Lawmakers Aim to Stop Verizon Sale to Frontier

Verizon Communication's proposed sell-off of 4.8 million rural phone lines in 14 states to Frontier Communications will saddle the smaller telecom firm with a huge amount of debt and should be rejected by the government, two U.S. lawmakers said Thursday. The US$8.6 billion deal, announced last May, would leave Frontier with $3.3 billion in debt while allowing Verizon to avoid paying about $600 million in taxes, U.S. Representative Paul Hodes, a New Hampshire Democrat, said during a press conference. Hodes plans to introduce legislation to close the tax "loophole" under a so-called Reverse Morris Trust transaction, in which a larger company sells off assets to a smaller company. The deal is a "tax scam, at its base," added Ben Scott, policy director of Free Press, a media reform group. In a Reverse Morris Trust deal, the selling company can avoid paying taxes on its sold assets as long as its shareholders end up with more than 50 percent of stock of the buying company.