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HAITI: Haiti Telecom Kickbacks Tarnish Aristide

by Lucy KomisarSpecial to CorpWatch
December 29th, 2005

cartoon by Khalil Bendib

Two U.S. lawsuits charge that former Haitian President Jean-Bertrand Aristide and his associates accepted hundreds of thousands of dollars in kickbacks from politically connected U.S. telecom companies. "Plus ça change," one might say in Haiti. The more the leadership in this corruption riddled country changes, the more things stay the same.

President Aristide's sudden departure from Haiti in 2004 is stalked by controversy. His defenders say he was a champion of the poor hustled out of the country by a Bush administration fearful of his radical populism. His critics charge that he was a corrupt and cynical demagogue building power by appealing to the poor and repressing opposition.

Lawsuits filed this Fall challenge the former priest’s image of political purity and raise claims that both he and U.S. corporate executives scammed illegal profits off the hemisphere’s poorest population. In one suit, a fired executive charged his former employer, the U.S. telecom IDT (Newark, NJ), with corruption, defamation, and intimidation under the New Jersey anti-racketeering law. In the second, the government of Haiti contends that IDT, Fusion (New York, NY) and several other North American telecoms violated the federal RICO anti-racketeering statute. Both suits allege that Aristide, now in exile in South Africa, and his associates, took kickbacks.

The story that the suits reveal is emblematic of the business relationship between a powerful rich country and a tiny impoverished nation linked by technology – and corruption. It starts out ironically: with a Western policy, designed to protect U.S. companies from price competition, which acts to give poor countries a break.

International phone calls access the routing systems of both the caller’s country and the recipient’s. The phone company where the call originates routinely pays a per-minute charge or "termination fee" for accessing the overseas system. The goal of this arrangement is to level the playing field in situations where most of the calling goes in one direction. There are, for example, far more Haitians in America who can afford to call family in their native land than there are Haitians in Haiti who have the money to dial America. Without the 23 cents termination fee, only the U.S. company would be paid and the Haitian phone service would not be reimbursed for maintaining its infrastructure.

The U.S. established a system of fixed fees – the international settlements policy (ISP) – in the 1980s, based on a practice dating to the 1930s, to strengthen the bargaining position of American telecoms against foreign carriers. In spite of the rhetoric of free-market competition, the U.S. didn’t want foreign phone companies making deals that forced U.S. companies to compete against each another. The Federal Communications Commission fixed the per-minute rates and required all U.S. companies to pay it. Companies had to inform the FCC and competitors if they negotiated lower rates.

The lawsuits charge that some U.S. firms cut secret deals to pay Haiti cut-rate per-minute fees while kicking back hundreds of thousands of dollars to Aristide and his associates. Instead of providing the Haitian phone company with money to build up infrastructure and services, the deals helped corrupt officials to loot the system.

Bipartisan Friends in High Places

IDT corporate governance gets failing marks from The Corporate Library and Institutional Shareholder Services, which rate companies for institutional investors. The board that flunked the governance test includes highly connected Washington insiders from both parties.

IDT'S Republican Buddies (+1 Dem)

CEO James Courter, was a Republican New Jersey congressman from 1979 to 1991.

Vice President Dick Cheney is a friend of Courter's, and when Net2Phone, an IDT internet phone company, went public in 1999, he arranged for Cheney to buy 1,000 initial shares. According to David Cay Johnston in the New York Times, Cheney paid $15,000 for the shares and sold them the same day for $26,574, a neat profit of 77.2 percent.

Prominent Republicans on IDT's board of directors include:

Jeane J. Kirkpatrick, former ambassador to the United Nations;

Jack F. Kemp, former New York congressman and Republican vice presidential hopeful;

James S. Gilmore III, former governor of Virginia; and

Rudy Boschwitz, former senator from Minnesota.

Pete Wilson, former governor of California, is on the board of the IDT Entertainment subsidiary.

William F. Weld, former Massachusetts governor who plans to run for governor of New York, was a director of the IDT board and chair of its governance committee until he resigned this fall.

Slade Gorton, former Republican Senator from Washington, replaced him.

Leon E. Panetta, the lone IDT Democrat, a former congressman who was chief of staff in the Clinton administration, is on the board of the IDT Telecom unit.

Fusion Telecommunications' Political Connections

Past and present board members include:

Marvin Rosen, former finance chair of the Democratic National Committee;

Joseph P. Kennedy II, Massachusetts Congressman;

Thomas "Mack" McLarty III, Clinton special envoy to Latin America.

John Sununu, chief of staff for former President George H.W. Bush, joined the advisory board after Kennedy and McLarty resigned.

Artistide's supporters are loath to believe that the charismatic former priest may have betrayed Haiti’s desperate poor who saw him as their savior throughout tumultuous years of alternating hope and despair. Elected president for a five-year term from 1991 to 1996, Aristide was almost immediately forced into exile by a military coup. Three years later, a U.S.-led force, acting under a U.N. resolution, invaded Haiti to restore him to the presidency. When Aristide’s first term ended in February 1996, he was constitutionally barred from succeeding himself. His close associate, former Prime Minister René Préval, served as president until Aristide was returned to office in February 2001. Citing evidence of fraud, the Organization of American States' electoral observation mission declined to certify the elections.

