The William Jefferson Chronicles

How Siemens Underdeveloped Telecoms Sector (i)
This Day (Lagos)

22 November 2007
Posted to the web 22 November 2007

When a seemingly unconnected investigation broke out two years ago in the United States of America (USA), Cornelius Adebayo, then Minister of Communications, who coincidentally was in Lagos that August afternoon on a ministerial tour of facilities, was asked by newsmen to comment on an unfolding development linked to the Nigerian Telecommunications Limited (NITEL), the pioneer national operator under his ministry's watch.

In the U.S., a massive FBI sting operation had targeted US senator, William Jefferson, alongside Nigeria's ex-Vice President, Atiku Abubakar and Ghana's Vice President, Aliu Mahama, over allegations that they tried to swing a telecoms deal with NITEL, in favour of a US company, iGate Corporation.

iGate which has the patent for a broadband service capable of delivering faster voice, data and video along traditional copper telephone lines than digital subscriber lines at a relatively cheaper cost is looking to roll out the service in Nigeria.

However, Adebayo had in August 2005, in the wake of the outbreak of the corporate scandal in the US told newsmen in Lagos that his ministry, which supervises NITEL, was unaware of the FBI probe and does not have any dealings with iGate.

In his words at the time, "We are not working with any American company by that name. The only American company we work with is Motorola. I am not aware of this report or investigation."

Hitherto, FBI had raided Atiku's home located in an upscale Maryland suburb of the US capital on allegations of being linked with the telecoms deal said to be part of an international anti-corruption probe by the U.S. security agency.

The FBI probe of the planned telecoms deal that allegedly involved Nigeria, senior government officials as well as the US Congressman, Jefferson of Louisiana, was to assume a larger scale with searches at Jefferson's homes in Washington and New Orleans in search of evidence of alleged illegal payments made or arranged by the Louisiana Democrat for Abubakar, other Nigerian government officials as well as Ghanaian Vice President, Mahama.

The payments were to grease the palms of their beneficiaries to push for a deal between iGate, a Kentucky-based telecommunications company, hoping Nigeria's underserved telecoms landscape could use some fillip from iGate's plan to use its patented technology to deliver voice, data and video along copper telephone lines faster and more cheaply than a digital subscriber line, which is common in many American households and businesses.

But when FBI searches on the US lawmaker's home uncovered stashes of cash that investigators reckoned was to be used to deliver the deal, suggesting something more transparent had gone under, it attracted more than passing attention.

Atiku was later to fight a battle to clear his name of any wrongdoing and extricating himself of links to the US congressman.

But former African Regional Director ITXC Corporation, Yaw Osei Amoako, was not so lucky as he was jailed over a wide range of money-for-contract deals across Africa including bribery of an unnamed official of NITEL.

The US government, says two other former officials of IXTC Corporation, a voice over Internet protocol (VoIP) technology company, alongside Amoako pleaded guilty to giving bribes to secure lucrative telecoms businesses in Nigeria, Rwanda, Senegal, among others.

Steven J. Ott and Roger Michael Young, former executives of ITXC Corporation, pleaded guilty on July 25, 2007, to separate one-count criminal charge of conspiring to violate the U.S. Foreign Corrupt Practices Act (FCPA) and the Travel Act.

Investigators say Ott, Young, and their co-conspirators caused ITXC to pay approximately $266,000 in bribes to foreign officials; specifically, about $166,000 in Nigeria to an official employed by Nitel; approximately $26,000 to an official employed by Rwandatel, a telecommunications company that was wholly owned by the Rwandan government; and approximately $74,000 to an employee of Sonatel, a telecommunications carrier partly owned by the Senegalese government.

ITXC was a publicly traded company that provided telecommunications services, primarily Voice Over Internet Protocol (VOIP) services, to carriers across the globe.

Ott served as ITXC's Executive Vice-President of Global Sales and Young served as ITXC's Managing Director for Africa and the Middle East. In pleading, both defendants admitted that between September 1999 and October 2004, they conspired with each other and other former ITXC employees and officers to make corrupt payments to employees of foreign state-owned and foreign-owned telecommunications carriers in Nigeria, Rwanda and Senegal to obtain and retain contracts for ITXC.

Amoako, 55, was sentenced to 18 months in prison for conspiring to violate the anti-bribery provisions of the FCPA and to violate the Travel Act stemming from corrupt payments to foreign officials in order to retain business for ITXC in Africa and was also ordered to pay a $7,500 fine and serve two years of supervised release.

But when investigators probing some Siemens projects relating to the 2004 Summer Olympics in Athens stumbled on a bigger discovery of embezzlements and bribery and picked up five Siemens senior executives last year, they were later to realise that they were onto something bigger in corporate malfeasance as they, "believed the men were following company instructions rather than acting on their own."

At that time, ex-Head of State, late General Sani Abacha, an undisclosed former Minister of Communications, an undisclosed former top official of NITEL and other senior Nigerian government officials were said to have been linked as beneficiaries of a large-scale payoff running into about -200 million in the ongoing investigations by European authorities of German telecoms equipment supplier, Siemens AG.

The international investigation had involved public prosecutors spanning Germany, Greece, Italy, Switzerland, and Austria who uncovered large-scale cash-for-contract deal by the German company in a number of foreign countries including Nigeria.

Siemens, which employs some 461,000 people worldwide and 600 in Nigeria, has been doing active business in Nigeria since the 1950s in the areas of ICT, Automation and Control and power.

