Feb. 13, 2006 — Further details of Jeffrey Prosser's bankruptcy issues unfolded Monday as Innovative Communication Corporation (ICC) issued a press release attacking the two entities that filed involuntary bankruptcy papers Friday in Delaware against Prosser and ICC. While ICC was engaged in battle on the public relations front, another interesting development occurred Monday: U.S. District Court Judge Curtis Gomez's opinion, denying ICC Vitelco's request for a temporary restraining order to fend off the bankruptcy proceedings, was issued to the public.
In its press release, ICC characterized Greenlight Capital's attempt to force ICC and Prosser into bankruptcy as "predatory," calling "the legal trick of having this motion filed in a bankruptcy court in another jurisdiction" part of Rural Telephone Finance Cooperative's "efforts to avoid fully adjudicating the cases it is clearly losing in the Virgin Islands."
The release from ICC, stressing that ICC was solvent, seemed to belie unconfirmed reports, mentioned in an earlier story, that Prosser had voluntarily filed for bankruptcy. (See "Prosser Pushed toward Bankruptcy".)
In a call to the Source Monday afternoon, Carol Rich, an attorney for ICC with the law firm of Dudley, Clark and Chan, said ICC had no intention of filing for bankruptcy. "It hasn't happened and it isn't going to," Rich said, while calling from the office of Holland Redfield, ICC vice president for public affairs.
The pending involuntary bankruptcy filing stems from the decision by two of Prosser's courtroom adversaries to join forces against Prosser and his companies. The two are RTFC, ICC's Virginia-based, long-term banker, and the Greenlight companies, a set of three New York hedge funds representing minority stockholders in ICC's predecessor company.
As a result of an October 2005 agreement between the two parties, Greenlight moved a petition of involuntary bankruptcy against Prosser and ICC in the federal bankruptcy court in Wilmington, Del., on Friday. Delaware is the site of a state court decision awarding Greenlight an estimated $134 million in compensation for what the court regarded as underpayments to minority stockholders when Prosser took the company private in 1998.
That Chancery Court decision has been appealed by ICC to the Delaware State Supreme Court.
Rich said ICC has filed a motion to transfer the venue on the involuntary bankruptcy filing to the Virgin Islands, where she said, "it belongs." She also said ICC will file a motion to dismiss the action.
Monday's ICC press release was issued by Redfield. He said, among other things, that "Innovative and all of its subsidiaries are financially sound and current on all loans to RTFC. Any suggestion of bankruptcy or insolvency created by filing this motion in such a court is malicious, misleading and a disservice to our employees and customers wherever we operate."
The question of where the RTFC-ICC case is to be litigated was one raised by RTFC recently. The nonprofit bank argued that Judge Gomez should recuse himself from ICC-related cases because of the key role, according to RTFC, played by Redfield — in his role as Republican National Committeeman for the Virgin Islands — in Gomez's appointment to the federal bench (See "Gomez Recuses Himself from One ICC Case, but Not From Two Others".)
The text of Gomez's ruling against the ICC request for a temporary restraining order (TRO) and a preliminary injunction was made available at the district court office and on the Web site Monday morning but was dated Friday, Feb. 10.
In the 16-page memorandum opinion, Gomez laid out the complex background for the request and stated his reasons for denying it. One element was the fact that while Vitelco had been specifically mentioned in an earlier set of papers, it had been dropped in later ones. The removal of any mention of Vitelco from the Inter-Creditor Agreement belies Vitelco's claim that the involuntary bankruptcy proceeding is designed specifically to take over Vitelco and makes the potential harm to Vitelco even more remote, Gomez said.
Vitelco's basis for requesting the TRO (temporary restraining order) was the concern for the stability of the Virgin Islands' only telephone company, they said.
Gomez also said Vitelco is way down the chain of the bankruptcy filing and far removed enough from ICC as not to be the target of the bankruptcy.
"Vitelco is a subsidiary of ICC. ICC in turn is a subsidiary of Emcom, which is a subsidiary of ICC-LLC. Accordingly, there are at least two layers between any potential entity that may be the subject of a bankruptcy petition and Vitelco," Gomez wrote.
The judge also indicated that he felt secure that the bankruptcy courts would bear in mind the powers and responsibilities of the V.I. Public Services Commission in any decision made about the parent company. In its filings for the TRO, Vitelco said that the involuntary bankruptcy filing was inappropriate because no change in the ownership of the phone company could take place without the approval of the PSC.
In his opinion, Gomez wrote: "The Court is mindful of the role of Vitelco in the Virgin Islands community. In 1959, the Government of the Virgin Islands granted Vitelco a franchise to provide the people of the Virgin Islands "a modern and adequate system of domestic and world-wide telephone and related services."
But, the judge wrote, "Because there is insufficient indicia that the anticipated harm may materialize in the manner that Vitelco suggests or with any degree of certainty, the law requires an outcome other than that urged by Vitelco."
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.