columnBy Christopher Drew
"A case against politicians,a tale of friendship, ambition and betrayal".
In July 2005, Vernon L. Jackson returned home to Louisville from Washington, where he had just met with Representative William J. Jefferson, the Louisiana Democrat who had been helping to promote his fledgling digital-technology company. David Harper, a lawyer for the company, said he had never seen Mr. Jackson so demoralised. For nearly five years, the inventor and the congressman had carried the message that Mr. Jackson's company, iGate, could help close the "digital divide" by delivering high-speed internet access to poor blacks around the world.
They had flown to Africa to seek business opportunities and they had talked up iGate to potential partners at the Kentucky Derby and the United States Open tennis tournament in New York.
But now, with iGate starved for cash, Mr. Jackson was convinced that Mr. Jefferson, his "friend on the Hill," was about to betray him, Mr. Harper recalled.
Over breakfast at the Grand Hyatt Hotel, the congressman had made a proposal that,in Mr. Jackson's view, he was tantamount to theft: in return for a quick infusion of cash, Mr. Harper said, Mr. Jefferson and his investors would take control of iGate and its promising broadband patients while easing Mr. Jackson aside and cutting off most of the company's creditors. Unbeknownst to the two men, the Federal Bureau of Investigation had been monitoring their dealings. Less than three weeks later, agents raided Mr. Jefferson's homes in Washington and in New Orleans and found stacks of cash stuffed in a freezer.
Mr. Jackson, 54, has pleaded guilty to paying more than $400,000 in bribes for Mr. Jefferson's help; on Sept. 8, he was sentenced to seven years imprisonment. An F.B.I. search of the congressman's office last May set off a showdown between Congress and the Justice Department. Mr. Jefferson has denied any wrongdoing and remains under investigation.
In recent months, the outlines of the case have emerged in court filings and news reports. But an examination of court records and dozens of internal iGate documents, as well as interviews with a number of Mr. Jackson's associates, offers a far clearer picture of the relationship between the two men, and of how Mr. Jefferson went from helping a small company to trying to take it over for his family's benefit.
Though Mr. Jefferson, 59, grew up poorly on a cotton farm, yet he became one of the most prominent black members of Congress, with a seat on the powerful Ways and Means Committee. He developed a reputation for nurturing black entrepreneurs, like Mr. Jackson, and working to expand trade with Africa.
Jobs for Family Members
Soon after meeting Mr. Jackson in late 2000, Mr. Jefferson prodded the Pentagon to test one of iGate's products, documents show. He recruited investors and did favours for iGate's leading supplier. He also lobbied political leaders in Nigeria, Ghana and Cameroon to include iGate in telecommunications projects, while repeatedly urging the Export-Import Bank of the United States to finance the deals.
And each time the company seemed poised to take off, records show, Mr. Jefferson sought a greater share of the potential profits for his family.
His wife, Andrea, had a marketing contract with iGate; their eldest daughter did legal work for iGate and one of its investors; and Mrs. Jefferson's brother-in-law was iGate's chief engineer. Even before the congressman brought up the takeover proposal, he had arranged for a consulting firm owned by his wife and five daughters to receive nearly 31 million shares of iGate stock, roughly a quarter of the company, at no cost, documents show.
The F.B.I. has said that Mr. Jefferson also sought a substantial share of profits made by iGate's partners in a Nigerian venture and that a complaint from one of those investors prompted the investigation.
"Greed is one thing," said William A. Warner, a former I.B.M. executive who had a contract to market iGate's products. "But this guy took it to another level."
Mr. Jefferson's lawyer, Robert P. Trout, said that given the investigation, the congressman and his family would not discuss their dealings with iGate. Mr. Jefferson, who is seeking a ninth term in office, said earlier this year that his family's dealings with Mr. Jackson were legitimates and that when "all is said and done, you will see that there is an honorable deal.
Mr. Jackson, a boisterous man as big as a football lineman, has been cooperating with federal authorities.
