’s decision by U.S. District Court Judge Ursula Ungaro-Benages "revisits and reverses her position on her March 11th preliminary injunction when she ruled that GOB had illegally removed two ICC directors from the BTL board."
7News contines: "Well, [it] turns out, the Judge was wrong on that and in this judgment she admits it. Her reversal is based on a change in perspective; Ungaro-Benages says that instead of seeing whether the ICC directors were illegally removed, she went to see if they were legally appointed, and she found that they were not."
The Belizean media, often critical of the Belize government's handling of the BTL matter, was openly delighted with the Miami decision. 7News called it a "thundering and comprehensive judgment this morning and basically tells Jeff Prosser to go home and lick his wounds because he isn’t gonna get any sympathy from her court."
The 55-page decision, handed down just seven weeks after the last oral arguments in the case, goes into excruciating detail about the complex financial maneuvering of ICC and the Belize government as they initially agreed on the purchase, and later fell out over the actual payments.
There are three classes of stock in BTL, a board of directors consisting of eight members chosen in a variety of ways, and bitter disagreements about just about every facet of the failed deal. Prosser’s lawyers had claimed that ICC had been damaged by Belize to the tune of $24 million.
While the judge ruled largely in favor of Belize, she found that ICC was correct on one minor count and awarded nominal damages to ICC. According to the Belizean media, "nominal damages" means only a few dollars.
The one count that ICC won dealt with whether or not Belize had credited ICC with a payment of roughly $4 million. The judge ruled that Belize had failed to credit the payment, but wrote: "However, Plaintiffs failed to introduce any evidence demonstrating that they have suffered anything more than nominal damages as a result of the Government’s breach."
One item in the dispute, left up in the air by the decision, was the question of how much Belize owed (if anything) to the U.S. Treasury for ignoring the judge’s earlier injunction? She had set down a $50,000-a-day fine (a substantial one for a small, poverty-stricken nation). There was nothing in the decision about either how many days were involved, or if the whole matter was now moot.
ICC said, in a press release, that it would either seek reconsideration at the district court level or an appeal to the 11th Circuit Court of Appeals. It called the decision "an expropriation of ICC's $57 million investment in Belize" and said it does not believe the decision "reached the central issue in the dispute: how the Belizean government defrauded Innovative into making a substantial investment in Belize Telecommunications Ltd. with the promise it would create an environment in which it could operate profitably."
That "environment" would have guaranteed a market without compettition from any voice-over IP providers, as well as any traditional phone carriers.
The Miami decision was the third recent or fairly recent decision which has gone against Prosser in the mainland courts. (See "Prosser Busy in At Least Five Courthouses".) In the first, a Delaware state court judge issued a decision, which is not yet a judgment, against ICC for failing to correctly value the stock in its predecessor company, thus hurting the then minority stockholders. ICC subsequently agreed to make $85 million in payments, but since a substantial part of the security for the payments was a lease held by ICC in Belize (a lease the GOB subsequently said did not exist), the state judge put proceedings on hold until the Belize situation was settled.
In the second decision, a federal court in Virginia ruled against an effort by ICC to move a civil case to the Virgin Islands. Shortly thereafter, a settlement, agreeable to ICC’s now-estranged lenders, the Rural Telephone Finance Cooperative, was made by ICC. Some $4 million in borrowing was involved in that case.
In the meantime, observers suggest Prosser’s investment in Belize will not do him as much good as anticipated. He now has a minority position in a corporation controlled by elements unfriendly to him (such as the Belize government and its new ally, Lord Ashcroft, who is buying his way back into control of the local phone system). There will be no management fees to ICC from Belize under these circumstances (one player had described the fees as "outrageous" in the current Miami case), and no opportunities for ICC to lease anything to the Central American phone company.
There has been no news lately on still another judicial front, RTFC’s effort to get ICC to pay the full $500 million it owes the Virginia-based cooperative. That matter is before the U.S. Courts in the U.S. Virgin Islands and RTFC’s months-old request to the judge that he recuse himself has not generated a response. A preliminary hearing in that slow-moving case is scheduled for next month.
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