|Behind the cash in the freezer|
Scandal follows a Louisville businessman's
dealings with a Louisiana congressman
By Sharon Walsh
HERALD-LEADER STAFF WRITER
Vernon Lamar Jackson and William J. Jefferson and their wives spent a pleasant weekend in New York City in the fall of 2004. The Kentucky businessman and the Louisiana congressman watched U.S. Open tennis from an air-conditioned corporate box, attended The Lion King on Broadway and did a little shopping.
Rep. Jefferson and his wife had become trusted friends of the Jacksons. In e-mail messages and telephone calls, the congressman was simply "Jeff."
The cord that tied the two men was their stated opinion that Jackson's high-tech company, iGate, was going to save the government money and give poor black people around the world access to information they couldn't otherwise afford.
Jefferson seemed to work as hard for iGate as if he were the owner of the company. He went to Louisville for demonstrations. He pressed the Army to test the technology for use by the military, introduced Jackson to political and business stars, including Bill Clinton and Bill Gates, and went with Jackson to Nigeria to help sell his product. Jefferson even found an investor willing to put millions of dollars into iGate.
At the time of the U.S. Open, Jackson might have appeared cocky about his important supporter. What he didn't realize was that the congressman, while appearing to help, was stealing his company, piece by piece.
And Jackson was paying him to do it.
That, at least, is the view of FBI investigators and federal prosecutors, who have recounted secret meetings in Washington and Louisiana where Jefferson plotted to take over the company from Jackson -- a man he didn't think was up to making the company a success.
A review of public and private documents and interviews with associates of both men reveal a relationship from which both planned to profit. Jackson thought his company would get hundreds of millions of dollars worth of business through "Jeff's" help. Jefferson, according to those documents, thought he could reap a financial windfall for his family and ultimately take control of the company.
As for any visible role, "I'm in the shadows, behind the curtain," Jefferson, a Democrat, said in a conversation taped by the FBI.
His role became a very public one 17 months ago, when the FBI searched Jefferson's Washington, D.C., home and found that his freezer contained $90,000 in cash packed in frozen-food containers and wrapped in aluminum foil.
Conundrum of a man
There are many sides to the story of Vernon Jackson, depending on who's doing the telling. Perhaps he is a brilliant engineer who doesn't know how to operate in the world of big business. Perhaps he is a guileless entrepreneur whose product would undermine other companies whose officials fear his technology would outstrip theirs. Or he's a loyal friend who never meant to bribe anyone. Perhaps his product isn't as good as he claims and he needed someone with power to push it forward.
Whether any of these scenarios is true, Vernon Jackson now finds himself in a very different spot than he might have predicted that September night at the U.S. Open. Forecasts that his company and its partners could reap $200 million in earnings by their fifth year of sales in Nigeria alone are now just smoke. His business still exists, but it has no money while it waits for possible Army contracts.
He has pleaded guilty to bribing a public official -- Jefferson -- and is scheduled to be sentenced next month. He could receive a prison sentence of up to 15 years and a fine of $250,000.
The story of his friend "Jeff," who is up for re-election this year, has so far been told only by prosecutors and FBI agents. Was he merely doing business as usual in a pay-to-play Congress? Or was he guiding business to his wife's firm in a way that, although unethical under congressional rules, does not meet the legal test of bribery?
"It would be allowed if it's payment for legitimate services," said Craig Holman, a governmental ethics lobbyist for Public Citizen, a non-profit government watchdog. "But what a very easy and convenient way to try to bribe a member of Congress -- just hire a member's family. Technically, it's not illegal unless they're doing it in exchange for services."
Whether his actions were illegal, unethical or neither, Jefferson is still battling mightily to keep an indictment at bay.
"When all is said and done, you will see that there is an honorable explanation for everything," Jefferson told The Times-Picayune of New Orleans in June. "I believe an impartial forum can reach and will reach that same conclusion."
Wrestling with failure
Vernon L. Jackson, 54, and William J. Jefferson, 62, both had the intelligence and drive to succeed.
