The Komisar Scoop Reports & Analysis by Investigative Journalist Lucy Komisar

Thursday, November 10, 2005

Follow Aristide’s Money Offshore: How Haiti was looted with the help of tax haven shell companies & secret bank accounts and U.S. citizens & corporations

Filed under: Corporate Abuses,Crime & Corruption,offshore,Scoops — Tags: , — Lucy Komisar @ 9:59 am

By Lucy Komisar

Haiti Democracy Project, Nov 10, 2005

Add former Haitian president Jean-Bertrand Aristide to the long list of corrupt and repressive officials who have used Western banks and companies and offshore tax havens to plunder their countries and launder the stolen money.

Aristide and his associates looted government coffers, wrote checks to front companies for nonexistent purchases, padded invoices to get kickbacks from vendors, secretly owned companies that cheated Haiti of taxes, and laundered the money they stole through shell companies and secret bank accounts set up in the United States and the offshore tax havens of Turks and Caicos and the British Virgin Islands.

Aristide’s corruption is documented by incorporation papers, copies of bank checks, bank transfer documents, invoices, company payment statements, and sworn testimony.

Check from account of Aristide

Nearly $20 million has been documented as stolen between 2001, when Aristide took office as president for the second time, and 2004, when he fled or was forced out of the country according to varying accounts.

A Haiti official commission of inquiry says that at the beginning of the chain of transfers, ex-director general of the government bank Rodnée Deschineau moved $19 million in government funds through the accounts of Aristide’s governmental “Private Secretary Account.” I have copies of twelve checks drawn on that account from 2001 to 2002 and cashed by the Bank of the Republic of Haiti for sums of $100,000 to $600,000, and totaling $4,662,000.

The information, including the private secretary checks, was collected by the Central Unit of Financial Information (UCREF), an agency set up, as in other countries in recent years, to investigate money laundering, and by the Administrative Commission on Inquiry (Commission d’Enquête Administrative) headed by former Haitian senator Paul Denis. Denis was charged by the current government with investigating corruption during the Aristide years. His report says Aristide and his collaborators transferred $17,489,415 abroad.

The documents are the basis of a Haitian government lawsuit filed in Miami Nov. 2, 2005, under the U.S. RICO (Racketeer-Influenced and Corrupt Organizations) statute. The defendants are listed at the end of this report. The Haitian government and Teleco, its telecommunications company, seek to recoup the stolen money plus penalties allowed by the law. Allegations also appear in a New Jersey lawsuit filed by a former employee of IDT, a U.S. telecommunications company accused of paying kickbacks to Aristide.

The Haiti investigators’ mandate till now has been to look at events during Aristide’s second term. However, the attorneys in the lawsuit have the option of using the discovery process to look into earlier practices, including during the 1990s when Aristide was in exile, when he continued his first term (1994 to 96), and when his close associate Rene Préval was president (1996 to 2001). This would likely considerably increase the amounts involved.

Payoffs to Aristide or his associates were also made by drug traffickers, according to the testimony of half a dozen Haitians indicted by the U.S. for helping the transit of cocaine through Haiti to the United States.

This investigation raises questions beyond the corruption of the Aristide administration. It is a case study in how corrupt individuals use the offshore bank and corporate secrecy system and easily-incorporated shell companies at home, offshore and elsewhere to loot their countries’ treasuries and facilitate international crime.

There are about seventy offshore jurisdictions around the world. Among the most famous are Switzerland, Grand Cayman, Luxembourg, British Virgin Islands, Jersey, Liechtenstein. Offshore centers allow companies and bank accounts to keep their records, including owners’ names, secret even from regulators and law enforcement. They apply no or low taxes, which is why they are known as tax havens. Most of them give these advantages only to foreigners.

Offshore financial centers are the parallel financial services system for criminals: for corporate crooks and fraudsters, tax evaders, drug and arm traffickers, terrorists and for government officials who steal from their countries. The big international banks all have offshore subsidiaries where they can hide the money of clients who are evading taxes at home or committing other crimes. And in many countries, including the United States, it is relatively easy to set up companies and bank accounts without providing documentation about the true owners.

Corrupt Western business people, negligent or complicit bankers and offshore tax havens – all the enablers of corruption — make a lot of money by helping the world’s crooks. They provide the capital for those crooks to stay in power, and they tilt the playing field against the interests of firms and individuals who do business honestly.

