Otto Reich and the Honduran Coup D’Etat: The Provocateur, his Protege, and the Toppling of a President – Part One

The story of Otto Reich’s role in fomenting the June coup d’etat in Honduras is not a brief one.  This report will be posted over two days.


The Provocateur, his Protégé, and the Toppling of a President (Part One)

By Machetera*

The very same day that the coup d’etat in Honduras began, in an emergency session of the Organization of American States (OAS) in Washington D.C., Roy Chaderton, the Venezuelan ambassador to the OAS, spoke with a simmering fury as he looked directly at Hector Morales, the U.S. Ambassador to the OAS.

“There’s a person who’s been very important within U.S. diplomacy, one who has re-connected with old friends and colleagues and helped encourage the coup perpetrators,” he said.

“The gentleman’s name is Otto Reich, former Assistant Secretary of State for Western Hemisphere Affairs during the government of George [W.] Bush. We in Venezuela have suffered this man, as the U.S. Ambassador in Venezuela, as an interventionist, we suffered him later in his position as Assistant Secretary of State…we had the First Reich, later, the Second Reich, now unfortunately we’re facing the Third Reich, moving within the Latin American ambit through an NGO [non-governmental organization], to fan the flames of the coup.”

Following Chaderton’s furious denunciation, Reich penned a strange non mea-culpa opinion piece which the Miami Herald obligingly printed, complete with Reich’s deliberate misspellings of Chaderton’s name.  He said that he was not the coup’s “architect,” which is quite some distance from a total denial.

Shortly thereafter, news reports began to circulate about an unusual guest making the rounds in Tegucigalpa.  He had checked into the Plaza Libertador Hotel under the pseudonym Armando Valladares, and was seen making frequent visits to the Presidential Palace and the National Congress. Armando Valladares was the Cuban prisoner who faked paralysis to gain worldwide support for his release, and went on to become chairman of a CIA-linked non-profit front group in New York: the Human Rights Foundation, until he resigned this July, angry that the Foundation had not supported the coup.  The man traveling under his name was actually Robert Carmona-Borjas, Reich’s protégé and the notorious figurehead for yet another “non-profit” front group: the Arcadia Foundation.  This was the NGO Chaderton was talking about.  Until now, a detailed summary of Arcadia’s activities in Honduras has not been reported outside Latin America.

The story that emerged outside Honduras about Zelaya’s insistence on holding a public opinion poll being the trigger for the coup is only a partial one, because the effort to undermine Zelaya was proceeding on several tracks in the years leading up to the coup.  A whispering campaign about corruption was one of them. Juiced with Reich’s contacts at the highest levels of the U.S. government, the Arcadia Foundation coordinated a farcically one-sided media campaign against the Honduran state telephone company, Hondutel, in order to create the public perception, similar to the accusations made some years ago against Haiti’s deposed president, Jean Bertrand Aristide, that Zelaya’s government was hopelessly corrupt from the top on down, and that Zelaya was unfit for the presidency.

Reich’s history in U.S./Latin American relations is a repellent one.  He has worked tirelessly in support of the U.S. economic blockade of Cuba, helped the anti-Cuban terrorist Orlando Bosch find shelter in the United States, and produced domestic anti-Sandinista propaganda for the Reagan White House, reichthrough the State Department Office of Public Diplomacy for Latin America.  In that post, he worked with a non-profit front group called Citizens for America to spread that propaganda throughout the U.S. press.  He came to his final State Department post under such a cloud of controversy due to these activities and so many others just like them, that Bush II was forced to install him through a one-year recess appointment in 2001, in order to avoid a Congressional confirmation process that was likely to fail, not to mention dredge up unpleasant reminders.  Once installed, Reich busied himself supporting the unsuccessful 2002 coup against Hugo Chávez in Venezuela and the successful 2004 coup against Jean Bertrand Aristide in Haiti.

Carmona-Borjas is a Venezuelan attorney who drafted the Carmona decree, named not for himself but for Pedro Carmona, to rcb2whom he bears no evident relation.  Pedro Carmona seized power in Venezuela during the two days of the unsuccessful 2002 coup d’etat against Hugo Chávez. The Carmona decree was the document that dissolved the Constitution, the Congress and all other democratic institutions in Venezuela during those two days.  Following his involvement in the failed coup, Carmona-Borjas sought and easily received political asylum in the United States.

