US court throws out $1.5bn alleged corruption case against Digicel

Denis O'Brien's Caribbean telco, Digicel, has succeeded in having a $1.5 billion (€1.4 billion) Haiti-linked political corruption case against it thrown out by a US court.

A judge in New York has dismissed the case taken by Haitian emigrants against Digicel and several other telecommunications and money transfer companies, following an application from the defendants. The case also included the impoverished nation’s former president Michel Martelly.

The now-defunct allegations included that Digicel, along with several other companies, “colluded” with politicians in Haiti, including Mr Martelly, to “fraudulently” collect levies on Haitian telephone calls and money transfers that were supposed to be ring-fenced to pay for education.

Instead, the plaintiffs had argued, the money was allegedly siphoned off to fund the lifestyles of some politicians. Digicel was also accused of Haitian “price fixing” in the US case. The company had always denied “any wrongdoing” in the case, which was originally filed almost 18 months ago.

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Defendants in the case asked last June for a dismissal on the grounds that the court had no jurisdiction to hear it under the “act of state doctrine”, which holds that a US court may not adjudge the acts of a foreign sovereign government.

The plaintiffs – Haitian emigrants who had settled in the US – argued that the case did not meet the criteria for “act of state” because the telecoms levy scheme, and the way it was enacted, was in itself a breach of sovereign law.

‘Unpersuaded’

In recent weeks, a judge in New York said the court was “unpersuaded” by the plaintiff’s arguments, and threw out the case. As well as Mr O’Brien’s company, the plaintiffs were also suing Digicel’s smaller rival, Natcom, and three money-transfer companies including Western Union.

The genesis of the row was a 2011 scheme to add government charges to all international phone calls and money transfers to and from Haiti. A fee of $1.50 was automatically added to every money transfer, while an extra five cents per minute was added to every international call. Digicel is the dominant player in the Haitian telecoms market, so collected the bulk of the call levies.

The levy scheme was started by Mr Martelly, a former musician known as “Sweet Micky”, who promised voters the cash would be ring-fenced to pay for “free and compulsory education”.

The fund has been the subject of allegations of mismanagement and corruption ever since, and was especially criticised by US-based Haitian emigrants, who say Haiti’s education system is still underfunded.

Mr O’Brien also also previously acknowledged concerns over the scheme. In a 2012 New York Times interview, he addressed concerns that $26 million had allegedly gone missing from the fund by promising to ask then-president Martelly for it to be audited.

Digicel, which recently asked bondholders to approve a debt write-off of up to $1.7 billion, last week mourned the death of its long-serving former chief executive, Colm Delves, who lost his battle with cancer.

Mr Delves passed away in Dublin last Thursday. Mr O’Brien lauded his deceased former colleague’s “humility, along with his kind, calm, low-key demeanour – and not forgetting his wry sense of humour. It made him beloved among our staff and indeed, anyone and everyone who had dealings with him.”