The U.S. was involved in the Aristide case in two ways. The offshore system was used to collect kickbacks or divert payments from American companies that should have gone to the Haitian government. U.S. banks moved large amounts of money for shell companies set up in the U.S., Haiti and offshore.

The phone companies

Haiti’s Telecom Sector is estimated at 400 million minutes a year, valued at $48 million.

Foreign phone companies that provide calling services to other countries must pay for routing of their calls on the switching equipment of the receiving country, which records the time of calls. Foreign companies routinely pay a per-minute rate for these calls.

Teleco (Télécommunications d’Haïti), the Haiti national telephone company, made agreements with telephone companies, including IDT (Newark, NJ), Fusion Telecommunications (New York), Skyytel (Montreal), Cinergy (Miami) and IPIP/Terra (Miami), granting them rights to connect to Haiti phone lines.

The suit by the Haiti government says that payments to Teleco were diverted or kicked back to Aristide’s group through companies and bank accounts in the offshore Turks and Caicos Islands and the British Virgin Islands. The offshore companies, described as “agents” or “consultants” for Teleco, were used for the benefit of Aristide and his associates.

The suit focuses on the years of Aristide’s second term, but according to a report by Christopher Caldwell in the July 1994 American Spectator, kickbacks or diverted payments were nothing new. He says that when Aristide was in exile in Washington, 1991-1994, he ordered that the proceeds from Haiti’s international phone traffic handled by the Latin American division of AT&T be moved to a numbered bank account in offshore Panama. He says Aristide used the settlement accounts of Teleco in the US to finance his return to power in 1994 and that the practice continued after he was returned to office in 1994.

The Caldwell report was cited by reporter Mary O’Grady in an article about the telecom scandal in the Wall Street Journal last year. Asked if it was true, Jim Byrnes, head of AT&T Corporate Media Relations, told me, “AT&T declines to comment on a characterization in a media report from 1994, or a paraphrasing of that characterization in The Wall Street Journal.” Caldwell did not respond to phone and email messages asking for more details.

The recent case with the most evidence of Aristide corruption involves IDT, a telecommunications company founded in 1990 and headquartered in Newark, NJ. A former employee says the company vice-president told him that IDT in 2003 agreed to pay kickbacks to Aristide’s offshore bank account in return for a favorable phone deal in Haiti.

Michael Jewett, who in 2003 was associate regional vice president for the Caribbean at IDT, made the charges in a suit for wrongful dismissal filed in federal court in Newark in October 2005. He said that during discussions on the agreement, Teleco sought bribes in exchange for a cut-rate price and that IDT agreed to kickbacks.

Under U.S. law, American companies would have to pay 23 cents a minute to Teleco for its services in completing calls from the U.S. Teleco was offering 9 cents a minute, with 3 cents kicked back.

Jewett said he’d been told that the initial Teleco proposal called for IDT to first deposit funds in a U.S. bank account. He said IDT decided that was too risky: that it might pay and get no agreement. (No honor among thieves.) He said that Jack Lerer, IDT Executive Vice President for International Business Development, went to Haiti in August 2003 and met Aristide to work out an accord.

A month later, he said, Lerer met with Jewett and told him that the deal was that IDT would deposit money in an account set up for Aristide under the name Mont Salem, in the offshore Turks and Caicos. Jewett said Lerer told him they had to move fast so that they didn’t lose the deal.

Jewett’s suit says, “Plaintiff asked defendant Jack Lerer what Mont Salem was, and he replied it was the private bank account of the President of Haiti, Mr. Jean Bertrand Aristide, that had been created by legal counsel for President Aristide, Adrian Corr, member of the law firm Miller, Simons and O’Sullivan.”

Jewett testified that Lerer appointed him the “go-between for all commercial correspondence between Teleco Haiti and Mont Salem.” He said Lerer told him “not to reveal the details of the Teleco Haiti deal with anyone within IDT.” Jewett says he repeatedly protested that the deal was illegal. After it was completed, he was fired.

In October 2003, IDT concluded an agreement with Teleco to pay 9 cents a minute for Teleco’s services. Instead of making payments directly to the Haiti government company, it would make them to Mont Salem as Teleco’s agent. Under the agreement, Teleco would actually receive only 6 cents a minute, and the other 3 cents would be kept by Mont Salem as a kickback. Teleco’s records were falsified to show Mont Salem as the carrier, not IDT.

