by JM » Tue Oct 06, 2009 5:28 am
Paradise Lost: Successful entrepreneur now in bankruptcy
BY JAKE THOMPSON
WORLD-HERALD BUREAU
Nebraska native Jeffrey Prosser built one of the largest telecommunications companies in the United States. A telephone company. A cell phone operation. High-speed Internet service. Two cable TV businesses. A newspaper. He had a mansion in Palm Beach, Fla., a condo on St. Croix and a home on New York's Lake Placid. Paintings, jewels and furnishings worth millions.
Jeffrey ProsserLegal battles with investors and lenders in Delaware, Virginia, Florida and the Virgin Islands culminated last fall. He and his company are in bankruptcy. Now with his company and soon his homes gone, it's paradise lost.
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WASHINGTON — When Falls City, Neb., native Jeffrey Prosser threw a 50th wedding anniversary bash for his parents, he spared no expense.
In typical style, Prosser hired Kansas City-based decorating and catering crews to transform the plain Camp Rulo River Club in nearby Rulo, Neb.
They draped the walls with peach- and coral-colored fabric, placed bouquets of flowers all around and set elaborate tables. On that June 2003 night, about 180 guests dined on filet mignon and lobster tails and danced to the Duke Ellington Orchestra.
"It was an elegant, spectacular evening," said Rodney Vandeberg, Falls City's mayor. "It was like we've never seen before and never will again see."
Jeffrey Prosser may not, either.
The former Nebraska accountant who became a Caribbean entrepreneur found as much turmoil as he did success. Prosser's tale is that of the rise and fall of a high-flying businessman — a financial thriller set in an island paradise.
His story includes street protests in the nation of Belize, making money from phone sex telephone traffic, soured business partnerships and acrimonious civil lawsuits.
In the eye of this tropical financial storm stands a driven, 51-year-old executive with a knack for highly leveraged corporate acquisitions and a taste for the finer things in life.
"Yes, we entertained well. I did live well," Prosser said in an interview. But he said his lifestyle wasn't illegal and he has never been charged with illegal acts.
"There isn't one lawsuit out there alleging accounting fraud or that the audits were wrong — or anything else — which you would normally see," he said.
Until recently, virtually no one in the Virgin Islands could communicate without help from Prosser. He owned the telephone company, a cell phone operation, high-speed Internet service, two cable television businesses and the main newspaper.
He also had a bank in the islands as well as cable operations on neighboring Caribbean islands and in France.
He counted 75,000 telephone customers and 150,000 cable subscribers. With 800 workers, he was the islands' second-largest employer.
Over two decades, he set up companies to buy companies, ultimately building one of the largest privately owned telecommunications businesses in the United States.
But a hurricane of legal rulings — growing out of accusations that he shortchanged investors, and countercharges that his company was targeted by a greedy investor and a disgruntled lender — battered the CEO. His troubles culminated last fall, when Prosser was ordered into involuntary bankruptcy. His company is in Chapter 11 voluntary bankruptcy.
U.S. Bankruptcy Judge Judith Fitzgerald wrote in October 2007 that she had previously extended deadlines to allow him to pay a settlement to creditors, but he failed to do so.
"This bankruptcy case is now over 14 months old," Fitzgerald wrote, "and there is no likelihood of a reasonable prospect of rehabilitation of debtor's financial affairs."
His company, Innovative Communications Corp., owes more than $500 million. Court proceedings also revealed an additional $10 million to $15 million in unpaid pension liabilities.
The judge appointed trustees who are working to liquidate his personal assets and parts of his empire to pay off the debts.
Until last fall, Prosser earned an annual salary of $1.5 million. But bankruptcy court-appointed trustee Stan Springel, who removed him as CEO, said Prosser also treated his company as "his personal 'piggy bank' to fund a lavish lifestyle," according to a court filing.
Bankruptcy court records show that Prosser traveled in a company-owned Boeing 727. He split time between a condo on St. Croix, an $8.7 million mansion in Palm Beach, Fla., and a $1.4 million home on New York's Lake Placid — all at least partly financed by company funds, according to court filings.
He used company money to buy $9.1 million in luxury items, for himself and family members, that included "jewelry, art, automobiles, personal watercraft, fine wine, silverware, negotiable and non-negotiable securities, season tickets to sporting events, country club membership, clothing, rugs, antiques and other home furnishings," Springel said in a court filing.
The items included four paintings by French Impressionist Camille Pissarro valued at about $5 million; a $400,000 platinum necklace studded with 736 diamonds; $197,000 ruby-and-diamond earrings; a $265,000 diamond ring with an oval ruby; and a $596,850 diamond-encrusted bracelet studded with 37 rubies.
"He left his companies in terrible, terrible shape," Toby Gerber, a lawyer for the private, nonprofit Rural Telephone Finance Cooperative, said in an interview. The cooperative has loaned Prosser more than $500 million since the 1980s and helped force him into bankruptcy.
During a phone interview, Prosser was sometimes indignant, yet willing to tell his side of the story.
