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Good News and Bad News for Prosser and His Companies

July 8, 2007 — There have been two significant developments recently in the bankruptcy case involving Jeffrey Prosser, owner of Innovative Telephone.
To use a Wall Street phrase, a white knight has offered a potential solution to the whole case. (A "white knight" is usually regarded as a financial entity friendly to the current management of an enterprise.) Prosser's adversaries, meanwhile, have opened an entirely new front by calling for the involuntary bankruptcy of a Prosser company previously not involved in the case directly.
The white knight is the Rothschild Bank, which has provided a "full-financing commitment letter" that "will completely fund the settlement agreement and settle all claims" his adversaries have against Prosser and his companies, according to Prosser executive Holland L. Redfield II. The Prosser and Rothschild interests have talked to each other for months, according to the transcripts of the bankruptcy hearings.
The catch is that the Rothschild offer assumes the bankruptcy judge will decide that an earlier financial agreement between the creditors and the debtors remains in force. That deal called for the payment of about $400 million and interest to settle all outstanding claims. But Prosser's adversaries say, in effect, that this was a limited-time offer. The time to pay the reduced claim has come and gone, and the total amount owed to the creditors is now in the neighborhood of $650 million and interest, they say.
In fact, much of the last hearing — held June 28 on St. Thomas — was devoted to arguments about whether the bargain offer was still in effect. Judge Judith K. Fitzgerald has not handed down a decision on this part of the complicated controversy.
As for Prosser’s adversaries, the Greenlight companies have filed an action in St. Croix's bankruptcy court seeking to force involuntary bankruptcy on Innovative Communication Corporation. The Greenlight companies represent minority stockholders in the predecessor company to Prosser's current firm. Innovative Communication Corporation is a Prosser holding company not previously involved in the litigation directly.
Greenlight won a decision earlier from a Delaware state court. That ruling said Prosser had, in effect, failed to pay the minority stockholders appropriately when he took the company private.
The St. Croix filing does not shed light on why Greenlight took the action. Telephone calls from the Source to Greenlight lawyers over the weekend were not returned.
Prosser's side, however, didn’t hesitate to characterize the filing. “The new filing represents another attempt by Greenlight to try to squeeze more money than was already agreed upon in the settlement reached over a year ago,” Redfield said.
He also noted that the "new proceeding in St. Croix could potentially involve a new judge and might further delay … the outcome."
The current bankruptcy case, originally filed by Prosser's creditors in Wilmington, Del., was moved to St. Thomas because Prosser's lawyers argued that the Virgin Islands was a better location for airing the dispute than the mainland. The federal bankruptcy courts in St. Thomas and St. Croix are separate from one another and staffed by different judges. The St. Thomas case involves Prosser individually and two of his holding companies, but not the holding company sued on St. Croix.
Adding St. Croix to the list means there are now 11 jurisdictions where Prosser and his various adversaries are struggling with each other, or have done so in the recent past. The others include federal courts in Alexandria, Va., Atlanta, Delaware, Miami, New York City and St. Thomas; the state courts in Delaware; and, regarding Prosser's so-far-thwarted efforts to control the Belize monopoly phone system, judicial forums in that country, Canada and London’s House of Lords.
The Greenlight filing does not appear, on its face, to involve Prosser's other main creditor, the Rural Telephone Finance Cooperative. It’s a Virginia-based non-profit agency that for years served as Prosser's banker. Greenlight and RTFC have often operated in tandem in these proceedings, but not always.
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