In a recent interview, he declined to talk about details of the case. But he said that while he had lost an earlier company to chicanery by business associates, "I didn't think it was going to happen to me in dealing with someone in government."
Several of Mr. Jackson's associates described him as an innovative engineer, if a bit naive about business.
As a minority student with top science scores, he was recruited in high school by Bell Labs, which paid for him to get an associate's degree in electronics. After rising over 20 years to senior engineer, Mr. Jackson said he retired and started a company to develop video conferencing from desktop computers. The collapse of that business led him to start iGate in 1998, with a focus on delivering high-speed Internet access over the old copper phone wires. Mr. Jackson said he thought military bases, corporate campuses, hospitals and schools would be able to use iGate's relay boxes to send graphics and streaming video to outlying buildings without expensive fiber-optic lines. He also hoped to interest the phone companies.
Vying for an Army Contract
Mr. Jackson and Mr. Jefferson were introduced in late 2000 by a Washington consultant, Jack W. White, who had been hired to sell iGate's technology to the Army. Mr. Jefferson soon called an Army official to his office to press for a test of the device, which supported iGate's claims about data-transfer speeds.
In early 2001, the congressman told Mr. Jackson that he could not provide any more help, according to court documents filed in connection with the F.B.I.'s search of the congressman's office and Mr. Jackson's guilty plea. Instead, he recommended hiring the ANJ Group, a consulting firm just incorporated under the names of his wife and his daughters.
The women were hardly marketing professionals: Mrs. Jefferson was Vice Chancellor of the New Orleans campus of Southern University and while the Jeffersons' oldest daughter was a lawyer, the others were still in school. Even so, iGate's agreement with ANJ provided for payments of $7,500 a month, plus 5 per cent of any money it raised from investors and 5 per cent of sales over $5 million it made for iGate. Mr. Jackson also gave ANJ 100,000 shares of stock and options for a million more.
Former iGate officials said Mrs. Jefferson made at least two marketing contacts in Louisiana, with a telephone company and a university, though nothing came of them. But, the officials said, it was her husband who kept driving most of the action.
Over dinner in New Orleans that spring, he and Mr. Jackson persuaded five men, mostly Jefferson campaign donors, to invest $375,000 total. One of them, Lloyd L. Villavaso, said he had left feeling an iGate contract with the Army was "pretty much a done deal."
By mid-2002, Mr. Jackson had persuaded a unit of Siemens, the German conglomerate, to manufacture iGate's devices. Mr. Jefferson attended iGate's annual shareholder meeting with a Siemens executive and an Army testing official and that summer, Siemens invited Mr. Jackson to a stock-car race, where iGate's slogan, "Communications in Motion," was painted on two cars.
The congressman later did several favour for Siemens at Mr. Jackson's request. Mr. Jefferson offered, for example, to arrange for the company's chief executive to be taken to the front of the customs line when he flew in from Germany and he set up a meeting with Army officials about possible contracts, said Paula Davis, a spokeswoman for Siemens USA.
Reaching Out to Nigeria
Africa was another promising market, former iGate officials said, because few countries there could afford fiber-optic lines. In June 2003, the congressman introduced Mr. Jackson to officials at Netlink Digital Television, a Nigerian company that agreed to invest $45 million to use iGate's products in Africa. At this point, Mr. Jackson was developing a new product, a "triple play" switch that could deliver voice, data and video communications to home and business consumers. Netlink was to put up $6.5 million and finance the rest, with Mr. Jefferson's help, through the Export-Import Bank.
But in his guilty plea, Mr. Jackson asserted that iGate's payments to the family's consulting firm amounted to bribes for Mr. Jefferson's help. He also said he believed that if he had stopped paying, Mr. Jefferson would have quit helping him.
As Mr. Jackson began gearing up, Mr. Jefferson moved to increase his family's stake: in late July 2003, court papers show, he presented Mr. Jackson with an amendment to the ANJ contract, giving the firm 35 per cent of iGate profits in Africa.
