Cinergy Telecommunications, Inc: Real Calling Minutes, Fictional Services

In the Cinergy Telecommunications, Inc FCPA case, prosecutors alleged a bribery scheme to secure favorable contracts, preferred telephone rates and credits against money owed to Haiti Teleco. The second superseding indictment traced payments for supposed services to officials who could change the carrier’s bill. For someone who knew the calling-minute balances, approved the checks or worked with the supposed service providers, the business records could tell a very different story from the payment descriptions.

The indictment described Cinergy as a privately owned telecommunications company incorporated in Florida and headquartered in Miami. It shared officers, employees and office space with Uniplex Telecom Technologies, and Haiti Teleco sometimes treated the companies as one. Their contracts allowed customers to make calls to Haiti through the state-owned telephone company.

What the Guilty Plea Says About the Payments

In a guilty plea announced in July 2017, a former Cinergy executive admitted that he and his co-conspirators paid roughly $3 million in bribes from 2001 through 2004. The Justice Department’s account of his admissions identified recipients employed by Haiti Teleco and an official in Haiti’s executive branch. He said the payments were intended to secure a favorable contract and favorable treatment under it.

In his plea, the executive admitted that some money went through third-party intermediaries while other payments went directly to officials or their relatives. The indictment alleged that Cinergy’s president, vice president and director authorized bribes and arranged payments for fictional services to intermediary companies chosen by Haitian officials.

What Preferred Rates and Credits Bought

Preferred rates and credits changed what the carrier owed for the calls its customers made. As the indictment explained, international telecommunications companies contracted with Haiti Teleco and paid a set rate for each minute of calls to Haiti. Haiti Teleco was then the country’s only provider of non-cellular telephone service to and from Haiti.

That is the commercial setting behind the telecommunications bribery allegations. A lower rate affects the price of the service being bought, while a credit reduces the amount the carrier must pay. Prosecutors alleged that the intended benefits included both, along with the contracts themselves, and that obtaining them would deprive Haiti Teleco of revenue.

The indictment described an August 2002 letter agreement granting Cinergy a block of calling minutes, backed by a standby letter of credit from the Bank of Haiti. It also described a March 2004 agreement granting additional minutes that Cinergy could use at no cost. The important records were the agreements and credits that changed the business relationship, alongside the payments allegedly made to obtain them.

A Distributor That Distributed Nothing

Cinergy’s agreement called for $1,228,500 in distribution and administration fees to an intermediary identified in the indictment as Company A. Prosecutors alleged that Company A performed no distribution or administration under the agreement and that Cinergy intended part of the money to reach the executive-branch official. The fee had a business description. The alleged work behind it amounted to nothing.

The indictment’s account of the payments went beyond a check from Cinergy to the intermediary. It alleged that Cinergy also asked Haiti Teleco to advance money to Company A on its behalf, then later wrote to Haiti Teleco about paying the remaining balance of that advance. We can hardly miss the absurdity: the state-owned service provider allegedly being cheated was asked to front the fee.

That makes the supposed services worth a closer look. A signed agreement tells us what somebody authorized. The work performed and the destination of the money tell us what the fee bought.

New Official, New Consulting Company

The indictment alleged that Cinergy sought more favorable treatment when a new director of international relations took over at Haiti Teleco. By then, Cinergy had used most of the prepaid minute credits it had obtained on favorable terms. Prosecutors said its executives sought to extend that treatment and obtain more credits by bribing the new director through Telecom Consulting Services.

Telecom Consulting’s president was the director’s sister, according to the indictment. She received checks from Cinergy, Uniplex and another intermediary, deposited them into the company’s bank account and disbursed money for her brother’s benefit. The alleged routes included checks to him or his family, cash withdrawals and purchases made on his behalf.

The government alleged that Cinergy’s vice president used false memos on checks to conceal the payments. Telecom Consulting, prosecutors said, performed no consulting services for Cinergy, Uniplex or any other telecommunications company. That is a sharp discrepancy for someone who approved a fee, expected a deliverable or knew the supposed consultant’s actual role.

The previous Haiti Teleco director of international relations then appeared on the other side of the transaction. According to the indictment, Cinergy and Uniplex hired him as a consultant after he left the telephone company. He allegedly received Uniplex funds through Process Consulting and passed money to Telecom Consulting for his successor’s benefit. The person who had administered the carrier’s contracts became an intermediary to the person now administering them.

The Same Payee Name in Miami and Haiti

The indictment described another route through JD Locator Services, a shell company with a Miami bank account. Cinergy’s vice president allegedly issued Uniplex checks to that company, and intermediaries moved funds onward through checks, transfers and cash for officials’ benefit. The name on the carrier’s check was only the beginning of the payment trail.

Prosecutors also alleged that executives sent checks bearing the JD Locator Services name to Haiti, knowing there was no such business at the Haitian address printed on them. The indictment said the Bank of Haiti’s governor used his position to have those checks negotiated for the benefit of Haiti Teleco’s director general, his son. A familiar payee name concealed a different address, payment route and beneficiary.

Why the State-Owned Service Provider’s Role Matters

Haiti Teleco’s role brought public authority inside the commercial relationship. The Cinergy indictment alleged that its director general set landline telecommunications rates with the board and negotiated and signed carrier contracts. Its directors of international relations administered those contracts. The court’s account of Haiti Teleco described ownership by Haiti’s national bank, presidential appointments to the board, and monopoly and tax privileges. The carrier was buying service from a state-owned telephone company whose officials could change the terms of its bill.

The Advantage Can Be Written Into a Law

TIGO Guatemala shows another way telecom bribery can buy a commercial advantage. Under its deferred prosecution agreement, the company admitted a scheme involving legislation that moved infrastructure approvals, including cellular towers, from municipal authorities to the national government. For the first six months, TIGO alone met the law’s technical specifications for seeking those approvals.

Its admitted statement of facts explained the result:

In Cinergy’s case, the alleged advantage appeared in rates and credits under a telephone contract. In TIGO’s admitted scheme, it appeared in the approvals needed to build the network. Both put the business decision beside the payment, where someone inside the industry can recognize what changed and who had the power to change it.

What the Telecom Records Can Show

Calling-minute agreements and credit balances show the benefit a carrier received, while checks, bank records and service agreements show how money left the business. In the Cinergy allegations, those records crossed company boundaries: shared management, Uniplex accounts, Cinergy contracts and intermediaries acting for officials. A finance employee may know who approved the payment; someone managing the carrier relationship may know why an unusually favorable credit appeared.

We connect that knowledge to the decision, payment and description in the books. The work includes identifying who controlled the contract terms, what the service provider actually did and where the payment ultimately went. An insider who can explain those connections brings something a list of checks cannot: the reason the transactions belong together.

You Know What the Telecom Fee Bought

If you know why a carrier received unusual credits or who benefited from a supposed consulting payment, talk with our whistleblower experts about the transaction. We build the case around your knowledge of the business and bring in FCPA whistleblower lawyers who understand payments to officials and the records used to disguise them. We stay with you through the whole process, working to build your strongest FCPA whistleblower case.