In one six-month period, February to April 2004, IDT paid $302,588 in kickbacks to the Aristide group, according to the Haitian government lawsuit.

Mont Salem was in fact a shell company. Timothy O’Sullivan of Miller, Simons and O’Sullivan was listed as Mont Salem’s registered agent.

One of the functions of offshore law firms is to set up shell companies – fake or front companies – that have no purpose other than to carry out phony transactions to justify the movement of money into crooks’ secret accounts. Mont Salem’s incorporation papers show registration in June 2000 with capital of $5,000 – not much for a real company.

The owner of shares was “M & S Nominees Ltd,” not the real owners, just another name for Miller, Simmons, at the same address. “Nominees” means “stand-in” or “strawman.” Using nominees hides true owners, a typical offshore ploy when the real owners are up to no good.

Mont Salem was, like all such offshore companies, exempt from taxation. M&S just had to promise that “the operation of the proposed Company will be conducted mainly outside the Turks and Caicos Islands.” The local folks don’t want corrupt companies and criminals doing business on their doorstep, but they don’t care if they loot other countries and people.

If IDT did as alleged, it violated U.S. Federal Communication Commission rules. When it entered its agreement, calls from the U.S. to Haiti were covered by the ISP, International Settlements Policy, which requires transparency and nondiscriminatory rates. That meant that U.S. carriers had to pay 23 cents a minute for phone calls sent to Haiti. Companies would have to inform the FCC and all competitors if they negotiated a deal for lower rates. IDT didn’t do that. After November 2004, Haiti was exempted from the ISP rules, so rates for U.S. telecoms were open to the market.

If IDT did as alleged, it also violated the U.S. Foreign Corrupt Practices Act, which bans payment of bribes or kickbacks to get foreign contracts.

The Department of Justice, the Securities and Exchange Commission and the United States Attorney in Newark, NJ, have initiated investigations into Jewett’s charges.

IDT’s CEO James Courter and the company’s attorney in the Jewett case, Leslie Lajewski (Grotta, Glassman & Hoffman), both declined to return phone calls and emails seeking comment.

However, Courter has been quoted publicly as saying that Jewett is a disgruntled ex-employee with no evidence.

IDT, whose business plan apparently included lucrative deals with Haiti’s politicians, appears to play the same political game at home. James Courter, a Republican New Jersey congressman from 1979 to 1991, is a friend of Vice President Dick Cheney. When Net2Phone, an IDT internet phone company, went public in 1999, he arranged for Cheney to buy 1,000 initial shares. Cheney paid $15,000 for the shares and sold them the same day for $26,574, a neat profit of 77.2 percent.

Prominent Republicans sit on IDT’s board of directors, which includes Jeane J. Kirkpatrick, a former ambassador to the United Nations; Jack F. Kemp, the former New York congressman and Republican vice presidential nominee; James S. Gilmore III, a former governor of Virginia; and Rudy Boschwitz, a former senator from Minnesota.

Pete Wilson, the former governor of California, is on the board of its IDT Entertainment subsidiary. And until he resigned in fall 2005, William F. Weld, the former Massachusetts governor who plans to run for governor of New York, was a director of the IDT board and chairman of its governance committee. IDT corporate governance gets failing marks from the Corporate Library and Institutional Shareholder Services, which rate companies for institutional investors.

The lone IDT Democrat, Leon E. Panetta, a former congressman who was chief of staff in the Clinton administration, is on the board of the IDT Telecom unit.

After the suit, the IDT audit committee engaged the law firm Latham & Watkins to look into the matter.

In September 2004, IDT had proposed to Teleco that it end the agency agreement with Mont Salem and not allow any agent to make or receive payments in violation of US Foreign Corrupt Practices Act. But even then, Teleco billed IDT at 6 cents rather than 9, because its records showed that the agreed price. Later an increase for all carriers in Aug. 2004 increased the IDT rate.

According to the Haiti lawsuit, a similar kickback deal was worked out for Skyytel, a Montreal company. Its 2003 agreement with Teleco provided for payment of 9 cents a minute to Mont Salem as Teleco’s agent. Again, Teleco would get only 6 cents a minute, with the rest sent as bribe and kickback to the Aristide group. The Teleco records were falsified to show Mont Salem as the carrier, paying Teleco 6 cents a minute. The difference of $872,371 was paid as kickbacks.