But relations soured with the Nigerian company and by early 2004, Netlink was demanding some money back. The F.B.I. said Mr. Jefferson had also expected to receive a share of Netlink's profits. Agents found a letter the company's lawyer had sent the congressman that May, accusing him of breaking Nigerian laws.
In June 2004, Brett M. Pfeffer, a former aide to Mr. Jefferson, introduced him to a Virginia investor, Lori A. Mody, who ran a foundation that supplied technology to public schools. When Ms. Mody wired iGate $3.5 million for a new Nigerian deal, it looked as if the company was finally starting to click.
Mr. Jackson's original device had passed a field test at Fort Stewart, Ga., and Fort Sam Houston in Texas was about to begin what would become another successful test. Siemens had installed the technology in security systems at Howard University and Ronald Reagan Washington National Airport. That August, after the company demonstrated the triple-play switch, a top research official at SBC Communications, which later merged with AT&T, asked in an e-mail message to an iGate engineer how the company had managed to surpass an industry standard.
On Aug. 20, 2004, company records show, iGate granted the ANJ Group 30 million shares of stock. And that Labor Day weekend, said Ms. Davis, the Siemens spokeswoman, Siemens treated the congressman, Mr. Jackson and their wives to a weekend in New York, including airfare, lodging and tickets to the United States Open and "The Lion King."
An Informer Wears a Wire
But before long, nearly all of iGate's sales initiatives had stalled or begun to crumble. The Army had to pay for the war in Iraq and the fight against terrorism. The biggest phone companies had decided to extend their fiber-optic networks or develop triple-play switches with other suppliers.
Meanwhile,Ms. Mody, had become suspicious and in March 2005, she agreed to wear a wire for the F.B.I.
Over the next several months, she recorded conversations in which Mr. Jefferson pushed for 30 per cent of her profits. According to court documents, he suggested that 30 per cent go to a Nigerian company owned by his daughters and that both his sons-in-law be involved in the deal. The F.B.I. said he asked Ms. Mody for $100,000 to bribe Nigeria's Vice President and agents found nearly all of it in his freezer.
The wire also captured the congressman telling Ms. Mody that he was frustrated with how Mr. Jackson was running iGate, and asking her to help ANJ buy a controlling interest and replace Mr. Jackson. According to the F.B.I., he told Ms. Mody, "I'm in the shadows, behind the curtain."
Three days later, on July 15, 2005, at the Washington breakfast, the congressman revealed his takeover plan to Mr. Jackson, proposing that iGate be merged into a new company, with Mr. Jackson's ownership shrinking to 3 per cent from 60 per cent, said Mr. Harper, the iGate lawyer. Mr. Jackson was offered an incentive: $500,000 in cash and two years on the company's payroll, at a total additional salary of $1 million. But he rejected the deal, Mr. Harper said.
Since the case became public that August, Mr. Pfeffer, the former Jefferson aide, has pleaded guilty to conspiracy charges. iGate has rescinded nearly all the Jefferson family's stock grants. Siemens has severed its ties with Mr. Jackson and iGate has closed its offices and furloughed its staff.
But even with his looming prison term, which could be reduced if he continues to cooperate, Mr. Jackson has not given up on his dream of providing broadband access both here and in the developing world. He remains disappointed in how slowly the phone companies have upgraded broadband services, and he continues to talk to investors about providing more bandwidth over leased phone or power lines, he said.
He has also become a minister at the Spirit of Peace Missionary Baptist Church here.
The pastor, R. Z. Miller, said that at first, he was afraid the scandal might have set Mr. Jackson on "a run for the cross." But he said Mr. Jackson recently preached about his struggle to embrace forgiveness and atone for his mistakes. "I told Vernon that even though I teach forgiveness," Mr. Miller said, "I don't know if I could really forgive like he has."