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SETAR Describes Itself As A “Private Sector Business,” But The DOJ Alleges That It Is A Foreign Government “Instrumentality”

What's the Difference

As highlighted here, in last week’s Foreign  Corrupt Practices Act enforcement action against Lawrence Parker in connection with a telecommunications bribery scheme in Aruba the DOJ alleged that Servicio di Telecommunicacion di Aruba N.V. (SETAR) was an instrumentality of the Aruban government such that Egbert Yvan Ferdinand Koolman (a product manager at SETAR) was a “foreign official.”

That’s interesting because since 2003 SETAR has described itself as a “private sector business.”

According to SETAR’s website:

“The history of SETAR dates back to 1986 when Aruba acquired it’s Status Aparte in the Dutch Kingdom. Servicio di Telecomunicacion di Aruba (SETAR) was established by merging the formerly called “Landsradio” and “Telefoondienst” (telegraph & telephone service of the Netherlands Antilles.

Before 1986 the telegraph and international telephone services where provided by the company that was owned by the Government of the Netherlands Antilles, headquartered in Curacao, the largest island of the Netherlands Antilles where all the political decisions were made at that time. The “Landsradio” provided the telegraph service and the “Telefoondienst” provided local calls.

SETAR owned by the Aruban Government and operating as separate entity became the primary phone company on the island of Aruba. SETAR maintained a monopoly on telecom services until privatisation of the company in 2003. The government of Aruba remained as it’s owner since then, with ownership of 100% of it’s shares.

[…]

In 2003, and the company’s focus on customers intensified, when SETAR became an incorporated company with the local government as shareholder. When operating as a private-sector business-venture innovation in technology products and services, became even more important.

[…]

In 2013 SETAR celebrated in this year it’s 10th anniversary as a privatized company.”

Moreover, in this March 2017 U.S. court filing (see this post for more on that), SETAR describes itself as follows:

“[SETAR] is a foreign corporation organized under the laws of Aruba. Setar is the privatized full telecommunications service provider for the island of Aruba. The Company provides telephone, internet, and GSMrelated wireless services to consumers and other end-users.

Until 2003, Setar was the telecommunications division of the Aruban Government, and considered a utility. Strategic decisions for Setar were made by the Minister of Telecommunications (the “Minister”), and all business-related decisions, such as hiring, marketing, and competitive issues, also were directed by the Minister. 5. In 2003, while Setar remained 100% owned by the Aruban Government, its reporting and leadership structure changed. A Board was formed and a Director named. From that point forward, all employees reported to the Board and/or the Director. The Minister no longer had a role in the management or day-to-day operations of the Company. Hiring, purchasing, distribution, competitive issues and business strategy and positioning were handled by the Board and the Director. Profits, however, would continue to flow to the Aruban Government.”

Regarding the telecommunications market in Aruba, according to the Department of Economic Affairs, Commerce & Industry of Aruba “the market for telecommunication has been liberalized. There are several providers of telecommunication providing solutions for Fixed line, Mobile, Internet and Data.”

In 2014, the 11th Circuit (which includes Florida where the Parker enforcement action was filed) addressed the issue of when a business enterprise can be an “instrumentality” of a foreign government such that its employees are “foreign officials” under the FCPA. The decision in U.S. v. Esquenazi has many flaws (see this article for a complete discussion as well as here) but nevertheless the 11th Circuit stated:

“An ‘instrumentality’ [under the FCPA] is an entity controlled by the government of a foreign country that performs a function the controlling government treats as its own. Certainly, what constitutes control and what constitutes a function the government treats as its own are fact-bound questions. It would be unwise and likely impossible to exhaustively answer them in the abstract. […] [W]e do not purport to list all of the factors that might prove relevant to deciding whether an entity is an instrumentality of a foreign government. For today, we provide a list of some factors that may be relevant to deciding the issue.

To decide if the government ‘controls’ an entity, courts and juries should look to the foreign government’s formal designation of that entity; whether the government has a majority interest in the entity; the government’s ability to hire and fire the entity’s principals; the extent to which the entity’s profits, if any, go directly into the governmental fisc, and, by the same token, the extent to which the government funds the entity if it fails to break even; and the length of time these indicia have existed.

[…]

We then turn to the second element relevant to deciding if an entity is an instrumentality of a foreign government under the FCPA — deciding if the entity performs a function the government treats as its own. Courts and juries should examine whether the entity has a monopoly over the function it exists to carry out; whether the government subsidizes the costs associated with the entity providing services; whether the entity provides services to the public at large in the foreign country; and whether the public and the government of that foreign country generally perceive the entity to be performing a governmental function.”

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