Just as there were remarkable similarities in the kidnapping of President Aristide in 2004 in Haiti, and President Zelaya in Honduras, both being put on planes with the shades drawn and flown to unannounced destinations, there were similarities in the use of telecom as a propaganda tool to turn public opinion against them and set the groundwork for them to be prematurely removed from office, and once out, kept out.

A Brief History of Washington’s Relationship to Telecom

From a neoliberal political point of view there are two advantages to a propaganda offensive centered upon telecom corruption.  The first is obvious. If telecom corruption can be tied directly to a leader who is not following Washington’s agenda, it promotes public support for the leader’s removal.  The second is a little less obvious, but equally as important.  It promotes the argument that telecom companies under state control really ought not to be, especially in underdeveloped countries, and would be better off privatized.

To make that argument, one must of course ignore the abundant evidence of telecom corruption in the United States, where men like Bernie Ebbers and Joseph Nacchio, who became telecom kingpins thanks to privatization (called “deregulation” in the U.S.) and are serving federal prison terms for accounting fraud and insider trading.  The fact is that telecom, as an essential service in the modern world, has always been a kind of money printing press, and the fight over state control vs. private control is all about who gets to control the switch, and what will be done with the profits.

ITT, which owned the Cuban phone company at the time of the revolution in 1959, was the first foreign owned property to be nationalized in Cuba, in 1961.  In 1973, ITT was so fearful of repeating the experience in Chile that John McCone, a board member and former allende2CIA man promised Henry Kissinger a million dollars to prevent Salvador Allende’s election.  According to the U.S. Ambassador to Chile at the time, Edward Korry, ITT did pay $500,000 to a member of the compensation committee for expropriated properties in Chile, until Allende found out about the payments and nixed the compensation entirely.

In Venezuela in 2007, privatization was also reversed, and Verizon was paid $572 million for its share in the Venezuelan phone company, Cantv. This sent chills down the spine of every U.S. politician and telecom executive or consultant (like Reich) invested in expanding telecom privatization extra-territorially.  And the chill was bipartisan.  Democrats as well as Republicans had benefited equally from global privatization of the telecom mint.

As someone who counted AT&T and Bell Atlantic (Verizon) among his former (acknowledged) clients and a proven antipathy for leftist governments, Reich had plenty of motive.  A front group disguised as a foundation would provide the opportunity.

A Brief History of Washington Front Groups

Political front groups are a relatively recent Washington phenomenon, at least on an overt basis.  The CIA of course, has been in the front group business since its inception.  But during the Reagan years, public front groups with pleasant names and non-profit status began to flourish.  The National Endowment for Democracy (NED), is the largest federally funded non-profit front group, set up to funnel enormous amounts of money to the International Republican Institute (IRI) and the National Democratic Institute (NDI).  Allan Weinstein, one of the NED’s founders, said “A lot of what we [NED] do today was done covertly 25 years ago by the CIA.”  The NED was formed in 1983, the same year as the corporate funded non-profit Citizens For America, which received contributions from Northrup, Shell Oil, Chase Manhattan and a variety of right-wing tycoons to drive its anti-communist agenda.

The IRI and NDI provide money and resources to foreign groups working in support of U.S. foreign policy, which basically means that in non-capitalist countries or those with non-capitalist leanings, they fund whoever is in opposition.  The corporate supported non-profit front group on the other hand usually has a domestic agenda and is above all, a propaganda tool, used to facilitate favorable press coverage that in turn drives policy.  Relatively unencumbered by burdensome government reporting requirements, they are quite a bit more agile and can be comparatively opaque, both useful qualities in the propaganda business.  In Latin America, where the press is highly concentrated in the hands of a small oligarchy, the front group provides a unique opportunity.  When an oligarchy is eager to topple a leftist president, a front group can be a third-party source of useful allegations which can be printed without question, as well as a distanced, albeit fake, source of comment on reaction to those allegations, adding fuel to the fire.  It’s a kind of self-licking ice-cream cone, and it is exactly the role Arcadia has played in Honduras.

The one thing this type of front group must be certain to do is file for non-profit status in the U.S.  They therefore must make at least a passing effort to put together a plausible board of directors and a credible mission statement, and comply with tax and other public disclosure requirements.  The Arcadia Foundation has the mission statement – a rambling treatise on democracy and civil society, but little else.  Carmona-Borjas shares billing at the group with Betty Bigombe, a Ugandan World Bank consultant who appears to have lent Arcadia nothing beyond her name.  Although Carmona-Borjas has insisted the group’s activities are entirely legal, he has concealed the documents he is required to make available to any member of the public upon request and is reportedly hostile to those who ask to see them.

