Feb. 12, 2006 — An effort to thrust Jeffrey J. Prosser and his firms into involuntary bankruptcy was launched Friday morning when attorneys for the Greenlight companies, one-time minority stockholders in the predecessor firm to Innovative Communication Corporation, filed papers to that effect in the U.S. Bankruptcy Court in Wilmington, Del. The papers were filed against Prosser, Innovative Communication Company LLC, and Emerging Communications Inc.
Later that day, according to unconfirmed reports in the Virgin Islands impossible to verify over the weekend, Prosser filed for voluntary bankruptcy. It is unknown in what jurisdiction the voluntary bankruptcy was filed.
He reportedly did so after Judge Curtis Gomez, late Friday afternoon, rejected a temporary restraining order sought by Prosser to fend off the involuntary bankruptcy filing, sources said.
The involuntary bankruptcy filing in Delaware was an effort to force payment of the $134 million (the Source?s estimate) that Greenlight had won against Prosser and ICC in that state?s Chancery Court. The minority stockholders had argued, successfully, that they had been under-compensated when Prosser took the company private in 1998. (See "Prosser Loses $89 Million Decision in Delaware Court").
Last month Prosser and ICC , apparently seeing the writing on the wall, had quietly sought a temporary retraining order (TRO) from the U.S. District Court in St. Thomas to head off any involuntary bankruptcy filing. As of 4:30 p.m. Friday no TRO had been issued by that court, but it is reported that the ruling denying the TRO was issued around 6:30 p.m., after the court‛s normal office hours.
Prosser‛s lawyers had argued in the TRO filings that the effort to force an involuntary bankruptcy on ICC would involve its subsidiary Vitelco, and that there could be no change in the control of Vitelco without the consent of the Virgin Islands Public Service Commission.
The opposing lawyers in the case disagreed saying that there is no need for an emergency TRO on the grounds that things were not moving that quickly and further, the suits were aimed at Prosser and ICC, and not at Vitelco. These lawyers added that there should be no court order barring creditors like Greenlight from going into federal bankruptcy court.
For the last couple of years ICC has been fighting a series of separate legal battles with Greenlight on one hand, and with ICC‛s banker, Rural Telephone Financial Cooperative, on the other. The two ICC adversaries had appeared to be at odds with each other, as each sought to secure recoveries from the same pool of assets.
Late last week it became apparent, in the TRO filings and counter-filings, that RTFC and Greenlight had worked out a deal, an "inter creditor agreement," that set up a division of money between the two of them, should ICC and Prosser be forced to make payments.
The two outfits suing ICC are RTFC, a specialized non-profit bank in Northern Virginia, and the three associated Greenlight companies, described in the TRO request as New York-based hedge funds. In October, 2005, according to court papers, the two agreed to work together.
Their agreement runs to 19 pages and describes in great and sometimes hard-to-follow detail how they want to divide the assets of Prosser and ICC. For these purposes all the assets of ICC and Prosser are divided into three parts:
Innovative assets: These include ICC holdings in the Virgin Islands, in Guadeloupe and elsewhere. Greenlight is to get $27.5 million plus 10 percent of anything over $327.5 million with RTFC getting the rest, presumably most of the money.
Prosser collections: Greenlight is to get the first $35 million and two-thirds of the rest, with RTFC getting the rest, a smaller sum. This would involve collecting money from Prosser personally, as opposed to getting it from his companies.
Belize collections: RTFC and Greenlight split any receipts 50/50. Prosser and ICC are suing the government of this Central American nation for damages in connection with Prosser‛s failed attempt to purchase of the country‛s monopoly telephone system.
The sums involved in the earlier law suits by the two current allies are larger than those mentioned in the creditor agreement; these were the $134 million in the Greenlight case, and more than $500 million in the RFTC case, which has been pending, first in Virginia, and later in the Virgin Islands, for well over a year.
As one observer noted, Greenlight had a lesser claim on ICC‛s funds (its debt was non-secured) while RTFC‛s claim involved secured debt (like a mortgage) but Greenlight was doing better in court than RTFC, so they merged their interests
ICC‛s third major court-room adversary, the government of Belize, is not involved in the alliance as any court or arbitration award against Belize would be an asset of ICC, and thus something to be divided between the two allies, were they able to win against ICC in court. In other words, this is one courtroom battle (it is in Miami) that Greenlight and RTFC want Prosser to win, as it would give the allies a possibility of a larger settlement.