Skyytel president Colin Povall denies that kickbacks were paid. He explained how the deal was made. “Mont Salem approached us. I heard they were going to go after IDT and not give us the original deal they made. They [Mont Salem] were very secretive as to how they got their license to do this. They said we’re a licensed carrier.”

He told me, “Mont Salem had the direct contact; we never met anybody in Haiti. Fred Beliard is the only one I met. He was dealing with some powerful people.” Beliard, a Haitian is accused in the lawsuit of participating in a scheme to misappropriate Teleco profits by granting telecoms reduced rates in exchange for kickbacks.

Povall said, “Beliard had promised us a tremendous amount of capacity, but I think they gave it to IDT. Our prices were between 7.2 and 8 cents; we made a margin of a half to a penny, which is reasonable in this business. We were reselling Mont Salem’s capacity. What deal they had, they kept it very secretive. They always told us they were paying 6 cents. They had their partnership; they didn’t reveal it was through Aristide. Adrian Corr, we only heard about him when it came to sign the contract; his name was on the contract.”

Why didn’t Skyytel go directly to Teleco? Povall said, “In a perfect world that would be great. You have to have the contacts. The way they fast track is they had someone [is that] Aristide placed people inside. Instead of Teleco approaching and making a bid, they sought out telecommunications companies to facilitate deals. Any teleco on earth would die at the chance of selling minutes to Haiti. There are a lot of minutes. If you have a decent margin. It doesn’t make sense that Teleco would bother making those payouts.”

He said, “When the FBI called us, we were more than cooperative. They asked us to be witnesses, and we agreed on it. I told FBI I’ll give the entire file and you can check what we paid. We asked them to give us immunity. We did nothing wrong, but how they construe it….” He added, “Mont Salem, whatever they were paid, they must have paid their partners. Their partners are not legitimate partners but government partners.”

One of Skyytel’s advisors is Ron Beliard, who acknowledged by phone that he is related to Fred Beliard.

Where did the money go? Who really owns Mont Salem?

I phoned Adrian Corr. I asked him who the real owners are. He said, “As in Delaware, you can have nominee directors.”

[Delaware. Hmmm. It is true that Delaware is the American “offshore” venue, where crooks from around the world can set up companies, secure in the knowledge that Delaware authorities will not fuss if the names of verifiable owners are not listed. Delaware just collect the profitable registration fees.]

Were there nominees (fake owners) in this company? “I don’t know: you put me on the spot,” said Corr. “I don’t want to answer any questions about this. I have lawyers retained; it’s better you speak with them. It’s [former New Jersey] Governor Byrne’s law firm.” His attorney Kerrie Heslin at Carella Byrne in Newark did not respond to numerous requests for comment.

Neither did Mont Salem’s Newark lawyer, Michael Weinstein (Podvey, Meanor, Catenacci, Hildner, Cocoziello & Chattman). I told him, “I’d like to know more about Mont Salem: who owns it (the real owners, not the nominees), what its business is, how it got involved with Teleco.” His reply was, “No comment.”

The Haiti government lawsuit charges that IDT is not the only American company that appears to have paid kickbacks or diverted payments. Fusion Telecommunications (New York), a company run by former high-level Clinton Administration officials, is said in the lawsuit also to have made a suspect deal.

Fusion’s politically well-connected board has included Marvin Rosen, former finance chair of the Democratic National Committee; Massachusetts Congressman Joseph P. Kennedy II; and Thomas “Mack” McLarty III, Clinton special envoy to Latin America. Kennedy and McLarty resigned, and John Sununu, chief of staff for former President George H.W. Bush, joined the advisory board.

The Clinton administration played an important role in offering asylum to Aristide when he was forced out of the country by a military coup and used its influence to get him restored to power in 1994.

Fusion began operating in Haiti in 1999 and provided services to Teleco until June 2002. The Haiti government lawsuit says Fusion made some payments to Teleco via CW Holdings, a company with a bank account in Florida. Lawyers for Haiti do not know where CW Holdings is located. However, a source said that the CW Holdings contact person is named Leonard Whan.

Fusion, through its representative, Howard Rubenstein Public Relations, told me that in mid-2001, “Teleco notified Fusion Telecommunications that Teleco had assigned its “Accounts Receivable” to a factor identified as CW Holdings.” The money was “less than $1 million a month.” Howard Rubenstein PR said, “Fusion was instructed to make payments that it owed to Teleco to the account of CW Holdings in Bank Atlantic in Florida.