Both Reich and Carmona-Borjas have denied Reich’s connection to the group, but a legal connection would have been both unnecessary and inconvenient.  Reich could have worked the same way with Arcadia as he did with “Citizens For America,” without being legally tied to the group, and based on the available evidence it seems likely that this is exactly what he did.

The Launch

In the fall of 2007, the El Universal newspaper in Mexico printed a story based on a report it had received from the Arcadia Foundation. Interestingly, the report itself is not available at the Arcadia website, but there are clues to its contents and objectives in the newspaper stories which followed.

The report evidently contained allegations about corruption in the Honduran phone company, peppered with innuendo, a Reich trademark. It claimed that income to Honduras’s phone company, Hondutel, had declined by nearly 50% between 2005 and 2006.  Out of the dozens, if not hundreds of companies involved in Honduran telecom, Arcadia exclusively targeted one: Cable Color, a company owned by the wealthy and influential Honduran family, the Rosenthals, for diverting calls away from Hondutel, thereby depriving the phone company of revenue.

It was an old horse that had seen service once before, in Haiti, against Aristide.

Interconnection and the Haiti Case

All international telecom traffic is subject to interconnection fees with the phone company in the country where the call is terminated.  These interconnection fees are split 50/50 between the company sending the call and the company receiving the call so that they are only paid if there is an excess of traffic in one direction or another.

With underdeveloped countries such as Honduras or Haiti, there is an overwhelming excess of one-way traffic as a result of emigrants to the U.S. or tcm4other Western countries calling their families back home.  It is precisely in these extremely poor countries, where the telephone company has not been privatized, that interconnection settlements represent a vital source of revenue to the state.  Until recently, the Federal Communications Commission (FCC) intervened on behalf of the multiple carriers who’d emerged as a result of privatization (deregulation) in the United States, to negotiate interconnection rates with other countries that would apply equally to all carriers.  In 2004 the FCC’s intervention began to be phased out, and since 2006 it has vanished entirely except for a short list of countries that does not include Haiti or Honduras.

During the fixed-rate years, some U.S. companies still tried to get a better deal regardless, and while state owned companies such as Haiti’s Teleco and Honduras’s Hondutel were free to offer lower interconnection rates than those set by the FCC, they were supposed to be offering them equally to all carriers, not just a privileged few, so as not to make a mockery of the FCC’s system. If payments from the U.S. carrier were involved in securing the discount it would also be a violation of the U.S. Foreign Corrupt Practices Act (FCPA).

This appears to be what occurred with IDT, a New Jersey telecom company that negotiated a special rate to interconnect with Haiti’s Teleco.  The FCC’s rate at the time was supposed to be 23 cents per minute for connections to Haiti, but IDT negotiated and received a contract for 9 cents a minute.  When a former IDT employee claimed that part of that fee was a kickback to Aristide, the anti-Aristide lobby went crazy.

The Wall Street Journal’s Mary Anastasia O’Grady, followed by Lucy Komisar writing for another non-profit front group sponsored by a Haitian oligarch, the Haiti Democracy Project, claimed that jbaAristide knew of and personally benefited from the kickback.  Before, corruption allegations against Aristide had tended to be confined to equally unproven insinuations about profiting from drug trafficking, such as those Reich provided to O’Grady when he sat down with her for an interview in 2002.

None of the defamatory allegations about Aristide’s involvement in any of the schemes could be proven, and a much publicized court case brought against Aristide by the Haitian (U.S.) puppet government was quietly shelved.  But proving the case was secondary to floating the allegations, both as a propaganda tactic against Aristide, and political intimidation of his supporters in the U.S. Congress.

Grey Traffic

In Honduras, Arcadia had no “whistleblower” to rely on, like Michael Jewett, the ex-IDT employee who originally smeared Aristide and whose wrongful dismissal case provided much of the fuel for O’Grady’s and Komisar’s strident accusations.  Carmona-Borjas would have to be a little more creative.  The report he fed El Universal claimed that the Rosenthal’s company, Cable Color, had diverted the incoming international calls and turned them into “grey traffic.”

Grey traffic means that a call is being diverted to an Internet (IP) network rather than a switched one. Voice over IP (VoIP) which is essentially telecom over a broadband connection works this way – Skype and Vonage are both well-known varieties of this kind of service.

