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Mary Anastasia O'Grady, Wall Street Journal, 2005-09-02

September 2, 2005

For more than a year now, New Jersey-based IDT Corp. has been denying any wrongdoing involving the long-distance telephone contract it negotiated with the former Haitian government of Jean Bertrand Aristide in 2003.

But new revelations that surfaced in a lawsuit against the company in Newark's federal district court in July cast doubt on the company's claims of innocence. If the evidence holds up in court, IDT could be in very hot water. The company didn't return my calls asking for comments on the case.

The latest revelations also support allegations by the current interim government in Haiti that Mr. Aristide --beloved Haitian messiah of Washington's Congressional Black Caucus and Joseph P. Kennedy II -- was extremely corrupt. Mr. Aristide, who California Congresswoman Maxine Waters calls "a close friend," was dipping quite liberally into the government till for his own personal gain, the new evidence suggests.

The case reminds us of questions we raised about what arrangements Mr. Aristide had with Fusion, a telecom company that became a big player in the long-distance market to Haiti during the Clinton administration and whose board of directors included Mr. Kennedy and a host of Democratic Party heavyweights. Fusion declined to speak about its Haiti dealings when we wrote about them in 2001 even though by Federal Communications Commission law its contract should have been a matter of public record. Yesterday, Fusion told us that it has always filed what is required with the FCC.

International telephony is one of Haiti's very few sources of hard currency. The large and relatively affluent Haitian diaspora in the U.S. religiously calls home to relatives in Haiti every week, making the circuit one of the busiest in the Western Hemisphere.

The U.S. has been pushing countries to introduce competition to their telecom sectors so as to lower rates and improve service. But governments like to hold onto their monopolies, milking them for income. So in places where monopolies remain, the FCC seeks to minimize the potential for mischief, which could be aided and abetted by U.S. carriers, through its mandated "international settlements policy." ISP countries are supposed to have one transparent rate for all U.S. carriers terminating calls to the monopoly carrier and public disclosure of all contracts with ISP countries is required by law.

Until late in 2004, Haiti was an ISP country. In negotiations, it won a relatively high 23-cents-per-minute official settlement rate, on the grounds that it needed revenues to expand its phone network. Yet telephone access did not improve during Mr. Aristide's tenure. To the contrary, Teleco Haiti revenues dried up. The new revelations about IDT and Fusion suggest why.

As IDT itself pointed out in comments to the FCC in October 2004 "The ISP exists, primarily to prevent discrimination against U.S. carriers" and the requirements of the ISP include that "all U.S. carriers must be offered the same effective accounting rate."

Yet apparently not everyone was offered the same rate in Haiti. A Journal editorial reported in May 2001 that, "Two different long distance suppliers shopping the Haitian market have reported to us that Teleco officials offered them access to the local network at rates well below the official settlement rate in exchange for payment made to specially designated accounts."

According to former IDT employee Michael Jewett, who filed a complaint against the company in federal court in Newark in March 2004, IDT took advantage of just such an offer. Mr. Jewett claims that he was fired because he objected to facilitating the deal, which involved depositing settlement payments in an account in Turks and Caicos designated as Mount Salem Management. Mr. Jewett alleges that when he asked why the payments were not going to Teleco Haiti, IDT's Senior Vice President of International Business Development indicated they were going directly to President Aristide's bank account. He was also told to keep quiet about the transaction.

IDT initially argued that the rate it secured with Haiti was a trade secret and thus should be sealed in court documents. Mr. Jewett's lawyers appealed that decision, citing FCC regulations. In July the negotiated price was unsealed: It was nine cents per minute, 14 cents below the established ISP rate.

The Denis Report, a recently released independent investigation in Haiti of Teleco operations during the rule of Aristide, indicates that a party called "Mount Salem" owed Haiti Teleco over $411,000 at the time its contract was cancelled in September 2004, after Mr. Aristide was exiled. How much of the nine-cents-per-minute rate that Mr. Jewett alleges IDT sent to the Mount Salem account was owed to Teleco and how much was assigned for another beneficiary is still not known. But Teleco has already hinted at the answer.

In May 2004, then-Teleco Director-General Rene Meronney told Haitian Metropole radio that under the Aristide scheme "lower-level international companies" were allowed access to the Haitian network at six cents per minute. Those companies, he said, then turned around and wholesaled the minutes to the larger well-known international carriers at a 12-cent mark-up, capturing a spread that was shared "with the former regime."

It is worth noting that the Denis Report also indicates that Fusion owed Teleco $1,406,000 when its contract was terminated in September 2002. In January 2001, as we reported here, there were rumors in Haiti that Fusion had a sweetheart deal with Aristide that included access to the network at a price substantially below what competitors were charged. At the time, Fusion's in-house counsel declined to answer any questions about Haiti, offer the name of anyone at the company who might do so, or return follow-up phone calls. Clinton chum Thomas "Mack" McLarty, also on the Fusion board, clammed up too. "Mack doesn't know anything about Fusion and Haiti," a McLarty spokesman told me.

Annual hard-currency revenues to the Haitian government through the Teleco monopoly should have been upwards of $60 million but instead the company was rifled. That's something to think about the next time you see a picture of a small Haitian child dying of starvation in the arms of his mother