June 9, 2008 — A recent decision by the U.S. Circuit Court of Appeals for the Atlanta circuit has left the already-tangled dispute between Jeffrey Prosser and the government of Belize further entangled.
Prosser, former owner and CEO of Innovative Telephone, had sought to control the monopoly phone company in the Central American nation, using what appeared to be Vitelco funds. He did not prevail, and a flurry of lawsuits followed.
Now a three-judge panel on the 11th Circuit has decided, unanimously, to toss two elements of that dispute back to the U.S. District Court in Miami.
The case has a number of unique aspects:
— both Prosser and his creditors are on the same side of the issue;
— five different courts in three different nations are involved (the United States, Belize and the United Kingdom);
— the U.S. State Department, on a narrow aspect of the case, came down hard against Prosser and for Belize; and
— the U.S. Bankruptcy Court, now sitting in St. Thomas this week, has no involvement whatsoever, despite its deep involvement in other issues related to Prosser and the companies he owned.
The reason Prosser and his creditors are on the same side relates to the fact that one of the litigants is Belize Telecom, a corporation once owned by Prosser's Innovative Communications Company. BTL, like the rest of the Prosser corporate empire, is now owned by his creditors.
The five courts handling the dispute include the U.S. District Court in Miami, whose ruling against Prosser's interests several years ago was on appeal to the Atlanta Circuit. The Miami court got the case originally because of a related loan involving a Miami bank. Both the Belize Supreme Court (a trial court despite its name), and the Belize Court of Appeals issued rulings favorable to Prosser's interest, and these have been appealed by the Government of Belize (GOB) to the Privy Council in London. Belize, a former British colony, still regards its highest court as a body within the House of Lords usually called the Law Lords.
A further complication is that under Belize law, the GOB has some power to appoint the directors of the local phone company, Belize Telecommunications.
After Prosser failed in November 2004 to make the final payment for the phone company stock — then owned by GOB — the government appointed four new directors, taking control of the phone company away from Prosser. Prosser sued in Belize and Miami.
At first the Miami court made preliminary rulings favorable to Prosser, including a contempt-of-court decision that called for a $50,000-per-day fine on GOB until it met one of the court's orders. (This decision, subsequently reversed by the trial judge, brought the U.S. State Department roaring into the case, saying it had no interest in the merits of the matter, but that setting a precedent that a sovereign nation could be fined by a trial judge in another nation was potentially a terrible problem for the U.S. worldwide.)
Ultimately the Miami court decided that GOB was correct in its decision about the board of directors, but the courts in Belize took an opposite view.
Prosser's lawyers then appealed the Miami decision and, at the same time, sought unspecified financial damages for the board of directors decision. The lawyers further sought to get Belize to pay its legal fees for Prosser's costs in connection with the contempt citation.
On May 28 the appeals court ruled that two of the GOB-appointed directors were legitimate and two were not, leaving the corporation board tied 4-4. The appeals court also said the contempt citation may have been appropriate, and told the trial court to revisit that issue, along with the legal fees related to it. The appeals court said the trial court should see if any damages should be given to Prosser's former company because of the directors' issue.
The appeals court faulted the district court for not paying appropriate attention to the rulings in Belize.
A key question as the district court revisits the controversy relates to whether the presence of a 4-4 split on the board of directors would support a claim for damages. A much stronger argument for damages could be made if the board should have had a pro-Prosser majority, said one observer familiar with the case.
Among the many unanswered questions are these: Will the trustee appointed by the bankruptcy court, Stan Springel, actively pursue the Belize matter on behalf of the creditors? And will the State Department reappear to argue against the country having to pay lawyers to inflict a contempt-of-court fine on Belize?
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