Jefferson, a Louisiana native, is a graduate of Southern University and A&M College and Harvard Law School. He has a master's degree in law from Georgetown University. He's proud that three of his five daughters also went to Harvard and Harvard Law. Another is a graduate of Boston University, and the youngest is a student at Brown University.
Jackson, born in Mecklenburg County, N.C., outside Charlotte, had an aptitude for math and engineering, and he was selected for training at Bell Labs at an early age, before he even finished college. He moved to Louisville nearly 20 years ago and soon started his own business.
A powerfully built man with a smooth, shaved head and neatly trimmed mustache, Jackson could have passed for an NFL linebacker a few years ago. Thinner now, he still projects an assurance that he ultimately will succeed, whether at his business or as a sometime lay preacher.
Many associates thought that the technology Jackson had patented would make him incredibly successful. But at every turn, he seemed to wrestle with failure. A previous company he had founded, Videolan Technologies, went bankrupt. Jackson later bought the patents for the technology from the bankruptcy court and formed his second company, iGate, in 1998.
iGate owns patents for technology that can transmit images, audio and data over copper wire faster, farther and more cheaply than most methods, according to iGate's promotional materials. Yet, if its product is as good as it says it is, it apparently has not yet found its market.
In 2001, the Army tested his technology, and it was used at Fort Stewart, Ga.
From 2001 to 2004, Jackson met many of the top officials of the technology giant Siemens -- including Heinrich von Pierer, former chief executive of Siemens AG, and Tony LeDinh, a vice president of Siemens Building Technologies.
The Jacksons and the Jeffersons were guests of Siemens that New York weekend. Jefferson, Jackson and Siemens officials went to the New Jersey offices of iGate to demonstrate its technology. Siemens had a three-year contract to be the exclusive manufacturer of iGate products beginning in 2002. When Jefferson and Jackson flew to Nigeria, a Siemens representative was scheduled to meet them at the airport.
Siemens used iGate products in some airports and at Howard University in Washington, but the amount of business was small compared with what Jackson had expected.
A Siemens spokeswoman said the company did not take the relationship further because iGate did not give Siemens the financial assurances it needed.
As he waited for the payoff for his company, Jackson was often unable to pay his or his company's bills. Siemens wasn't paid for all the equipment it manufactured and sued him. He borrowed money from friends and relatives for daily expenses.
He would drive from Louisville to Chicago to meet von Pierer and drive back, unable to afford airfare or a hotel room.
Jackson met Jefferson in 2000 when the Kentucky businessman was looking for someone in Washington to help him promote his technology in Africa.
Jefferson was the logical person. He was on the Africa Trade and Investment Caucus as well as the Congressional Caucuses on Brazil and Nigeria. From January 2000 until June 2005, Jefferson or members of his staff made nine trips to Nigeria and Brazil.
One of the first things Jefferson did was to get iGate's technology tested at Fort Huachuca, Ariz., where the Army's Technology Integration Center tests any products that might be used by the military.
"Congressmen call up and want us to test a lot of products of these little companies," said Dan Bradford, director of TIC. "My engineers said it would do what the vendor claimed for the Army."
He said that test was performed in early 2001, and it's impossible to know whether the iGate technology has kept up with advances in the field. "Five years is an eternity in this business."
Copper versus fiber
After the TIC tests, William Warner, a former IBM executive, was part of a team that received permission from iGate to market its product to the military.
Few who know Jackson wanted to speak about him, but Warner said that he still believes in him -- and he believes in Jackson's technology.
Warner said the military had promised that, if the product worked at Fort Sam Houston, where it was tested after TIC, it would be rolled out at 22 Army installations in the Southwest.
"They passed with flying colors," Warner said.
Hundreds of Army buildings aren't connected by fiber optics, Warner said. It costs about $1 million to install a mile of fiber optics. The cost to get the same function from iGate's technology is about $5,000, he said.
