[kictanet] ITXC judgement lifts the carpet on bribes to seven African telcos for contracts

[Brian Munyao Longwe]

Phew, whatever happens in the dark shall eventually come to light.....

Though this report mentions Telkim Kenya it doesn't go into any detail  
(was it 'edited')

;-)

Brian

Sent from my iPhone

On 06 Sep 2008, at 8:26 PM, "Eric M.K Osiakwan" <emko at internetresearch.com.gh 
 > wrote:

> Everyone knows it happens but the conclusion of the trial of three  
> former ITXC employees has aired publicly how it is done. Employees  
> of seven African telcos – all state owned with one exception –  
> were given bribes to obtain wholesale VoIP voice contracts. The sums 
>  involved were not large but court documents reveal how it was done  
> and some interesting incidental detail about its pitfalls as a way o 
> f approaching sales acquisition.
>
> Founded in1997 by Tom Evslin, a former Vice President at AT&T, ITXC  
> was one of the new breed of VoIP based carriers that set out to  
> conquer the world. One of its key markets was Africa because of the  
> plentiful arbitrage opportunities offered by the extremely high  
> costs of international calling. ITXC sold low-cost international  
> wholesale minutes to incumbents who were therefore able to either  
> lower their prices or (as was often the case) simply increase their  
> margins.
>
> The company was sold to Teleglobe and it was during that process  
> that the bribery allegations first emerged. ITXC’s in-house attorney 
>  asked its sales department to provide a list of ITXC agents who als 
> o worked for telcos. On 27 October 2003, this person sent the follow 
> ing list: Sonatel, Nitel (through Standard Digital), Telkom Kenya (t 
> hrough Adwest), Ghana Telecom and Angola Telecom.
>
> Subsequently Teleglobe was sold to Tata’s VSNL. Three former ITXC em 
> ployees were charged under the US Foreign Corrupt Practices Act: for 
> mer Managing Director Roger Young, former Vice President Steven J. O 
> tt, and Yaw Osei Amoako. Other co-conspirators were named but not ch 
> arged as some were not US citizens. Young and Ott received reduced s 
> entences because they co-operated with the investigation which is “o 
> n-going” according to the Department of Justice statement. Young was 
>  fined US$7,000 and Ott US$10,000, with latter also getting five yea 
> rs probation, six months community confinement and six months home i 
> mprisonment.
>
> A third defendant in the case, Ghanaian Yaw Osei Amoako (a US  
> citizen), pleaded guilty on Sept. 6, 2006, and was sentenced on Aug.  
> 1, 2007, to 18 months in prison, a $7,500 fine and to serve two  
> years of supervised release following release from prison.
>
> The carriers named in the court case were:
>
> Nigeria’s Nitel: “On or about October 25 2002, ITXC and Nitel  
> executed a VoIP Network Services Agreement…” In November ITXC  
> then entered into a sales agreement with Standard Digital Internatio 
> nal, an agreement that was signed by Nitel’s General Director of Int 
> ernational Relations, a member of the committee that reviewed the bi 
> ds of those companies competing for the contract.
>
> On or about 10 October 2003 prior to ITXC signing with Nitel sent an  
> e-mail saying:”I was able to get (the person at Nitel) to chat with  
> (defendant Ott) in my hotel room and he poured out what we have to d 
> o to get the deal through with (sic) getting him in trouble favourin 
> g ITXC.” The following day he wrote:”Prior to sending real  
> traffic, Nitel is ready to sit down and give ITXC special rates. Do  
> I trust them on this? Yes. The Agents are the negotiators but is (si 
> c) afraid of other operators (sic) actions and political contacts wi 
> th Ministers, President and Vice President.” In 2003 there was a  
> “cost dispute” which required payment of a further approximately  
> US$150,000 to the sales agent.
>
> ITXC agreed to pay Standard Digital a retainer fee of US$10,000 and  
> a commission of 12% of ITXC’s profits from these service agreements. 
>  Between November 2002 and May 2004 ITXC wired approximately US$166, 
> 541.31 to Standard Digital.
>
> Rwandatel: The contract between ITXC and Rwandatel was entered into  
> at the end of February 2002. ITXC made the Rwandatel employee  
