[AfrICANN-discuss] ITXC judgement lifts the carpet on bribes to
seven African telcos for contracts
Eric M.K Osiakwan
emko at internetresearch.com.gh
Sat Sep 6 19:26:54 SAST 2008
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 of
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 also worked
for telcos. On 27 October 2003, this person sent the following list:
Sonatel, Nitel (through Standard Digital), Telkom Kenya (through
Adwest), Ghana Telecom and Angola Telecom.
Subsequently Teleglobe was sold to Tata’s VSNL. Three former ITXC
employees were charged under the US Foreign Corrupt Practices Act:
former Managing Director Roger Young, former Vice President Steven J.
Ott, and Yaw Osei Amoako. Other co-conspirators were named but not
charged as some were not US citizens. Young and Ott received reduced
sentences because they co-operated with the investigation which is
“on-going” according to the Department of Justice statement. Young
was fined US$7,000 and Ott US$10,000, with latter also getting five
years probation, six months community confinement and six months home
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 International,
an agreement that was signed by Nitel’s General Director of
International Relations, a member of the committee that reviewed the
bids 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 do
to get the deal through with (sic) getting him in trouble favouring
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 (sic) afraid
of other operators (sic) actions and political contacts with
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
terminated through Rwandatel. The sum sent in this instance was
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 current
agent must not be informed of the meeting and of the new
arrangement.” But they were happy with is complication:”The way I see
it, (the original employee bribed) cannot cause any trouble to ITXC
as the 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 October 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 he tells me
(France Telecom) is becoming very suspicious. We need to get him out
of the spotlight asap.” The problem continued as an e-mail in May
2003 makes clear:”Sonatel is not an easy organization to deal 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 agent
and pay him commissions “in exchange for his assistance in settling
Mali’s Sotelma: The contract was negotiated in 2002 and in order to
conclude the negotiations ITXC signed the overall boss of Sotelma,
its Director-General as its sales agent and paid commissions on
traffic generated. E-mails about the arrangement stated that:”I have
the Director General in the deal as an agent who is been (sic)
fronted by 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
disputes” which were the pretext for asking for more bribes. In one
instance, 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 decisive 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
emko at internetresearch.com.gh
42 Ring Road Central, Accra-North
Tel: +233.21.258800 ext 2031
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