"Fort Sam Houston was calling this product an alternative to fiber optics. We were, too," Warner said. It turns out, he said, "that wasn't a very smart thing to do."
"People in very powerful positions felt threatened by that," he said. "I think the big boys got to them."
Asked who he meant by the big boys, he responded that Halliburton and other big defense contractors have a stake in laying fiber-optic cable for the military.
"Thirty years in this business and I've never experienced anything like this. You go through two years of testing; the product exceeds expectations. Then, nothing. ... We don't know what happened."
"They [the Army] still ain't got anything to touch this" technology, he said.
Army contracting officials did not return telephone calls requesting comment.
Nothing is free
Although Jefferson became the target of a wide-ranging Justice Department investigation more than a year ago, the Louisiana congressman has not been charged with a crime and has denied that he did anything wrong.
In an unprecedented raid in May, the FBI searched Jefferson's homes in Louisiana and Washington and, in a move that some legal experts questioned, his Capitol Hill office. (Jefferson recently won an appeal to review the seized materials and invoke legislative privilege before the Justice Department can review the evidence.)
It was in the search of his Washington home that agents found the cash in the freezer. (That money was to be used to pay off certain Nigerian officials, Jefferson implied on tape.)
"Obviously, these are just allegations, but at some stage, your common sense tells you there's something to it," said Bruce Fein, a Washington lawyer who has watched the case closely.
Prosecutors contend that Jefferson's help for Jackson's company -- and for many others -- was not free. In early 2001, Jefferson told Jackson that if his help was to continue, Jackson would need to pay a marketing company registered in the name of Jefferson's wife $7,500 a month for professional services, plus 5 percent of all sales over $5 million a year and 5 percent of any investments that Jefferson was able to bring to the table.
Between 2001 and September 2004, Jackson paid Jefferson about $400,000.
In addition, the agreement between the two men concluded that Andrea Jefferson's company, the ANJ Group, would receive options for 1 million shares of iGate stock over five years.
But that wasn't enough.
In mid-2003, when Jefferson thought iGate would be the company whose technology would be used to wire Nigeria, he amended the agreement to provide ANJ Group with 35 percent -- not 5 percent -- of any profits iGate might receive in Africa.
A year later, Jefferson met wealthy investor Lori Mody through Brett Pfeffer, a former member of Jefferson's staff. At the time, Pfeffer was working for Mody, looking for investment opportunities for her. (He has pleaded guilty to bribing a public official and was sentenced to eight years in prison.)
Jefferson told Mody that an investment in iGate's Nigerian business was "a deal you can't refuse."
Mody agreed to an initial investment of $3.5 million, with the rest of a $45 million investment to be financed by the Export-Import Bank.
Jefferson also required that Mody initially give 7 percent of the company she set up to do the Nigerian deal to his five daughters. Later, he increased it to 18-20 percent.
"I make a deal for my children. It wouldn't be me," he told her on tape in May 2005.
A month later, Jefferson accepted a stock certificate worth 30 percent of Mody's interest in the Nigerian deal -- again, in the names of his children.
In late July, Jefferson told Mody that he intended to form a new company to take over the role of iGate, according to FBI documents. He feared that Jackson didn't have the business acumen to succeed in the Nigerian affair. He proposed that Mody invest $10 million to finance the takeover of iGate by ANJ -- his wife's marketing company.
Jefferson's plan was to name several friends to the board of directors and a business associate to take over iGate and control its patented technology.
A loan from a friend
In August 2005, Vernon L. Jackson's dreams of selling his technology in Nigeria and other West African nations with the help of Jefferson came to an abrupt end when he was approached by an FBI agent while taking a walk with his wife in Louisville.
Jefferson was working to take over his company and steal his technology, according to the FBI.
When Jackson asked the court to appoint him an attorney because he could not afford to pay one, he reported among his debts a $10,000 personal loan from a friend -- William Jefferson.
News researchers Tish Wells, in Washington, and Lu-Ann Farrar, in Lexington, contributed to this report.