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Dec 15, 2005

Republic of Haiti Sues Aristide

Edward A. Maldonado, Esq.

U.S. Carriers ImplicatedOn November 2nd 2005, The Republic of Haiti and its PTT, Telecommunications D’ Haiti S.A.M., filed suit against Jean-Bertrand Aristide and seven others in the Miami United States District Court based on an array of allegations including money laundering, drug trafficking, racketeering, and the diversion of revenues of the Haitian PTT Teleco in the form of bribes and kickbacks from U.S. carriers. Case number 05-23852, now before Federal Judge Marcia Cooke, is an unprecedented thirteen count lawsuit in which the people of Haiti seek compensation and damages stemming from the alleged illegal activity of Aristide and a confederation of Aristide controlled or held companies that stretch from Haiti, to the British Virgin Isles, to the United States. Of particular importance for those in the telecommunications industry are allegations that certain U.S. class “B” carriers, by and through select Aristide accomplices, quietly entered into sweet-heart agreements with the Haitian PTT well below all established class “A” carrier rates then in-force, conditioned on the payment of kickbacks to the Aristide Group through the BVI company Mont Salem Management, Ltd. The lawsuit further alleges that these dealing, and the silent acceptance of these as “concessions” by the U.S. carriers involved, violated U.S. telecommunications law.By-Pass and HaitiThe issue of diversion and telecommunications is particularly poignant in the case of Haiti. Telecommunications D’Haiti S.A.M. (commonly know as Teleco), is the government owned PTT and a monopoly whereby all lawful international calls terminated to the Haitian PSTN, as well as to Haitian cellular carriers, must be transacted through Teleco. The operation of Teleco as a monopoly has historically pushed many U.S. and international carriers to use “gray” or “bypass” routes to keep pricing competitive for use in their prepaid calling cards. From the late 1990’s to early 2000’s, the market saw a boom in illegal termination of services in Haiti through Cyber Cafes and shoe-string bypass route operators that openly offered bottom rate termination pricing for services, which was often unstable. Recent crackdowns by the Haitian government, and Teleco, have curbed such route operators and have normalized termination and rates through Teleco. In no small part, this is due to the importance of Teleco in Haiti, as Teleco revenues have been a principal source of foreign currency for Haiti over the past ten years.Bribes, Kickbacks and ConcessionsThe lawsuit now in the Miami U.S. District Court alleges that Aristide installed his accomplices in management positions within certain U.S. and Canadian telecommunications carriers, and thereafter granted those companies significantly reduced rates for services provided by Teleco in exchange for built-in bribes and kickbacks to the Aristide Group. This further reduced the value of those rates to the extent that Teleco only received a part of the revenue it was rightfully entitled to for its services in those dealings. Prominent among the implicated class “B” carriers in the lawsuit are IDT Corporation, Skytel, Ltd., Fusion Telecommunications, Haiti Direct Access, Terra IPIP Communications, Telsicom, and IVM Telecom. The lawsuit also alleges that some of the class “B” carriers were in fact allowed effective rate “concessions” because they were not required to pay the agreed per-minute rate for all of the minutes of their calls terminated by Teleco by virtue of: (a) being allowed to route calls around the Teleco switching equipment that records the duration of the international call were not recorded, (b) passing calls through switching hardware and software that counted “fewer” than all of the minutes passed, and (c) being allowed to “settle” allegedly disputed Teleco billing on favorable terms equating to a “concession”. Again, all such activity premised on cooperation of Aristide insiders in Teleco, and the payment of bribes and kickbacks to the Aristide Group.Although the case is still within the early rounds of pre-answer motions, legal observers agree that the impact of this case will likely place the dealings between small and mid-sized international carriers and PTTs under the microscope in the future. Also not entirely clear in this early stage is the possibility that the alleged activity violated the regulatory requirements of the class “B” carriers under their Section 214 Authority. To date, the FCC has not opened a docket, administrative action, or investigation of the allegations found in the Republic of Haiti’s lawsuit. Responsive pleadings from the Defendants in the case are still pending and will likely square off the legal issues of the alleged Teleco diversion, and, the true activity of the class “B” carriers implicated. However, for those in the business of international termination for the prepaid industry, this is definitely one case to watch closely for future dealings abroad.Ed Maldonado is a principal of Maldonado Law Group. He can be reached ateam@maldonado-group.com.
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