> negotiating the agreement its sales agent and agreed to pay him “one 
>  cent per minute for certain traffic to Uganda, Burundi and Rwanda t 
> erminated through Rwandatel. The sum sent in this instance was appro 
> ximately US$26,155.11.
>
> By the end of 2002, a dispute arose between the Managing Director of  
> Rwandatel and the bribed employee over the latter’s failure to share 
>  the money. There was then an e-mail exchange as to whether the size 
>  of the sum could be revealed to which “co-conspirator 2”  
> replied:”…we can reveal the information, although in the ordinary  
> case, we shouldn’t (but this doesn’t seem to be an ordinary case) 
> .”
>
> Subsequently they met the Managing Director who wanted to change the  
> agent receiving the commissions to someone nominated by him. As a  
> result the process became more complicated:”We also agree the curren 
> t agent must not be informed of the meeting and of the new arrangeme 
> nt.” But they were happy with is complication:”The way I see it,  
> (the original employee bribed) cannot cause any trouble to ITXC as t 
> he Managing Director is in charge. He cannot sue because he would be 
>  arrested for receiving kickbacks.”
>
> Senegal’s Sonatel: The contract was signed in February 2001 and the  
> following month the employee negotiating the contract entered into a 
>  “Non-Exclusive Regional Agency Agreement” which offered  
> commission on revenues earned by ITXC. Between March 2001 and Octobe 
> r 2003 US$74,772.06 was paid to this Sonatel employee.
>
> But there were problems as France Telecom, the private shareholder  
> in Sonatel could clearly see all was not right. An e-mail in  
> September 2002 was sent to Ott stating:”(The bribed employee) is the 
>  only one defending us in (the Sonatel monthly Board meetings) and h 
> e tells me (France Telecom) is becoming very suspicious. We need to  
> get him out of the spotlight asap.” The problem continued as an e-ma 
> il in May 2003 makes clear:”Sonatel is not an easy organization to d 
> eal with. France Telecom is gripping them pretty tight. (The bribed  
> employee) is not the force he used to be – but we still need him and 
>  he can still do good. Just be prepared not to get the most complete 
>  or direct answers to your questions.”
>
> Ghana Telecom: The ITXC agreement was signed in February 2001 but  
> came to grief in December 2002 when Ghana Telecom disconnected its  
> link to ITXC over a “cost dispute”. ITXC then offered to retain a  
> General Manager in the International Department as ITXC’s sales agen 
> t and pay him commissions “in exchange for his assistance in settlin 
> g this dispute.”
>
> Mali’s Sotelma: The contract was negotiated in 2002 and in order to  
> conclude the negotiations ITXC signed the overall boss of Sotelma, i 
> ts Director-General as its sales agent and paid commissions on traff 
> ic generated. E-mails about the arrangement stated that:”I have the  
> Director General in the deal as an agent who is been (sic) fronted b 
> y his lieutenants.”
>
> It will be clear from the summary of the available public documents  
> that this approach to business has a number of pitfalls. The bribed  
> employees in two instances subsequently had to sort out “cost disput 
> es” which were the pretext for asking for more bribes. In one instan 
> ce, the bribed employee failed to share his gains with the managing  
> director. In the only company with a private shareholder (which also 
>  sells wholesale minutes), the bribed employee became isolated under 
>  commercial questioning: this provides a strong if not always decisi 
> ve argument for privatisation.
>
> From the telco side, what has been known privately for years is now  
> revealed clearly and publicly by the Rwandatel and Sotelma examples.  
> Corruption is systemic and goes right to the top and bribes are  
> expected to be shared with the boss of the organisation and woe  
> betide anyone who tries to keep the money to themselves.
>
> NB: Sory for crossposting..
>
>
> Eric M.K Osiakwan
> ICT Integrator
> Internet Research
> www.internetresearch.com.gh
> emko at internetresearch.com.gh
> 42 Ring Road Central, Accra-North
> Tel: +233.21.258800 ext 2031
> Fax: +233.21.258811
> Cell: +233.24.4386792
>
>
>
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