"Everybody, in my view, missed the point: I owned 100 percent of this company," he said. "We weren't public."
Because the Rural Telephone Finance Cooperative, based in the Washington area, had two officials serving on his company's boards until 2001 — and continued lending him money until 2003 — it should have known how he was operating, Prosser said. His company was sound, he said, and it had upgraded telephone and cable equipment after two damaging hurricanes.
"We made a lot of money, we had a lot of cash flow and our only lender financed most of our assets," he said. "But now you'd swear to God they never knew what they lent $500 million on."
He said his fight with the cooperative started in 2003, after he accused it of falsifying documents related to its own financial picture. Then, he said, the lender teamed up with Wall Street hedge fund Greenlight Capital LLC — which had won a judgment against Prosser in a dispute over a stock buyout — to take away his company.
"This all comes down to (Rural Telephone Finance Cooperative) and their desire to destroy me," Prosser said.
Officials at Greenlight and the telephone cooperative declined to discuss the case.
But Gerber showed his client's frustration about its lengthy court battle during a hearing last September before Fitzgerald, the bankruptcy judge: "We've been patient long enough with Mr. Prosser's frolics and detours . . . with his appearing that he doesn't owe the creditors anything."
In the Virgin Islands, the executive director of the Public Service Commission that regulated Prosser's companies, Keithley R. Joseph, also declined to discuss Prosser or his business.
On St. Croix, an island with a population of 53,000, Prosser is perhaps best known through the Prosser ICC Foundation, which has given more than $5 million to promote education, athletic and arts events and provided scholarships for college-bound Virgin Islands students, said Michael Dembeck, executive director of the St. Croix Chamber of Commerce.
Roger Dewey, executive director of another local philanthropic group, the St. Croix Foundation, got to know Jeffrey Prosser during a decade of pickup basketball games.
"He played basketball like a Nebraska lineman," Dewey said with a laugh. "He was physically aggressive, but always played clean."
Nebraska was where Prosser first learned about the telephone industry. For years, his father managed the Southeast Nebraska Telephone Co. in Falls City. Prosser's parents didn't flaunt their prosperity, and they were heavily involved in community activities.
At Falls City High School, Jeffrey Prosser participated in Spanish Club and on football, basketball and golf teams.
He was well-liked and popular, but not a terribly good public speaker or dynamic personality, classmate Lonnie Goff recalled.
"He didn't cause problems or raise hell. He was just a nice guy," Goff said.
He did show a streak of determination later seen in business. When Goff and Prosser were seniors on the school basketball team, a new coach said he'd start only sophomores in hopes of improving the team's dismal record.
"I think he's the only senior who didn't quit," Goff said.
Prosser drove a backhoe, spliced and buried cable and learned to run a telephone switchboard at his father's business. He studied the industry's financing and regulatory oversight at the University of Nebraska-Lincoln. He still keeps close tabs on the Cornhuskers.
He received a bachelor's degree in business administration in 1978 and became a certified public accountant.
In the early 1980s, he started an accounting firm in Omaha, then established an office on St. Croix in the U.S. Virgin Islands in 1984 and prospected for other business.
Prosser allied with former Nebraska State Sen. John DeCamp to try to bring video gambling machines to the Virgin Islands.
That first deal fell through, but Prosser scored in 1986, buying the Virgin Islands Telephone Company from the international conglomerate ITT Corp. He financed the purchase with Cornelius Prior, who left his position overseeing telecommunications financing at the now-defunct brokerage and investment banking firm Kidder, Peabody & Co.
"He came in completely unknown to me and me to him," Prior said. "He got ITT to sign; I got the money to pay them."
With additional financing from the rural telephone cooperative, their operations thrived and made both men wealthy.
But Prosser's personal life suffered. He divorced his wife in 1990 and remarried in 1998. His first wife sued him for failing to pay an agreed-upon $2.5 million settlement.
"It got paid," he said in the interview. Court records back him up.
Then, his business relationship with Prior broke apart.
"It's a question of daily aggravations; eventually it takes a toll," Prior said. One "aggravation," Prior said, was Prosser's use of a company jet for personal trips.
Prosser attributes the tension between the two to their diverging financial goals. "We had different directions we wanted to go in, I with acquisitions and he with starting up companies."
In 1997, they split. Prosser's enterprises grew — and so did his notoriety.
He commuted to work on the island of St. Croix in a Rolls-Royce sandwiched by black Chevy Suburbans driven by bodyguards, according to two business officials there.
Prosser acknowledged he has adversaries in the islands, which he says are rife with "small town politics."
Since 2003, he's waged legal battles in Delaware, Virginia, Florida and the Virgin Islands to hold onto his businesses. All the while, his creditors closed in.
For now, he has lost his job and his company. Trustees also are seeking to sell Prosser's homes and have a potential buyer for his bank.
But through his continuing legal appeals, Prosser sees a chance to win it all back.
"I think what's been done has been a tremendous injustice to this company and to me," he said. "Hopefully, the next chapter will be different."