In invoices that Fusion received from Teleco, Teleco accounted for Fusion’s payments to CW Holdings as payments made to Teleco. Fusion made payments to CW Holdings for three months until Teleco instructed Fusion to make all future payments directly to Teleco. CW Holdings acknowledged to Fusion that its factor agreement with Teleco had ceased. Consistent with the instructions Fusion received from Teleco, CW Holdings directed Fusion to make payments directly to Teleco going forward. Fusion complied with this request.”

Howard Rubenstein PR said, “At no time has Fusion Telecommunications ever made improper payments or engaged in any improper activity. More specifically, during the time Fusion Telecommunications did business with Teleco, Fusion Telecommunications did nothing improper and made no illegal payments.”

Fusion didn’t respond to queries about where CW Holdings was registered or the cost of the minutes it paid to that intermediary or to Teleco.

Turks and Caicos may not have been the only offshore center used to siphon off kickbacks. The lawsuit says that Cinergy (Miami) made payments through Toscana Telecom, in the offshore British Virgin Islands. Asked about that, Washington Cruz, owner of Cinergy, said on the phone, “I have nothing to comment to you.”

IPIP Communications (Henry Frandzi) and Terra (Joel Esquenazi), which took up the IPIP contract, are also named as having made suspicious contracts. James Dickey, attorney for both Miami companies, said he could not discuss the matter. He said, “It is our practice that we do not comment on any lawsuit at any time.”

An interesting footnote is that the lawsuit says that in this period, AT&T refused to divert payments offshore. AT&T spokesperson James Byrnes said that he could not provide any details of particular situatons, but emailed that, “AT&T has a firm policy against making payments that can end up being used as bribes of foreign government officials. Such payments would violate AT&T’s internal code of conduct as well as the Foreign Corrupt Practices Act.”

The Sam Ash Case

Another case involves shell companies set up in Haiti, and not offshore. They were Digitek, owned by Lesly Lavelanet, brother-in-law of Aristide’s wife, Mildred Trouillot Aristide, and VJLS Computer Services and Accessories, owned by Marie Alice Valin and Sonia Jean Louis, Haitians who were evidently nominees. UCREF discovered that VJLS was a fictitious corporation with a fictitious place of business but that it nevertheless received more than $16 million in public funds. Lavelanet is a defendant in the Haiti government suit.

The lawsuit raises questions about payments that Digitek received from Sam Ash, the New York musical instruments store. It says that on Jan. 28, 2002, VJLS wired $467,171 from its account at the Bank of the Republic of Haiti to the account of Sam Ash Music Store at Chase Manhattan Bank in New York to buy a stadium sound system. The system was apparently delivered. The suit says that there was a commission of $67,650 for Digitek and return of an overpayment of $24,850. On Feb. 26, Sam Ash sent Digitek a check for $92,500 for the commission and refund.

David Ash, the company attorney, told me, “We didn’t know that the Haitian government was involved. It is not uncommon for us to deal with contractors. Contractors typically receive a profit on the materials and labor they put into whatever project they are involved in. Digitek placed an order. They said it had something to do with some festival. We filled the order and delivered the merchandise. We delivered an invoice.”

He said, “It was correct, there was an overpayment. They put too much money in my account. It can happen that a contractor says the bill is going to be “x” amount, that includes my commission and profit on labor and materials. We asked for instructions on what to do with the excess money. The instructions were to send the money to Digitek.”

Asked why the wire transfer had come from VJLS instead of Digitek, Ash replied, “I don’t know the relationship between them; it may have been as client-contractor or as related companies. That is why we requested instructions on where to send the check for the remaining funds.” He added, “If we were going to do a kickback, which I would not permit in this company, we would have written an inflated invoice and given the money under the table to someone.” He pointed out that it was the initial payment by Digitek, not the invoice by Sam Ash, that was inflated. The question of what Digitek did with the $92,500 refund must be asked of Lavelanet.

Correspondent banking

Aristide and his group were sophisticated users of the world’s money laundering techniques, one of which involves correspondent banking. A correspondent account is an account that a bank has in the bank of another country so that it can move its clients’ money to and from that country.

Until the U.S. Patriot Act passed in 2001 after the discovery that Al Qaeda had moved money via correspondent accounts, American banks could accept “bundled” transfers from foreign banks that didn’t indicate the senders. That has changed, but the system still makes it easy for U.S. banks to accept dirty money whose senders are vouched for by a corrupt sending bank and passed off as clean.