But back in Munich, the headquarters of Siemens, had since come under fire following the investigations that revealed that an international crime network in Siemens dating back to the 90s had done business the crooked way by bribing government officials in Italy, Greece, Nigeria, among others, to secure plum deals. In recent times, more countries including Libya were added to the list.

The lid was blown last year by German daily, Suedeutsche Zeitung, which reported that public prosecutors in Germany, Greece, Italy, Switzerland, and Austria, were told that Abacha benefited from the Siemens graft package.

At the time, the lid was kept firmly on the identity of other alleged Nigerian collaborators said to have been on the take of Siemens to secure juicy Nigerian deals. They include an ex-Minister, senior officials of the Nigerian Telecommunications Limited (NITEL), an ex-director of a radio station among others.

The top executives who had made disclosures that let investigators uncover that Siemens COM, the company's landline communications division, used 'black cash' transferred illegally from Siemens through an account in Salzburg, Austria, to secure big contracts including that awarded Siemens for the Olympics Summer Games in Greece in 2004.

Meanwhile, the Nigerian operation of Siemens had then declined comments on the issue rather than pointing Technology Times to a global press statement issued by the Munich headquarters condemning the "illegal business practices" of its employees.

"We have to relentlessly clarify and punish irregularities. Employees who violate our compliance regulations hurt Siemens in every respect. We cannot tolerate this," says Siemens CEO, Klaus Kleinfeld, in the statement posted on the company's website following series of raids by law enforcement agents across Siemens offices in Germany.

However, senior NITEL officials admitted weekend anonymously that it is "common knowledge" that the German company had a way of pushing through its way, particularly in the military era, when the policy of 'mono selection' was used to justify the awards of huge contracts to Siemens.

However, information obtained by Technology Times detailing contract awards by NITEL to Siemens revealed that the company secured big contracts which were sometimes advanced above 90 per cent payments ahead of implementation.

"They often give exotic cars to ministers and government officials and they take them on foreign trips," says a former NITEL source.

The way it often happens is for top government and NITEL officials to visit offshore sites ostensibly to see first-hand reference sites for projects that they intend implementing in the country as is often the practice among technology companies to validate their claims.

"But what often happens during those visits is that they take them abroad to verify the money lodged in their foreign accounts and there the business is sealed and everyone knows that Siemens gets all the major telecoms projects in NITEL before the coming of GSM", an insider confirmed, saying that the rot that the company had become today was tied inextricably to Siemens.

Add the elements of graft to the issues of corporate strategy, infrastructure deployments, human capital requirements, customer service problems and marketing of its suite of dormant telecoms products and services, it may explain why the behemoth of the pre-GSM era had failed to deliver the nation's vision of an efficient and affordable telecoms services to Nigerians.

At the height of its domineering era, NITEL had an estimated total installed network capacity of 720,270 lines of which 486,351 and 233,919 are digital and analogue. Out of the total installed capacity, only about 497,070 lines were connected bringing the switching capacity utilisation to 69 per cent and offering services only to the richest Nigerians alive, government ministries, departments and agencies and a handful of corporate bodies.

It wasn't uncommon to have installation of larger capacity in regions of relatively marginal demand while areas with installations in places with demand and switching capacity often lacked external line plant (ELP) to take service to customers.

Lagos was then worst hit by this obvious lapse in corporate planning where its huge demand for Nitel's services were largely unmet while idle capacity oftentimes languish in some hinterland without commensurate demand. Domestic call completion was also abysmally low due largely to a parlous state of existing transmission capacity.

A report of a survey on NITEL prior to the GSM era had surmised thus: NITEL has not taken a market-oriented approach in developing, improving and marketing the various telecoms services. While Nigeria has the highest population in Africa, it is saddled with a small installed wireline capacity of about 720,000 lines, a network of less than half a million wireline subscribers and about 30,000 cellular subscribers. Both the wireline and cellular network have reasonable switching capacity but the connected subscribers are much smaller. This keeps the utilisation of the switching system lower than desired. The teledensity of NITEL is below many of the other African countries."

But that ought not to have been the lot of Africa's most populous nation which had a history of telecoms tied to her colonial past when the British administration had in 1886 set up telecoms facilities, "geared towards discharging administrative functions rather than the provision of socio-economic developments of the country", according to contemporary history of telecoms evolution in Nigeria.

The fundamentally flawed pedigree of that past may have haunted Nigeria beyond the colonial era as latter day neo-colonialists corporations, like Siemens, using the conduit providing by the supply of complex telecoms technologies, have worked with willing local collaborators, oftentimes senior government officials, to once again suck the nation dry.

How does it work? It's the simple process of overbilling for contracts awarded them after they have bribed corrupt government officials.

The lid over the identity of alleged collaborators of Siemens in Nigeria was broken last week when the US newspaper, Wall Street Journal blew the lid and published the identity of some past Communications ministers, top NITEL and government officials that were allegedly paid bribery more than 10 million Euros in Nigeria and other countries where Siemens has operations to secure juicy contracts.

However, with the Nigerian leg of the Siemens bribery scandal under way by Nigeria's anti-graft agency, the Economic and Financial Crimes Commission (EFCC), the concern among industry analysts and experts is that the disclosures may have only scratched the surface. As the investigators dig deeper into the era of Siemens' 'mono selection' as the virtual sole provider of NITEL's equipment and facilities, it appears to be just the beginning.

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