Tuesday, July 29, 2008

Aristide's American Profiteers



Aristide's American Profiteers

Wall Street Journal

July 28, 2008; Page A13

(Read the original article here)

This column has long followed the story of Jean Bertrand Aristide's Haiti, two U.S. telephone companies and a few American political insiders. Many questions remain unanswered and now both companies are back in the news.

On July 10 the Federal Communications Commission hit IDT Corp. with a $1.3 million fine for "willfully and repeatedly failing to file with the commission" its contracts with Haiti's telecom monopoly, Teleco Haiti, in 2003 and 2004.

Not only should those contracts have been filed, they should have been made public. Now that they have been made public, we learn that Teleco Haiti granted IDT the right to terminate calls in Haiti at less than half the official settlement rate, and that IDT agreed to deposit all payments not at Teleco Haiti, but in an offshore account in the Turks and Caicos managed by a company called Mont Salem.

Long-distance revenues were one of Haiti's few sources of hard currency. Yet after President Aristide left office in 2004, Teleco Haiti's coffers were found to be empty. Still, IDT may have played only a small role in the alleged looting of Teleco Haiti.

A far more interesting actor is Fusion Telecommunications. It may have been terminating traffic in the country as far back as the mid-1990s, not long after Bill Clinton used the U.S. military to restore the coup-deposed Mr. Aristide to power. But we don't know if this is true because Fusion's contracts, which should also be public under FCC rules, have been shrouded in secrecy.

The FCC decision against IDT is a victory for former IDT employee Michael Jewett. He filed suit in federal court in Newark, N.J., in 2004, alleging that the company fired him because he objected to an illegal deal between it and Teleco Haiti.

Much of what Mr. Jewett described in his complaint turned out to be in the contract. But there's more. He also alleged in court documents that he was told that the Mont Salem account belonged to Mr. Aristide. IDT denies this.

Mr. Aristide's Haitian critics have long alleged that Fusion was getting a preferred connection rate in return for kickbacks to the strongman. This, they say, allowed Fusion to dominate the U.S.-Haiti route, something that would have made company insiders rich. Haitians told me in 2001 that Fusion even had an office inside Haiti Teleco.

The chairman of Fusion's board was and still is Marvin Rosen, who was the finance chairman of the Democratic National Committee during the 1996 Clinton fund-raising scandals. During the late 1990s, Joseph P. Kennedy II and Thomas "Mack" McLarty, both prominent Democrats, were on the board. Fusion has previously denied any wrongdoing.

In February 2007, the FCC told me that its "Haiti file," containing contracts, had vanished from its records room. To re-create the missing file, it asked IDT, Fusion and other companies for copies. Fusion produced one, from 1999, that it says matched the one it had filed.

In December, I filed an application to see that contract under the Freedom of Information Act. Eight months later the company is still blocking my request. Company lawyers have met with the FCC to argue for confidentiality.

Why Fusion would fight so hard to keep what is supposed to be a public contract out of the public's view is a good question. Here's one possible reason: A civil action filed by the Republic of Haiti in November 2005 in Florida charged that Aristide operatives gave "rate concessions" to various telephone companies, and these "included Fusion Telecommunications." The suit also charged that Teleco "allow[ed] certain carriers to 'settle' allegedly disputed Teleco billings on favorable terms," and that Fusion was one of them. These, the civil action notes, "were not in Teleco's interest" and "violated U.S. law."

The Florida suit -- which was withdrawn after a change of government in 2006 but can be reinstated if the plaintiff desires -- also alleges that "the fraudulent scheme to steal Teleco revenues was carried out in part through defendant Mont Salem," which "serve[d] as a front for the interests of the Aristide Group." It says that "at Aristide's direction," two carriers were instructed to make payments to Mont Salem. One was a Canadian company. The other was IDT. And further: "At Aristide's direction Teleco's then-counsel also caused Teleco to request at least one other carrier, Fusion, to make payments through Mont Salem."

The FCC is set to decide by Sept. 26 on whether the Fusion contract should be public. Its IDT decision sets a precedent, and Americans deserve to know what happened between the Clintonistas and Mr. Aristide. Haitians also deserve accountability. Mr. Aristide, who fled Haiti in 2004 under a cloud of corruption charges, is living in South Africa but trying to make a return to power in Haiti. If he succeeds, Haiti's future will remain as dim as its past. The FCC should give a full accounting on whether some of his past enablers were high-ranking American politicians.