Theoretically, an internet service provider (ISP) could purchase lines from a regular phone company like Hondutel, but then use those lines to sell cheap international phone calls to its own customers, providing international phone service at a vastly discounted rate.  This is said to be an exploding practice in Africa.  The only problem with it is that it is usually illegal for an ISP to offer such a service – when phone calls are handled this way, the state or incumbent telephone company, quite naturally, prefers to make an interconnection agreement with whoever is buying the lines for voice purposes, so as not to completely lose out on the revenue.

Carmona-Borjas wasn’t claiming that Cable Color was ending up with the termination fees, as this would have been impossible.  He just mentioned Hondutel’s traffic decline, pointed to Cable Color, said “grey traffic” and left the rest to the reader’s imagination. And he threw in a few extra details.

yr“According to the report,” said El Universal, “the Cable Color business is owned by the prominent Rosenthal family, with strong political and financial interests, and according to the document, is presently headed by Jaime Rosenthal, proprietor of the El Tiempo newpaper, the television Channel 11, and father of Yani Rosenthal, a presidential minister and someone who is considered in Honduras to be a potential presidential candidate.”

The report was likely fed first to the Mexican paper rather than the Honduran papers, because with the exception of El Tiempo, all are owned by Zelaya’s bitter opponents, the Canahuati Larach family, (Roberto Micheletti, the president of the Honduran National Congress, who would later rise to dictator in the 2009 coup, owns La Tribuna) and the self-interest in publishing such a report was a bit too obvious.  Once the story had been safely floated in Mexico however, El Heraldo, La Prensa and La Tribuna were delighted to run with it and over the next two years, would go on to print Carmona-Borjas’s allegations whenever they surfaced (with frequency), always describing him as the “Vice President of an NGO based in Washington” and raising no questions whatsoever about his funding or other “anti-corruption” projects.

Jaime Rosenthal sent a letter to El Universal which said that the Arcadia report had been “planted” by someone “interested in divulging in Honduras what couldn’t [be published] or wasn’t convenient to publish directly within [Honduras itself].”  Rosenthal pointed out that the decline in Hondutel’s revenues between 2005 and 2006 was directly attributable to the end of its monopoly on terminating international calls, which disappeared on December 31, 2005, when Hondutel opened contracts with two international cellphone service providers. International calls were valued at 16 U.S. cents per minute, he said, “but wireless providers don’t pay anything to Hondutel.”

In a subsequent radio debate between Carmona-Borjas and the Rosenthals, they also explained that Cable Color was in the business of selling phone lines to ISPs and whenever it found that the ISPs were illegally repackaging the service as telephone service rather than internet service, without the benefit of an interconnection agreement, it notified Hondutel, whose responsibility it was to take action.

Arcadia vs. Rosenthal

In that radio debate on September 12, 2007, Yani Rosenthal asked why, if Otto Reich had nothing to do with the Arcadia Foundation, his name had appeared on the foundation’s website until September 10th, and was then erased on September 11th?  Carmona-Borjas initially avoided answering the question, insisting that the Foundation was legally set up within the United States and it had nothing against Yani personally – “…caramba! We congratulate him [on his campaign] and wish him the best…” returning to his accusation that Cable Color had 340 lines connected to Hondutel that were causing great losses for the phone company because they were being used for grey traffic.

Yani responded: “… yesterday when Mr. Roberto Carmona spoke with Channel 5, he said unequivocally that the honorable Otto Reich, whom he respects and deeply admires for being a fighter for democratic principles in the region had nothing to do with the Arcadia Foundation.  These were his words, here you can see what he said last night on Channel 5 and here I’m showing you Arcadia’s website until September 10, where Otto Reich appeared.  And then I show you that here, on September 11, the erasure of the list of the Arcadia Foundation’s members begins and also the report here that Robert Carmona himself signed and sent to Hondutel on July 14, 2006 was also copied to Ambassador Otto Reich.  So, if Mr. Carmona will lie so shamelessly and obviously on something as simple as this where the lie can so easily be seen, what else will he lie about?….I can also show you communication between Cable Color and Hondutel, and how Cable Color cooperated with Hondutel so that Cable Color’s clients who dedicated themselves to this [illegal grey traffic] operation were punished.  And Hondutel even knows about it, there were two businesses who had these numbers and their equipment was confiscated…”

Carmona-Borjas insisted again that Arcadia had nothing whatsoever to do with Reich, qualifying the statement by adding, “from a legal point of view,” and said that any columns that appeared at the Arcadia website were not even necessarily related to Arcadia, which was really more or less an open bulletin board, where even Rosenthal could express his ideas if he wished.  (The only media reports on the Arcadia site then, and now, are those generated by Carmona-Borjas.)

