March 13, 2006 – Another group of Vitelco investors, a different group from the sets of investors in Jeffrey Prosser's properties who have filed lawsuits in the past, have indicated their unhappiness with how their money is being used.
The investors, a group of New York-based hedge funds, are the unnamed parties who bought some $85 million in preferred stock in Vitelco a couple of years ago.
It was the preferred stock issuance that set off a series of lawsuits beginning with the suit filed in June 2004 by the Rural Telephone Finance Cooperative, Vitelco's long-time bankers. (See "Cooperative Sues ICC and Says It Owes $530 Million").
There is a similarity between the current arguments of the preferred stockholders and those of RTFC, when they filed their initial suit.
In both cases the parties said, in effect: "We provided money to you with certain conditions, and you violated those conditions."
Through their attorney, Andrew K. Glenn of the New York law firm Kasowitz, Benson, Torres & Friedman, the preferred stock investors have written to Vitelco to object to what they regard as violations of the agreements relating to the issuance of that stock.
In the earlier suit, RTFC had argued that the very issuance of the preferred stock, without consulting RTFC, was a violation of ICC-RTFC loan agreements.
More specifically, the preferred stockholders say in Glenn's letter that Vitelco has done three things without seeking the consent of two-thirds of the preferred stockholders, which is in conflict with the purchase agreements.
Vitelco, the stockholders say: (1) lent "$33 million to Belize Telecom Ltd., a Prosser affiliate to assist Prosser, unsuccessfully, to acquire the Belize telephone company" and (2) made an additional transfer of over $30 million to "ICC and other Vitelco affiliates purportedly as a loan."
The third situation the stockholders objected to was Vitelco's handling of its finances in such a way that the Pension Benefit Guaranty Corporation (a federal agency) filed liens against the phone company for failing to pay at least $1.5 million into the workers' pension fund. (See "Federal Agency Files Liens Against ICC Companies").
No issue regarding non-payments of dividends was raised in Glenn's letter. Dividends of 10 percent a year are provided in the purchase agreement.
So far, Vitelco has not issued any response to the letter.
Glenn's letter said that his firm represented the holders of more than 50 percent of the preferred stock. That letter, dated March 3, set in motion a 30-day "cure" period in which Vitelco was told to correct the three matters outlined.
If this does not happen by April 3 – and over the phone Glenn was optimistic about the solution of only the pension payment shortfall – then another 90-day waiting period begins. At the end of that second period the holders would, assuming that a cure had not been found, have the option of filing a lawsuit against the Prosser property that has already seen many lawsuits.
Glenn would not speculate on where such a suit would be filed, if, in fact, one is filed.
Earlier, and quite independently of each other, two other sets of ICC investors had filed lawsuits against ICC and Prosser. In addition to that filed by RTFC, the Greenlight companies representing the minority stockholders in Emerging Communications, the predecessor to ICC, filed on behalf of minority stockholders in Emerging saying that they had been under-compensated for the shares they held when Prosser took that company private. The Delaware Chancery Court has ruled in favor of Greenlight, and ICC has appealed that ruling to Delaware's Supreme Court.
Subsequently RTFC and Greenlight joined forces, and most recently have moved in the federal bankruptcy courts to impose involuntary bankruptcy on ICC. (See "Prosser Pushed Toward Bankruptcy").
That case is moving along rapidly with ICC's lawyers having been deposed by their adversaries Friday in Wilmington, Del., and with hearings on various aspects of the case scheduled to be held at 5 p.m. on March 27 in Wilmington, and at 8 a.m. on March 31 in Pittsburgh.
Conducting both of these hearings, in two different places, will be the sometimes itinerant federal bankruptcy judge assigned to the case, Judith K. Fitzgerald. That name may be familiar to some V.I. attorneys as she also sits on bankruptcy cases about once a month on St. Thomas. Her judicial home base is Pittsburgh's federal bankruptcy court.
ICC has petitioned that the involuntary bankruptcy case be moved to the Virgin Islands, and Greenlight-RTFC has resisted that request. A decision on that matter is expected shortly, with Fitzgerald, presumably, deciding where she will hear the balance of the case, among other things.
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