Write to O'Grady@wsj.com

Thursday, July 17, 2008

McCain 'Trailblazer' Burned

McCain 'Trailblazer' Burned

The FCC hits James Courter's IDT with a $1.3M fine for a cloudy deal in Haiti.

IDT, the New Jersey telecommunications outfit run by one of John McCain's top fundraisers, Jim Courter, was fined $1.3 million by the Federal Communications Commission for failing to file a contract for telephone service to Haiti in 2004.

Its work with Haiti has been put under scrutiny since a former employee, Michael Jewett, then IDT's manager for the Caribbean, sued the company. His suit claims he was fired when he balked at negotiating a scheme that routed a portion of the company's long distance revenue from Haiti calls to a shell company owned by then-president Jean-Bertrand Aristide.

Jewett's suit alleges that the deal cut IDT's long-distance payments to Haiti to 8.75 cents a minute, from 23 cents, the legal tariff, which mainline U.S. carriers such as AT&T were paying.

Payments went to an offshore shell company, Mount Salem in the Turks & Caicos, which sent 3 cents to Aristide and the rest to the Haiti telecommunications company.

Courter, a former New Jersey Republican congressman, is one of 20 McCain national finance co-chairs, and joined the campaign in February 2007. He's a "Trailblazer" for McCain, meaning he raised at least $100,000. The IDT PAC has contributed $84,850 in 2008.

The F.C.C. said IDT had violated the law by "willfully and repeatedly" failing to file its Haiti agreements regarding rates and other matters.

The filings were required under the commission's International Settlements Policy, which called for the same best rates for all U.S. carriers. The goal was to ensure "a competitive playing field" and prevent dominant carriers on the foreign end of a U.S.-international route from leveraging their market power to the detriment of U.S. carriers and consumers.

IDT had had its share of run-ins with regulators even before the F.C.C. fine handed down Wednesday. Jewett's allegations are also being investigated by the Justice Department, the Securities and Exchange Commission, according to the company's filings with the S.E.C. The I.R.S. is also reportedly looking at the company, according to published reports.
An IDT spokesperson declined to comment.

Adrian Corr, a Turks & Caicos lawyer who was legal counsel for Aristide at Miller Simons O'Sullivan and who ran Mount Salem, confirmed that Aristide owned the shell.

Jewett's lawyer, seeking to read the Haiti contracts at the Federal Communications Commission, discovered that the entire file had disappeared. The F.C.C. directed IDT and other carriers to refile their contracts. IDT's showed payments to the Turks & Caicos shell company.

Jewett's suit charges that IDT evaded the rules and kept competitors in the dark. Documents obtained via Freedom of Information Act requests this year also revealed that IDT failed to file contracts with dozens of other telecoms around the world.

The S.E.C. and I.R.S. are looking into IDT's tax returns for 2001, 2002, 2003, and 2004. Any discount or ill-gotten gain, such as the difference between 8.75 and 23 cents, is taxable.

In a quarterly S.E.C. report filed June 6, IDT's balance sheet shows $365 million "income taxes payable," meaning the sum is put aside for back taxes. The figure was zero last year.

All the executives below Courter involved with the Haiti deal are gone. The June report announced the "involuntary" departure of the chief legal officer.

Top-tier Republicans have also bailed out.

William Weld, former G.O.P. governor of Massachusetts, was head of corporate governance at IDT but resigned after the Jewett complaint was unsealed in July 2005.

IDT announced in October 2006 that its entire board would not seek reelection, including former congressman and vice presidential nominee Jack Kemp, former U.S. Ambassador to the U.N. Jeane Kirkpatrick, former Virginia Governor Jim Gilmore, former Minnesota Senator Rudy Boschwitz, and former Washington Senator Slade Gorton.

"Why do you put very powerful politicians on your board. Because you like them, you think they’re capable and they buy you protection," said Herbert Denton, president of the New York investment firm Providence Capital, which owned IDT stock. "Why do they leave at the same time? I speculate there’s something rotten in Denmark."