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Senator Lashes Out at PSC for Secret Agreement

Oct. 6, 2006 — Sen. Adlah "Foncie" Donastorg Jr. registered serious displeasure Friday at news that a regulatory agency had secretly supported using the assets of the territory's only phone company to fund its owner's bankruptcy settlement.
Donastorg said it was an "outrage" that the Public Services Commission (PSC) had secretly signed off on a plan filed this week in District Court that would allow Jeffrey Prosser, sole shareholder of the Virgin Islands Telephone Corp.'s parent corporation, Innovative Communications, to use Vitelco to secure a $470 million loan to use as part of a settlement with three of his creditors. (See "Prosser Seeking to Involve Vitelco in Bankruptcy Settlement.").
"Such a maneuver could very well cause disruptions to our only source of telephone service in this territory," Donastorg said in a letter to PSC Chairwoman Alecia Wells.
According to court documents, the commission wrote a letter saying it would support the plan to use the phone company to secure the financing.
It was the commission's responsibility to protect V.I. consumers, Donastorg said, but instead "the PSC has once again decided to rule against consumers in favor of its friends at ICC." The senator has openly criticized several matters surrounding Vitelco (also known as Innovative Telephone) and its owner, including the company's recertification as a partially tax-exempt company under the territory's Economic Development Authority tax-benefits program.
Donastorg raised that issue in Friday's letter, saying, "More than 10 years ago we were told that, despite guarantee of a profit, Vitelco would be granted near total tax breaks in order to pay for upgrades to its system and provide good jobs to our citizens." But the phone service has not improved and the company has not met the terms of the tax benefits certification by employing the number of people required, Donastorg argued.
When the certificate period ran out, Vitelco officials applied for a rate increase and got it based on their assurance to the PSC that they were not going to reapply for benefits. And then, Donastorg notes, they reapplied and, "unbelievably," again received tax benefits.
Instead of using the money realized by the tax benefits to decrease rates to consumers, Donastorg said, "The profits were used to build an empire on the backs of the people of the Virgin Islands," he said, including the purchase of — among other things — international cable and telephone companies and the V.I. Daily News, the largest daily print publication in the Virgin Islands.
All this was done, Donastorg said, on the PSC's watch: "The lack of effective regulation by the PSC has resulted in both high utility rates and poor service."
Donastorg also took a swing at the commission for repeatedly shunning attempts to allow competition for local phone service. "In failing to allow any other enterprises to compete with Vitelco, and more importantly, in not working to ensure that we have modern and reliable utility service," Donastorg said, the commission was creating an "unfriendly business climate."
The PSC should immediately hold public hearings on the matter of using Vitelco to finance the bankruptcy settlement and to disclose Vitelco's financial records and the settlement agreement, Donastorg said.
"This body was once a voice for the people, but over the last decade has largely operated as an agent for corporate greed and mismanagement," he said.
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