Digicel wins eight-year legal battle with US rival it accused of fraud

Denis O’Brien’s Digicel mobile phone company has won a bitter eight-year legal battle with a US rival it accused of fraud. Digicel Haiti, one of its most lucrative units, has been awarded more than $10 million (€9.4 million) in damages against Oregon company UPM Technology and its chief executive, Bruce Tran.

Digicel accused UPM of so-called “bypass fraud”, where one telco uses technology to override the systems of another to essentially resell its calls on the cheap. During the case, which was first launched in 2015, UPM admitted to engaging in the practice but claimed it did not amount to fraud.

The case went to trial in Oregon district court a few weeks before Christmas. Evidence was provided by Digicel executives including Maarten Boute, the chairman of Digicel Haiti. Legal filings show that the jury decided UPM and Mr Tran had “engaged in fraud by active concealment” by using software to trick Digicel’s systems in Haiti into giving cheap calls.

Mr O’Brien’s company, which had sought tens of millions of dollars in damages, was awarded $5.4 million in compensation, of which 75 per cent was to be paid by UPM and the rest by Mr Tran. The jury awarded Digicel a further $3.6 million in punitive damages to be paid by UPM, and a further $700,000 in punitive damages against Mr Tran.

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UPM, which had denied all claims against it, lodged a $60 million series of counterclaims against Digicel but a judge last year said those claims should be spun off into a separate trial to be heard at a later date.

The genesis of the case lies in an investigation undertaken at first privately by Digicel, and later by Haitian police, over suspicions that a US company was defrauding its network.

Digicel argued that UPM had signed up Haitian citizens to bulk-buy Digicel sim cards. These were then inserted into computer servers in Oregon, and also into equipment that was exported to Haiti labelled as DVD players on customs documents.

Sophisticated software was then used to trick Digicel’s network. This allowed Haitian expats living in the US who called home to get calls costing less because Digicel’s network believed they came from local numbers, leaving UPM to profit on the savings.

After Digicel’s private investigation made headway and the issue was handed over to Haitian police, scores of locals who Digicel alleged were involved were arrested. These included a hotel receptionist who told police he received a commission of 89 cent for every Digicel sim he bought at local market stalls. Police found 553 sim cards in his room when it was raided by officers.

Digicel has also previously investigated alleged bypass fraud in another of its main markets, Jamaica. A local newspaper report in 2015 reported on a raid that it said was “a joint operation ... carried out by members of the counterterrorism branch and Digicel employees”.