The battle of Belize
An acquisition once called a 'chapter of harmony' has turned into a tale of legal warfare
BY JANE BUSSEY
The government of Belize hailed the 2004 sale of the national telephone company to a U.S.-Caribbean corporation as a moment of promise and partnership. And the principal in the nearly $90 million deal -- Palm Beach and St. Croix entrepreneur Jeffrey J. Prosser -- declared he was ''proud'' to be part of the small country's development goals.
Not everyone was so enthralled with the Nebraska native who owns telephone, newspaper and cable TV interests in the Caribbean.
Dean Barrow, leader of the Belize opposition, lambasted Prime Minister Said Musa for embracing Prosser ''as the new love of the government's life'' and questioned whether Said was ''completely naive'' or an ''utter idiot'' to believe in Prosser after he defaulted on more than half the payment for Belize Telecommunications.
Before the alliance reached its first anniversary, it had unraveled and the business deal that Musa once called a ''chapter of harmony'' had turned into a tale of legal and verbal warfare.
The battle began Feb. 9 when the Musa administration took control of Belize Telecommunications Ltd. from Prosser and his company, Innovative Communication Corp., after he twice failed to pay $57 million he owed the government for the phone company.
Prosser, 48, the chairman, chief executive, president and sole owner of Innovative Communications, decided to fight back.
But he didn't wage his battle on Belize's turf. He took his case to U.S. District court in Miami, charging the government of the Central American country with breach of contract and demanding the court issue an injunction that would overturn the boardroom takeover and put him back in charge.
Lanny Davis, one of Prosser's attorneys and once counsel to former President Bill Clinton, called the Belize government ''lawless'' after parliament passed a law authorizing the takeover of certain telephone company shares after Prosser's default.
And Davis vowed to pressure Washington authorities to do everything from seizing assets that the Belize government has in the United States to requesting the U.S. State Department suspend visas for government officials.
Rep. Jerry Weller, R-Ill., even sent an April 1 letter to the prime minister labeling Belize's actions ''illegal.'' Weller is married to the daughter of a former military dictator in neighboring Guatemala, which for decades claimed Belize as its own.
While it is not the first dispute involving a foreign government to end up in federal court, it has became one of the most unusual.
In the early stages of the case, U.S. District Judge Ursula Ungaro-Benages ordered Belize to reverse its action against ICC, then slapped the government with a contempt charge for disobeying, suggesting that Belize authorities seemed to want ``to be hit over the head by a 2-by-4.''
Meanwhile, back in Belize -- a sleepy former British colony of 273,000 people that lives off tourism and sugar, banana, citrus and fish exports -- the Musa government also faced problems.
In April, street fighting broke out in Belize City when telephone workers went on strike to protest the government's handling of the phone company controversy.
More upsets were coming.
Last Tuesday, UngaroBenages made a nearly 180-degree turn from her March orders and ruled in favor of Belize, upholding the government's right to retake the shares that Prosser failed to pay for. She also dismissed claims the government had breached its agreements with the American executive.
''A huge victory,'' said Barry Davidson, a lawyer at Hunton & Williams in Miami, which represented the government of Belize.
''We are disappointed,'' said Raymond Mullady, one of Prosser's attorneys who is with Orrick Herrington & Sutcliffe in Washington.
Davidson said that after a June trial that included expert witnesses explaining Belize's commercial law, UngaroBenages ``concluded that Prosser never had the right to control the board to begin with.''
But the case isn't over yet.
Mullady said a separate arbitration claim that will be heard in Toronto would center on the allegations that the government of Belize had ''fraudulently'' induced Prosser to invest by making promises that would not be kept.
''The central dispute between Prosser and Belize has not been litigated and was not addressed by the judge,'' Mullady said.
Meanwhile, the case has piqued interest in legal circles.
''Belize says this is the first time in history that a U.S. judge has held a foreign government in contempt. This is an unusual and fairly important case,'' said John F. O'Sullivan, a lawyer with Akerman Senterfitt who was not involved in the case.
''This kind of ruling is the natural fallout of globalization and privatization efforts in many countries,'' he said. ``When governments act as businesses, and engage in purely commercial activities outside their borders, it is not unexpected that courts will treat them as businesses.''
Normally, however, the doctrine of sovereign immunity protects governments from the jurisdiction of other country's courts.
But because the terms of sale included a $57 million promissory note from the International Bank of Miami to Prosser, both sides agreed in a bank document that any dispute would be settled in a federal court in Miami.
''Miami wants to be a place where international disputes get resolved,'' said O'Sullivan. ``Federal judges in Miami have been willing to take on issues of international law if they feel the parties have agreed to have their disputes decided here. And once everyone gets used to the rules, the availability of an impartial forum like Miami will be viewed as enhancing global commerce.''
BEFORE THE UN
Now the legal wrangling is expected to move to the United Nations Commission on International Trade Law in Toronto where Prosser has requested binding arbitration and demanded more than $200 million in damages.
Such battles seemed inconceivable when Prosser and Musa announced the March 31, 2004 sale of Belize Telecommunications to Prosser's Innovative Communication. He paid $32.7 million for the first bloc of shares, but a $57 million IOU was never paid.
Prosser, born and raised in Falls City, Nebraska, was no stranger to international business deals. Through his holding company, Prosser owns telephone companies in the U.S. Virgin Islands, the British Virgin Islands, Guadeloupe and Martinique, St. Maarten and southern France.
His business ventures have not been without controversy. Former minority shareholders in a firm Prosser merged won a suit that said he underpaid them. His companies have also been charged with breaching lending agreements.
But Musa still sought him out as an investor. The Belize phone company purchase would add another $75 million in annual revenue to Prosser's holdings. Besides profits from the company, Innovative Communication also earned a 6 percent management fee.
As part of the deal, Prosser pledged to invest $105 million in improving telephone service.
Prosser blamed his failure to pay the $57 million on Belize, saying authorities had not enacted regulations and other rules that would have protected his earnings. ''We were misled every step of the way,'' he said last week.
The judge said that her court couldn't rule on Belize's motivations.
But last week she did find fault with Prosser's actions. His company, she said, ``inexcusably defaulted.''