The Rosenthals said they’d been forced to go to the U.S. Embassy in Tegucigalpa to explain the situation, since Carmona-Borjas, a Venezuelan/U.S. citizen, had so helpfully gone there first, supplying the Embassy with a copy of his Arcadia report.

Rasel Tomé, the president of the Honduran telecom regulatory authority CONATEL, joined in, adding that there were no complaints on record at CONATEL against Hondutel or Cable Color for grey traffic, to which Carmona-Borjas repeated that grey traffic was the only possible explanation for such a serious decline in revenue, insinuating that Tomé’s position was based on the fact that he had been the Rosenthal’s attorney for many years.

Tomé would find later find himself the focus of Carmona-Borjas’s unique contacts within the Honduran justice system, when shortly before the coup d’etat tomeon June 28, 2009, he was ordered not to leave the country as a result of an investigation prompted by Carmona-Borjas and a business called Eldi, that had complained that Tomé, along with two other commissioners had illegally granted the license for television channel 12 to the Rosenthals, rather than Eldi.

The previous fall, Carmona-Borjas also filed a complaint at the Public Ministry against Tomé for illegal enrichment, based on the fact that he believed Tomé’s advertising campaign for a seat in the National Congress was so massive that Tomé could not possibly have afforded it.

In yet another radio debate, Tomé called Carmona-Borjas “an international blackmailer, a mercenary, who was being investigated for money laundering and was paid by powerful groups.” Tomé was running for Congress under the Micheletti wing of the Liberal Party.

(to be continued…)

* with additional reporting by Revolter

8 responses to “Otto Reich and the Honduran Coup D’Etat: The Provocateur, his Protege, and the Toppling of a President – Part One

  1. Don’t forget this advantage of using telecomm. companies as the focus of bogus allegations of corruptions: the “reformers” can then use the phone system for massive wiretapping.

  2. Charles II – you’re getting out in front of Part II of our report! The massive wire-tapping of Zelaya and his perceived allies seems to have been a key moment for him in deciding that he no longer wanted to deal with the nasty, blackmailing criminals that are the Honduran oligarchy. He has cited national security as a reason for his fight to keep Hondutel state-owned.

  3. Yes, good work Machetera…. note how an “olive branch” was recently offered to Cuba by the Obama administration in the form of allowing US telecoms to operate on the island without restriction.

    As has been previously noted in this comment section, and as exhaustively detailed in James Bamford’s latest NSA expose “The Shadow Factory” this permits embedded bugging of all communications systems, just as ATT and Verizon currently turn over all TCP/IP, VOIP and phone packet data to the NSA with complete impunity with the help of companies such as Narus and others.

  4. We are waiting for Part II !

  5. Too bad, your article seemed interesting and balanced. You had me listening until you used the word “dictator”. Choose your words with caution. The current Honduran government is not a dictatorship. Try Venezuela or Cuba.

    You neglected to mention Marcelo Chimirri. Chimirri sent the district attorney to shut down the company I worked for without a warrant, even though we were innocent. We even successfully sued the government a year later.

    Corruption in Hondutel wasn’t a fabrication of the Arcadia foundation.

  6. Aaron Ortiz,

    To find a honduran who speaks english is really dificult, considering the high level of analphabetism in the country.

    This surely says a lot about your position in society. Anyway. corruption in Central America is very common, from Costa Rica to Guatemala, no country is excempt. The problem is when you use corruption as an excuse to privatize. Corruption is present in both public AND private sector of the economy, but it’s the public sector the one that usually gets revealed by the right-wing media (with all the intentions implicated).

    In Cuba, people don’t have curfews all the time, as in Micheletti’s dictatorship. In Cuba, opponents can march along Habana without getting killed.

    I think your definition of “dictatorship” is very subjective, almost media-like. I suggest you visit Cuba, you’ll get the diference.

  7. What does it take to convince you people that Venezuela is NOT a dictatorship. If your definition says that it is, then 9/10 of the Americas are also dictatorships and the same for Europe.
    I agree that Honduras is not a dictatorship. It is merely a ruthless oligarchy determined to hold on to its oppressive power.

  8. Machetera — I’ve just had the time to read both parts of the article. Without a doubt, it is one of the best pieces of reporting I’ve ever seen.

    I can’t thank you enough for this illuminating report.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s