Dec. 2, 2006 — One of ICC owner Jeffrey Prosser's two main creditors, the Greenlight Companies, has switched sides on the issue of the secrecy of Prosser's finances in the ongoing bankruptcy proceedings and has now requested the judge to undo the secrecy order.
Up until now the U.S. Bankruptcy judge presiding over the matter has, at the request of the major creditors and the Prosser interests, kept the details of all financial matters under a court seal.
The Greenlight Companies — representing the former minority stockholders of Emerging Communications, a Prosser-controlled holding company — had previously joined both Prosser and his companies, and the Rural Telephone Finance Cooperative (RTFC), Prosser's longtime bankers, in supporting the secrecy agreements.
On Dec. 1, however, Greenlight filed a motion in the U.S. Bankruptcy Court in Delaware to undo the secrecy order, citing a Source article to support one of its arguments.
Greenlight's lawyers argue that Prosser's companies "cannot… satisfy the requirement of [the] Bankruptcy Code [on the secrecy matter] and seek simply to keep materials confidential to avoid the public and their creditors from having full and accurate information about the true nature of their assets and liabilities and the extent of related party transactions."
Later in the brief they stated: "…the information in the sealed documents and transcripts [of court proceedings] do not relate to the commercial operations of the debtors, but to the debtors' failed attempts to refinance those operations."
The brief also charged that the Prosser arguments for secrecy are "a facade for their real motivation, namely to cover up the debtor's embarrassment at the need to reorganize resulting from significant insider transactions, as well as their failure to accomplish such a reorganization."
The brief predicts that the Prosser interests will oppose the motion. On the other hand, the brief does not mention Greenlight's ally in the suit, RTFC, nor does it mention the prior, so-far unsuccessful efforts of two others parties to undo the secrecy order.
An effort by the preferred stockholders in Vitelco to unseal the proceedings has not, to the best of the Source's knowledge, been ruled upon by Judge Judith K. Fitzgerald.
An effort by St. Thomas attorney Mark D. Hodge, on behalf of Vitelco customer Justine Flashman, was brushed aside by the judge after she commented negatively on Ms. Flashman's eligibility to participate in the proceedings, saying that she was "simply a customer" (See "V.I. Phone User Given Short Shrift by Bankruptcy Judge").
A review of the current motion, and prior court proceedings, indicates that the Greenlight motion is different in three ways from Hodge's motion and may thus be treated differently by the judge.
The first difference is one of standing, or ability to participate in the case. Greenlight has been viewed by the judge as having standing from the beginning of the controversy.
The second difference is that whereas Hodge was attacking a secrecy arrangement that had been agreed to by all the major players, the Greenlight motion has been filed by one of those major players, thus breaking the united front of the recent past.
The third difference is that Greenlight, unlike Hodge, has attacked directly what it regards (now) as the narrow grounds that one can secure secrecy in a bankruptcy case.
According to the Greenlight brief "…a sealing order may be entered only to "(1) protect an entity with respect to a trade secret or confidential research development or commercial information or (2) protect a person with respect to scandalous or defamatory matter…." Greenlight says that neither situation applies in this case.
Further, regarding the question of competitive disadvantage, Greenlight argues that "the debtors [Emerging Communications, Inc. and Innovative Communication Company, LLC] are holding companies, not operating companies, and thus, have no competitors. Moreover, the debtors' operating nondebtor subsidiaries are regulated entities that do not have 'competitors.' Thus, the information requested to be unsealed does not constitute confidential commercial information."
Finally, Greenlight states: "Moreover, since Nov. 7, 2006, the debtors continuing efforts to refinance or sell their nondebtor subsidiaries have failed … the debtors have admitted that they have terminated the letter of intent with their most promising investor, secretly referred to as 'the investor.'"
As proof of these failings, the brief cites a Nov. 29 Source article covering the non-action of the Legislature on the proposed governmental purchase of Vitelco: "Prosser Tells Court Legislature Would Consider a Bill to Purchase Vitelco; It Didn't".
The full text of that Source article is appended to the motion as Exhibit C.
While no dollar figures are included in the brief, there was a reference to the relative size of the settlement agreed to earlier among Prosser's camp, RTFC and Greenlight. It was said to be "less than two-thirds of the aggregate amount of their [i.e., the creditors] claims." That proposed settlement has since collapsed, and the agreed upon figure — rumored to be in the $400-$500 million neighborhood is now moot.
The Source will report on the inevitable counter-brief when it is filed.
Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.