In February 2004, Aristide either resigned (the U.S. version) or was kidnapped (his story) and flown by the U.S. to South Africa.

Phone Home

Haiti’s phone system had become a contentious issue between the U.S., which demanded that it be privatized, and Aristide, who wanted it to remain government-owned. In the late 1990s, the Clinton administration cut off $500 million in promised loans and aid amidst charges by members of Congress that Aristide’s government was rife with corruption.

According to the lawsuits filed in Miami and Newark federal courts, the political corruption was a two-way street running between politically connected North American companies and Aristide's government. Haiti's Telecom sector is estimated at 400 million minutes a year, valued at $48 million. During the governments dominated by Aristide (1994-2004), Teleco (Télécommunications d'Haïti), the Haiti national telephone company, made agreements with foreign telephone companies, including IDT, Fusion Telecommunications, Skyytel (Montreal), Cinergy (Miami) and IPIP/Terra (Miami), granting them rights to connect to Haiti phone lines.

The suit by the Haitian government says that payments to Teleco were diverted or kicked back to Aristide's group through companies and bank accounts in the offshore Turks and Caicos Islands and the British Virgin Islands. A key company was Mont Salem in the Turks and Caicos. The offshore companies were described as "agents" or "consultants" for Teleco. These Caribbean tax havens are known for setting up shell companies and bank accounts that guarantee secrecy to the owners, who routinely use them to hide and launder the money of corruption, fraud, tax evasion, drug trafficking, and other crimes.

Details about the IDT charges are laid out in the case filed by D. Michael Jewett, who was IDT’s associate regional vice president for the Caribbean in 2003. That year, Jewett says, the company vice-president told him that IDT agreed to pay kickbacks to Aristide's Turks and Caicos bank account in return for a favorable phone deal in Haiti. Instead of the FCC-mandated 23 cents a minute for calls originating in America, Teleco was willing to accept only 9 cents a minute--with 3 cents kicked back to Aristide, Jewett said.

Jewett's Tale

IDT fired Jewett in November 2003, within a week after IDT got back its signed contracts from Teleco and Mont Salem. He fought for and won unemployment benefits, then hired a lawyer. He filed suits for wrongful dismissal in federal court in Newark in May 2004 and October 2005. He claims he was fired because he opposed the deal.

Jewett's version of events goes like this: The initial Teleco proposal called for IDT to deposit funds in a U.S. bank account. But fearing that it might pay and get no agreement, IDT decided to negotiate directly with Aristide. In August 2003, IDT executive vice president for International Business Development Jack Lerer met with Aristide in Haiti. A month later Lerer told Jewett the plan: IDT would deposit money in a Turks and Caicos account that Aristide had set up under the name Mont Salem. In September 2003 the deal was sealed: Teleco would receive 6 cents and Mont Salem would keep 3. Teleco's records were falsified to show Mont Salem as the carrier, not IDT.

Aristide's Miami lawyer, Ira Kurzban, refused Corpwatch’s request for comment on the telecoms cases.

Lawyers for the Haiti government say they know from Teleco billing statements that Mont Salem was paying Teleco 6 cents a minute for the minutes it was billing to IDT. They know from pleadings and a judicial order in the Jewett case that the rate in the IDT-Mont Salem agreement was 9 cents a minute. Putting the records together, the Haitian government lawsuit asserts that in one six-month period in 2004, IDT paid $302,588 in kickbacks to the Aristide group.

The U.S. Department of Justice, the United States Attorney in Newark, NJ, and the Securities and Exchange Commission have initiated investigations into the charges against IDT.

Offshore Adventures

One of the strongest links to Aristide is Mont Salem. Its Turks and Caicos incorporation papers show registration in June 2000 with capital of $5,000 – not much for a real company. Its registered agent was Timothy O'Sullivan of Miller, Simons and O'Sullivan, Turks and Caicos. The owner of shares was "M & S Nominees Ltd," (Miller and Simmons), listed at the same Turks and Caicos address. It fits the model of a classic offshore shell company designed to receive and launder money, rather than that of a real firm.

Where did the money go? Asked who the real Mont Salem owners are, Adrian Corr --lawyer for Miller, Simons and O'Sullivan in the Turks and Caicos--confirmed that "You can have nominee [strawman] directors," but declined to say if Mont Salem's listed owners were fakes. "I don’t know. You put me on the spot," said Corr. "I don’t want to answer any questions about this. I have lawyers retained; It's better you speak with them. It's [former New Jersey] Governor Byrne's law firm." His attorney Kerrie Heslin at Carella, Byrne, Bain, Gilfillan, Cecchi, Stewart & Olstein in Newark did not respond to numerous requests for comment.

Neither did Mont Salem's lawyer, Michael Weinstein, at Podvey, Meanor, Catenacci, Hildner, Cocoziello & Chattman, also in Newark.

