Dec. 3, 2002 – The contract agreement recently reached by Innovative Telephone and Innovative Cable TV and their more than 300 striking employees will likely leave at least 75 Virgin Islanders jobless as the holiday season approaches, according to Sen. Adlah "Foncie" Donastorg.
In a letter he sent to Gov. Charles W. Turnbull on Tuesday, Donastorg called for an investigation into the phone company's compliance with terms it agreed to four years ago in return for near-total tax benefits from the Economic Development Commission. At that time the company was V.I. Telephone Corp., or Vitelco, and the EDC was the Industrial Development Commission.
"It won't be a merry Christmas for those children whose parents and grandparents may have worked at Vitelco/Innovative for decades and will be terminated for simply standing up for their rights as workers," Donastorg wrote.
Under the terms of the agreement between Innovative and the United Steelworkers of America, about one-quarter of the workers who went on strike could lose their jobs because the company, during the eight-week walkout, replaced them.
"This is unacceptable," Donastorg said. "Especially given that we have given this company more than four years of near-total tax breaks in order to ensure jobs for Virgin Islanders."
Innovative attorney Joel Holt wrote to the commission on Nov. 19 requesting a meeting to discuss terminating the tax exemptions. The move that prompted public outcry from Sen. Adelbert Bryan, who said no action should be taken until the company is assessed any penalties incurred for failure to comply with the conditions of its tax certificate. (See "Bryan to EDA: Finish phone company probe first".)
Innovative Telephone also has asked the EDC to waive the requirement that the company employ a minimum of 421 persons, pending the final outcome of the strike.
To grant either of Innovative's requests "would mean being personally responsible for the layoff of 100 or more workers," many of whom have never worked any place other than the telephone company, Donastorg wrote.
He pointed out that in 1998 a Public Services Commission consultant, Georgetown Consulting Group, found that the telephone company had tripled its earnings, from $6.2 million in 1996 to $20.5 million in 1997. At the same time, he said, dividends paid to its parent company, Innovative Communication Corp., and its sole owner, Jeffrey Prosser, increased from $3.5 million to $7.6 million.
Donastorg also said auditors found the telephone company's profits to be well over 25 percent, when V.I. laws allow a maximum of 11.5 percent return. He charged that the profits were used to purchase the territory's two cable television companies and The V.I. Daily News "all in an effort to gain a stronghold on the territory's flow of information and communication."
But now, "facing a level of scrutiny as a result of the recent job action," Donastorg said, the phone company "is all too eager to escape the requirements of its EDC tax agreement, the benefits of which are due to expire in less than a year's time."
He said even a cursory examination of Innovative Telephone's record will show that the company has never been in compliance and that it owes the territory millions of dollars in back taxes and penalties as a result.
Donastorg's call for an investigation comes in the wake of two hearings on the phone company's tax-certificate compliance by the Senate Economic Development, Agriculture and Consumer Protection Committee, which Bryan chairs. Telephone company officials refused to attend the sessions, with counsel calling them a "thinly disguised" attempt at settling the ongoing labor dispute.
At the first hearing, the Economic Development Authority's assistant chief executive, Nadine Marchena, said a lack of compliance officers had hindered an investigation into the phone company's compliance history. She said a report should be ready in December. The EDC by law is supposed to issue compliance reports on all beneficiaries yearly.
Marchena was reported to be out of the territory on Tuesday, as were her boss, Frank Schulterbrandt, EDA chief executive; and Dean Plaskett, Planning and Natural Resources commissioner, who chairs the EDA board.
EDC's director of compliance, Margarita Benjamin, said the report is not finished and declined to comment on when it might be ready. She said Innovative's request for a meeting to discuss its beneficiary status is before the EDA board. The company cannot automatically give up its tax benefits, she said.
Innovative Telephone has full exemption from property, gross receipts and excise taxes and 90 percent exemption from corporate income taxes. In a controversial move of the Schneider administration, the tax exemption certificate was granted on June 30, 1997. It expires on Sept. 30, 2003. The conditions of the benefits package are that the company:
– Offer a capital investment of $100 million, excluding inventory.
– Employ at least 421 persons full time, no fewer than 80 percent of them V.I. residents.
– Provide employees medical, dental, life and accident insurance; and 401(k), retirement, savings and employee stock-ownership plans.
– Provide 10 scholarships of $1,000 each per year.
– Assist V.I. schools to gain Internet access.
– Contribute $40,000 yearly to the Boys and Girls Club.
– Sponsor youth programs.
– Contribute $5,000 yearly to both the St. Croix and the St. Thomas Little League baseball programs.
If found to be lacking in any of those areas, Marchena said, the company could face fines or suspension, modification or revocation of its benefits.

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