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McCain ‘Trailblazer’ Burned

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By Lucy Komisar
Condé Nast Portfolio, July 11, 2008

The FCC hits James Courter’s IDT with a $1.3M fine for a cloudy deal in Haiti.

James Courter

Its work with Haiti has been put under scrutiny since a former employee, Michael Jewett, then IDT’s manager for the Caribbean, sued the company. His suit claims he was fired when he balked at negotiating a scheme that routed a portion of the company’s long distance revenue from Haiti calls to a shell company for the benefit of then-president Jean-Bertrand Aristide.

Jewett’s suit alleges that the deal cut IDT’s long-distance payments to Haiti to 8.75 cents a minute, from 23 cents, the legal tariff, which mainline U.S. carriers such as AT&T were paying.

Payments went to an offshore shell company, Mount Salem in the Turks & Caicos, which sent 3 cents to Aristide and the rest to the Haiti telecommunications company, according to a lawsuit filed by the Haitian government against its former president and his associates.

Courter, a former New Jersey Republican congressman, is one of 20 McCain national finance co-chairs, and joined the campaign in February 2007. He’s a “Trailblazer” for McCain, meaning he raised at least $100,000. The IDT PAC has contributed $84,850 in 2008.

The F.C.C. said IDT had violated the law by “willfully and repeatedly” failing to file its Haiti agreements regarding rates and other matters.

The filings were required under the commission’s International Settlements Policy, which called for the same best rates for all U.S. carriers. The goal was to ensure “a competitive playing field” and prevent dominant carriers on the foreign end of a U.S.-international route from leveraging their market power to the detriment of U.S. carriers and consumers.

IDT had had its share of run-ins with regulators even before the F.C.C. fine handed down Wednesday. Jewett’s allegations are also being investigated by the Justice Department, the Securities and Exchange Commission, according to the company’s filings with the S.E.C. The I.R.S. is also reportedly looking at the company, according to published reports.

Jewett’s lawyer, seeking to read the Haiti contracts at the Federal Communications Commission, discovered that the entire file had disappeared. The F.C.C. directed IDT and other carriers to refile their contracts. IDT’s showed payments to the Turks & Caicos shell company.

Jewett’s suit charges that IDT evaded the rules and kept competitors in the dark. Documents obtained via Freedom of Information Act requests this year also revealed that IDT failed to file contracts with dozens of other telecoms around the world.

The S.E.C. and I.R.S. are looking into IDT’s tax returns for 2001, 2002, 2003, and 2004. Any discount or ill-gotten gain, such as the difference between 8.75 and 23 cents, is taxable.

In a quarterly S.E.C. report filed June 6, IDT’s balance sheet shows $365 million “income taxes payable,” meaning the sum is put aside for back taxes. The figure was zero last year.

All the executives below Courter involved with the Haiti deal are gone. The June report announced the “involuntary” departure of the chief legal officer.

Top-tier Republicans have also bailed out.

William Weld, former G.O.P. governor of Massachusetts, was head of corporate governance at IDT but resigned after the Jewett complaint was unsealed in July 2005.

IDT announced in October 2006 that its entire board would not seek reelection, including former congressman and vice presidential nominee Jack Kemp, former U.S. Ambassador to the U.N. Jeane Kirkpatrick, former Virginia Governor Jim Gilmore, former Minnesota Senator Rudy Boschwitz, and former Washington Senator Slade Gorton.

“Why do you put very powerful politicians on your board? Because you like them, you think they’re capable and they buy you protection,” said Herbert Denton, president of the New York investment firm Providence Capital, which owned IDT stock. “Why do they leave at the same time? I speculate there’s something rotten in Denmark.”

Story on Portfolio site

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