IDT's CEO James Courter and the company's attorney in the Jewett case, Leslie Lajewski (Grotta, Glassman & Hoffman in Roseland, NJ), also declined to return phone calls and emails seeking comment.

The Federal court in Newark court dismissed the RICO claim on grounds of “standing” but accepted the whistleblower cause of action as well as Jewett’s claims of defamation and intentional infliction of emotional distress. The case will soon proceed to discovery, where his lawyer will be able to demand internal IDT records.

Meanwhile, more details are available from the president of Skyytel, a Montreal company which, according to the Haiti lawsuit, got a similar kickback deal. While denying payment of kickbacks, Colin Povall does acknowledge that Skyytel's 2003 agreement with Teleco provided for payment of 9 cents a minute to Mont Salem as Teleco's agent. Again, the Haitian telecom would reap only 6 cents a minute.

The Lawsuit

The Haitian government-Teleco lawsuit filed was in Miami Nov. 2, 2005, under the U.S. RICO (Racketeer Influenced and Corrupt Organizations) statute. The defendants are:

Former President Jean-Bertrand Aristide. He lives in Pretoria, South Africa.

Faubert Gustave, minister of the Economy and Finance 2201-4. He lives in Sarasota, FL

Rodnée Deschineau, general manager of the government-owned Banque Populaire Haïtienne from 2001-4. He lives in Dorchester, Mass.

Lesly Lavelanet, the brother-in-law of Aristide's wife, Mildred Trouillot Aristide. He controlled several companies, including Digitek SA and Global Spectrum SA. He lives in Coral Springs, FL.

Fred Beliard, who lives in Cooper City, FL.

Alphone Inevil, Director of Planning at Teleco from 1997 to 2002, then Director General to 2004. He lives in Lakeland, FL.

Jean Rene Duperval, Director for International Affairs for Teleco from 2003 to 2004. He lives in Miramar, FL.

Adrian Corr, an attorney with the law firm of Miller, Simons and O'Sullivan in the Turks and Caicos Islands.

"Mont Salem approached us," he explained. "We never met anybody in Haiti. Fred Beliard is the only one I met. He was dealing with some powerful people." Beliard, a Haitian, is accused in the lawsuit of participating in the kickback scheme. Povall said, "Adrian Corr, we only heard about him when it came to sign the contract; his name was on the contract." One of Skyytel's advisors is Ronald Beliard, who runs a telecom consulting company in Quebec and is related to Fred Beliard.

The Haiti lawsuit says that Skyytel paid Mont Salem $872,371 in kickbacks.

Another player in the alleged scheme is Fusion Telecommunications, a U.S. firm that the Haitian government lawsuit says made a suspect deal through a shell company. Run by former high-level Clinton administration officials, Fusion, according to the suit, made payments to Teleco via CW Holdings, a company with a bank account in Florida. Lawyers for Haiti do not know where CW Holdings is registered; they could not locate it in either Haiti or Florida.

Fusion, through its representative, Howard Rubenstein Public Relations in New York, acknowledged to Corpwatch that in mid-2001, "Fusion was instructed to make payments that it owed to Teleco to the account of CW Holdings in Bank Atlantic in Florida. In invoices that Fusion received from Teleco, Teleco accounted for Fusion’s payments to CW Holdings as payments made to Teleco. Fusion made payments to CW Holdings for three months until Teleco instructed Fusion to make all future payments directly to Teleco." The amount, according to the PR firm was "less than $1 million a month."

Fusion did not respond to queries about where CW Holdings was registered or the cost of the minutes it paid to that intermediary or to Teleco.

Up to the Courts

As the lawsuits make their way through various courts, Aristide, in exile in South Africa, is silent on the topic. His Miami lawyer, Ira Kurzban, was emailed Corpwatch's references to Aristide's alleged telecom kickbacks, but he declined to comment on them. In a statement issued after the Haiti lawsuit was filed, he declared it a "political investigation" by the current Haiti government, and noted that no one has been able to find "the money that the president supposedly took." He said that "there is none" and that "there are no Swiss bank accounts." None of the suits refer to Swiss accounts. His statement did not mention or refute the charges of telecom kickbacks or Aristide's receipt of them through a Turks and Caicos shell company.

If it turns out that an American company paid cut-rate fees for minutes, it violated U.S. Federal Communication Commission rules. If it paid kickbacks, it also violated the U.S. Foreign Corrupt Practices Act, which bans payment of bribes or kickbacks to get foreign contracts. It will be left to the Justice Department to file charges.

Meanwhile, in November 2004, to help U.S. companies negotiate better deals, ISP rules were ended in routes where U.S. carriers get termination rates at or below levels set by the FCC. For lower income countries such as Haiti, the benchmark is 23 cents, the old standard which, for Haiti, is no longer a guaranteed minimum. Jacki Ponti, the spokesperson for the FCC, refused, or was unable, to provide information about the current U.S.-Haiti rates.

Lucy Komisar is a New York journalist writing a book on the international impact of the offshore bank and corporate secrecy system.