The group also used the money laundering technique called layering, in which illicitly obtained cash is transferred numerous times to obscure its origins and finally placed where it can be accessed without any trouble.

Digitek and VJLS were part of money movements that involved correspondent accounts and layering. This is how that worked.

The CEA/Denis report says that from Sept. 2001 to Nov. 2003, Digitek received more than $8 million for purchase of cell phones and modernization of the communications network of the National Palace and police. But current government investigators could obtain no bid information, no contract, or any proof that the goods were delivered. Where did the money go?

On February 27, 2003, Digitek was paid $239,000 by a check drawn on the government bank’s correspondent account at Citibank (NY) for equipment for Telco. The suit says it never delivered that equipment. Instead, it allegedly bought a CD for Global Spectrum, another shell company Lavalanet controlled. In October, Global Spectrum transferred $256,000 – the CD plus interest – to an account in the name of Trujillo & Sons at the Bank of the Republic of Haiti. The money was then wired to a Trujillo account at Ocean Bank in Miami.

Trujillo & Sons is a Miami company that deals in rice and other foodstuffs. It is family owned company run by Alberto Trujillo and Lucas Trujillo Jr. and has packaging plants and a warehouse in Northwest Miami which distribute to the U.S., Caribbean and South America. The lawsuit says that funds moved through front companies were used to buy rice and other products from Trujillo to resell in Haiti. The fronts were used to obscure transactions with paper work and to provide a rationale for siphoning “commissions.”

The check register of the Bank of the Republic of Haiti shows fifty-five checks from October 25, 2001 through August 12, 2003, totaling $16,447,795 made out to VJLS, which between October 2001 and March 2004 wire-transferred nearly $14 million to the Ocean Bank, Miami, account of Trujillo & Sons.

Sometimes the money was run through other shell companies. VJLS transferred about $3.6 million in public funds to the front company Se Pa’n and Quisqueya accounts at the Bank of the Republic of Haiti. Se Pa’an and Quisqueya were purportedly run by Ricardo Sanon, who was listed as managing director in 2002 although he was a 25-year-old student. At least $2.3 million moved from front companies to Trujillo.

Alfonso Perez, lawyer for the company, said Trujillo & Sons does $100 million of sales a year. He said that some Haitian merchants mistrust local banks and do not have accounts through which they can transfer payments to the U.S., so they deposit funds in Trujillo’s Haiti account, from where they are transferred to the company’s bank in Miami.

There is no indication of any illegal activity by Trujillo.

Tax evasion

Offshore corruption goes hand-in-hand with tax evasion. Corporations and the wealthy use shell companies and secret bank accounts to evade taxes and shrink the treasuries of the developed and developing worlds. The rice purchase scam is a small example of this. According to the CEA/Denis report, the provisions shipped by Trujillo were imported without the importers, Josesph Dieuseul Tchakounté and Global Spectrum, paying customs duties of $1,346,706.

Sometimes, says the suit, the illicit funds went to the U.S. banks accounts of U.S. shell companies, among them Southborder Enterprises and Giovanni of Miami.

Southborder

According to the lawsuit, Aristide and his group set up Southborder Enterprises in Florida, listing it at 1362 NW 58 Street, Miami, an address that does not exist, with phones that were not working numbers. Still, checks from the Private Secretary account of the Bank of the Republic of Haiti paid it $965,836 for hand-cranked AM/FM radios, t-shirts, bumper stickers and pins.

Giovanna of Miami is listed at a Miami phone number that does not answer. Its owner Michelle Cardozo has an unlisted phone. But Giovanna of Miami was a very active company when it came to receiving Haiti cash. On Jan. 24, 2002, about $169,000 in government funds was wired to the company’s Richmond, VA, Bank of America account for equipment for the Security Police for the National Palace. About $204,000 was paid April 11, 2002 to the company at the Bank of America for musical instruments for the Presidential Security Unit’s brass band. About $162,000 was sent to the company at Bank Atlantic July 11, 2003 for equipment for the Security Police for the National Palace.

Some $208,000 was sent to the company at Bank Atlantic July 30, 2003 for equipment for the Presidential Security unit. Another $143,000 was wired Oct. 30, 2003 for more equipment. Nov. 12, 2003 the $283,000 transfer was for musical instruments. Nov. 24, 2003 some $270,000 was wired for equipment. And then another $146,000 was sent for equipment. The invoices continued, and they were paid; the total came to more than $2 million.

