Suit Accuses GTE of Black Market Trading, Bribery
The former head of GTE Corp.’s Central American operation has alleged that the company engaged in a range of illegal activities including bribery, currency smuggling and exchanging money on the black market.
Paul DiMatteo, former GTE general manager for Central America, also claims in documents filed in U.S. District Court here that GTE officials pressured him to engage in illegal financial practices designed to drain capital from Nicaragua, Honduras, El Salvador and Guatemala, and then fired him when he refused.
The allegations are contained in documents accompanying a lawsuit by DiMatteo contending that he was fired unfairly after 10 years with the Stamford, Conn.-based General Telephone & Electronics. DiMatteo, 57, moved to San Diego County after he left GTE in March, 1985, and is co-owner of a small manufacturing business. He now lives in Escondido.
Judge Won’t Dismiss Case
The suit is set for trial on Sept. 13 before U.S. District Judge Earl Gilliam, who last month denied a request by GTE’s lawyers that the case be dismissed.
GTE officials declined to discuss the matter last week, but issued a brief statement denying DiMatteo’s allegations.
“In Mr. DiMatteo’s case, GTE did not encourage him to engage in any illegal activities nor was he terminated for such refusal,” the statement said. “Mr. DiMatteo was terminated for failure to perform satisfactorily as a general manager. Mr. DiMatteo’s suit is totally without merit and we’re confident that GTE will be completely exonerated in this matter.”
DiMatteo denies he was fired for poor performance, but neither he nor his lawyers would discuss the case. However, court files and lengthy depositions contain detailed accounts of DiMatteo’s allegations of irregularities during his tenure as general manager of the communications company’s electric products subsidiaries in Central America from November, 1981, to August, 1984.
The bribery scheme described by DiMatteo involved Odalier Villalobos, Costa Rica’s vice minister and later minister of the economy from 1983 through 1986. GTE, through a consulting firm, paid Villalobos about 10,000 colones a month--the equivalent of $400 to $500--beginning in late 1983 to ensure that he would prevent a competitor, the Philips Corp., from selling products in Costa Rica, DiMatteo said in a deposition.
The payments to the consulting firm, called Consultoria E. Inversiones Ltda., stopped when Villalobos left office, the lawsuit says.
The payments were suggested by Villalobos and approved by Frederick Howard, DiMatteo’s superior in Danvers, Mass., headquarters of GTE’s precision materials and Sylvania lighting groups, the lawsuit says. It was Howard who eventually fired DiMatteo.
Howard did not return a phone call placed to his office in Williamsport, Pa., where he is now vice president and general manager for GTE’s electrical components and materials division.
SEC Charged GTE in 1977
Attempts to find Villalobos in Costa Rica were not successful.
DiMatteo’s lawyers, of the San Diego law firm Harrigan, Ruff, Ryder & Sbardellati, have indicated in court documents that they intend to bring up at trial similar allegations made against GTE in the past. They point to 1977 charges by the Securities and Exchange Commission that GTE paid as much as $14 million in bribes and kickbacks in 28 countries, including Iran, the Philippines and the United States.
At the time GTE neither admitted nor denied the allegations, but consented to a permanent injunction, agreeing to refrain from any future violations of securities laws.
In his deposition, DiMatteo conceded that he did little to interfere with the payments to the Costa Rican official, except to set a 10,000-colones monthly limit and insist that a way be found to make the payments appear legal on the company’s books, a requirement that was satisfied by the use of the consulting company.
DiMatteo said he did, however, object to constant suggestions from GTE officials that if legal ways could not be found to exchange local currencies for U.S. dollars, then illegal means should be tried.
Many foreign corporations, including GTE, were fearful of leaving large amounts of money in the currency of an economically weak nation that could order a devaluation, causing huge losses overnight, DiMatteo said. GTE also feared that real property in those countries could be nationalized because of political turmoil, he said.
Smuggling Money
The illegal practices advocated by his superiors, DiMatteo said, included exchanging local currencies for dollars on the black market, “smuggling the money with a suitcase” and designing complicated pricing schemes to create paper losses that would “trick” Central American governments, DiMatteo said in a deposition.
Documents filed in the case show that Arthur Andersen & Co., the accounting firm, prepared an internal audit for GTE in 1983 that said that GTE employees had exchanged Nicaraguan cordobas for U.S. dollars on the black market in Nicaragua. The audit warned against the practice.