The address listed for the company so active in providing equipment and musical instruments to the Haitian Security Unit was a rented mailbox at a UPS store. The 2005 Dun and Bradstreet report for the company could not figure out its “line of business,” noted that its employees were “undetermined,” it had no banking or finance record, and was located at a residence owned by Cardozo. Bank of America corporate headquarters was asked what kind of due diligence was done on Giovanna of Miami and if these transfers had been scrutinized. There was no response.

Though a Miami resident, Cardozo in October 2004 made a $500 contribution to Rep. Maxine Waters, a California congresswoman active in the defense of Jean-Bertrand Aristide.

One shell company with a U.S. account could not be found registered in either Haiti or the U.S., which leaves the possibility that it was incorporated offshore. A wire Jan. 24, 2002 transferred $1.7 million from VJLS to an account of the Haffey Corporation at HSBC Bank, Miami. Haiti investigators could find no evidence that a company called Haffey exists either in the U.S. or Haiti.

Kathleen Rizzo Young, spokesperson for HSBC, said, “We do not provide information on particular customer accounts as to do so would be in violation of the laws requiring customer privacy. I can tell you, however, that HSBC maintains strict anti-money laundering policies and procedures. We obtain KYC (Know Your Customer) information on all accounts, conduct due diligence on customers as required, and in particular do enhanced due diligence on customers determined to be of higher risk. We monitor transactions, and, as necessary, report any transactions deemed to be suspicious as required by law and regulation.” Nevertheless, the Haffey transaction apparently came in under the radar.

Americans should be care that shell companies are being set up in the U.S. to facilitate corrupt transactions. They must also be concerned about American banks that provides accounts to shell companies with such little due diligence that they doesn’t discover that companies that receive transfers of large sums of money are offshore shells whose true owners cannot be verified or are registered at mail boxes and lack working phones.

Drug trafficking

Drug traffickers were among the earliest satisfied patrons of the offshore money-laundering system. U.S. indictments and testimony in the cases of half a dozen Haitians charged and convicted of cocaine trafficking show that Aristide government officials protected and participated in moving the illegal drug through Haiti to the United States. By 2004, about 8 percent of the cocaine entering the U.S. came through Haiti, an increase during Aristide’s time in office.

Beaudouin Jacques Ketant, the most notorious drug dealer in Haiti, told a U.S. court that Aristide controlled 85% of the cocaine flow through Haiti. Ketant, who was originally a customs employee at the Port-au-Prince airport, said at a February 2004 sentencing hearing that he had paid up to half million dollars a month in bribes to Aristide and Oriel Oriel Jean, who headed Aristide’s Presidential/National Palace security from 2001 to 2003, to allow planes with cocaine to land on National Route 9 near Port-au-Prince. Ketant smuggled cocaine to Ft. Lauderdale, Miami, West Palm Beach, New York and Chicago.

Oriel Jean testified that he and other Haitian law enforcement officials got hundreds of thousands of dollars from Haitian drug trafficker Serge Edouard, who ran an operation that imported cocaine from Colombia into Miami and New York. Jean said that Aristide approved a national security badge for Edouard so he could travel in the country without police searches. He said Edouard kicked back money to Fondation Aristide, a foundation controlled by the President.

Other Haitian traffickers indicted by the U.S. include:

Jean Nesly Lucien, former chief of police, who admitted money laundering. He worked with Ketant, helping to move drug shipments into Haiti from where they would go to the U.S. He had his police delay and divert DEA agents from interdicting ships and got $50,000 and 5 kilos of cocaine for each shipment.

Romaine Lestin, former head of police at Port-au-Prince airport, who took kickbacks to provide security for drug flights. He was part of Ketant group. He pleaded guilty to importing cocaine.

Rudy Therassean, former commander of national police Brigade of Research & Investigation, pleaded guilty to accepting protection money from drug traffickers in 2001-2002.

Evans Brilliant, former head of national police anti-narcotics brigade, allowed a Colombian plane with over 1,000 kilos of cocaine to land on a highway near the capital. He routinely took bribes for this and other traffic.

Fourel Celestin, former president of Haitian Senate, leader of the Lavalas party, and advisor to Aristide, received tens of thousands of dollars to ensure transport of cocaine through Haiti.

U.S. Law and interest

Under U.S. law, anyone who moves money of illicit origins – the profits of crime – into U.S. bank accounts violates statutes against money laundering. Anyone who offers bribes or kickback to get a foreign contract violates the Foreign Corrupt Practices Act. Bankers who fail to do “know your customer” investigations or report suspicious transactions violate banking regulations and U.S. anti-money laundering law.

The violations of law and regulations indicated by the lawsuits and official investigations cited here should prompt investigations by the Justice Department, bank regulators and other U.S. agencies.

Americans should be concerned about the harmful effects of the offshore system. Law enforcers routinely find, as they may in the cases discussed here, that it protects crooked clients by refusing to provide information about shell companies and bank accounts.

The U.S. Justice Department can request information under mutual legal assistance treaties. Even then, getting information is problematical, since while the legal niceties are going on, the culprits usually move their registrations and accounts to other venues. Private parties filing civil suits find getting information near impossible.

Americans should care also because the collection of bribes and kickbacks from foreign companies and the use of shell companies and secret accounts in tax havens helps looting by dictators and corrupt officials in all parts of the world and provides the funds that help keep them in power.

It is the same system that Saddam Hussein used to stash bribes and kickbacks from western arms companies during an international arms embargo against his government in the 1990s. It is the system he used to hide illicit payments from traders buying Iranian oil in the UN Oil for Food program.

It is the system used by dictators Sani Abacha in Nigeria, Omar Bongo of Gabon, Ferdinand Marcos of the Philippines, and the rulers of Angola and Equatorial Guinea, by the corrupt Benazir Bhutto of Pakistan and Carlos Menem of Argentina, and, of course, by François “Baby Doc” Duvalier in Haiti.

The political context

Aristide was elected President of Haiti for a five-year term from February 1991 to February 1996. In September 1991, he was forced into exile by a military coup. In September 1994, a U.S.-led force acting under a U.N. resolution invaded Haiti to oust the military regime and restore Aristide to the presidency. He returned to Haiti to serve the remainder of his first term, until February 1996.

Then, until February 2001, former Prime Minister Rene Préval, a man close to Aristide, served as President. Aristide returned to office in February 2001, in elections which, because of evidence of fraud, were not certified by the Organization of American States’ electoral observation mission.

In February 2004, Aristide resigned and flew first to the Central African Republic and then to South Africa.

The accused, as cited in the Haitian government lawsuit, are:

Former President Jean-Bertrand Aristide. He lives in Pretoria, South Africa.

Faubert Gustave, minister of the Economy and Finance 2001-4. He lives in Sarasota, FL.

Rodnée Deschineau, General Manager of the Banque Populaire Haïtienne, owned by the government from 2001-4. He lives in Dorchester, Mass.

Lesley Lavelanet, the brother-in-law of Aristide’s wife, Mildred Trouillot Aristide. He controlled several companies, including Digitek SA and Global Spectrum SA. He lives in Coral Springs, FL.

Fred Beliard participated in schemes to misappropriate Teleco profits. He lives in Cooper City, FL.

Alphonse Inevil, Director of Planning at Teleco from 1997 to 2002, then Director General to 2004. He participated in the plan to misappropriate Teleco profits. He lives in Lakeland, FL.

Jean René Duperval, Director of International Affairs for Teleco from 2003 to 2004; he participated in the Teleco scam. He lives in Miramar, FL.

Adrian Corr of the law firm of Miller, Simons and O’Sullivan in the Turks and Caicos Islands. He ran Mont Salem, the shell company allegedly owned by Aristide. He lives in that offshore tax haven.

Links

Haitian government lawsuit (English)

UCREF report (French) UCREF is the Haitian Financial Intelligence Unit (FIU).

Commission d’Enquete Administrative (Paul Denis) report (French)

Jewett suit against IDT (English)

Past reporting on Haiti by Lucy Komisar

“Thugs Are Still Terrorizing Haiti,” St. Louis Post-Dispatch, Sept. 24, 1993.

“Haitians Skeptical of Leader, but U.S. Pushing to Renew Assistance,” San Diego Union, May 13, 1989.

“A New Duvalier in Haiti?” New York Times, April 22, 1989.

Reporter, cameraperson and writer for a documentary report on the Haitian political situation for “The Kwitny Report,” aired in April 1989 on the PBS network.

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