A mate of Trujillo gets a lucrative contract with Telstra, makes a big deposit into a bank that pays low interest and Trujillo gets an appointment to the board of the bank.
No surprising is it really?
Trujillo's surprise seat on US bank boardFont Size: Decrease Increase Print Page: Print Michael Sainsbury | March 16, 2009 Article from: The Australian TELSTRA chief executive Sol Trujillo has a previously undisclosed board seat with a California bank that last year accepted a $US5 million ($7.6 million) deposit from one of the phone company's biggest suppliers.
Shortly after becoming chief executive at Telstra in mid-2005, Mr Trujillo handed an exclusive mobile phone supply contract to Miami-based Brightstar Corp, which is controlled by one of his business partners and long-time friends, Marcelo Claure.
Brightstar Logistics Australia, the local subsidiary set up to serve Telstra, has enjoyed handsome profit margins of more than 30 per cent on its contracts, which in three years have delivered up to $130 million in net profit on about $375 million in revenue.
According to documents seen by The Australian, in March last year Brightstar Logistics made a six-month, $US5 million term deposit with Los Angeles-based Promerica Bank at a time when the entire US banking sector was being hit by the sub-prime crisis.
It is understood that Brightstar's interest rate on the deposit was 2.25 per cent compared with a rate of almost 8 per cent the company could have earned from Australian banks at the time. It is unclear whether the deposit was rolled over. Brightstar Corp chair Maria Contreras-Sweet did not return phone calls or answer email questions from The Australian last week.
Mr Trujillo's unpaid board seat at Promerica has never been revealed to Telstra's shareholders, although the company says it was aware of the role.
Despite listing his positions as a trustee of Boston College and UCLA's School of Public Policy and as a director of the Tomas Rivera Policy Institute, Telstra's website makes no mention of his link to the the Nasdaq-listed bank. When he joined the company, Mr Trujillo agreed to keep only one external board seat outside Telstra. He quit the boards of EDS, Gannett and Pepsico, retaining a seat on the board of US retailer Target.
"Telstra is aware of Sol Trujillo's directorship of Promerica," Telstra public relations chief Andrew Butcher said. "It is a Los Angeles-based organisation that helps women and minority-owned businesses get financing that they might not otherwise get.
"Telstra has met all its disclosure obligations in relation to this directorship."
The bank does not mention its role funding female-run businesses on its webpage, instead saying its business model is targeted at Latino entrepreneurs and rich individuals. "Promerica Bank was formed to serve the Los Angeles business community and ultimately to become the leading financial services provider of Latino entrepreneurs," the company's website states.
The bank offers a full suite of banking services. It is part of a broader group of companies under the Promerica banner with operations in Latin American countries, including Costa Rica and Guatemala.
Telstra chairman Donald McGauchie said: "Not only was I aware of Sol's directorship, I thought it was a real measure of the man that he was involved in such a terrific organisation. I'd be delighted to see more business leaders involved in just this sort of group."
Telstra declined to comment on the Brightstar loan to Promerica.
Brightstar Corp was founded by Mr Claure, a co-investor with Mr Trujillo and former Telstra chief operating officer Greg Winn in a Chinese telecoms group called Silk Road Telecommunications.
Brightstar's Australian chief, Jeff Gower, has told staff he will return to the US in June. His departure will coincide with Mr Trujillo's resignation, which was announced last month after 3 1/2 years in the role. Mr Winn has already returned to the US.
Mr Gower did not return phone calls last week.
Brightstar has been fighting to keep its financial details secret and remains in dispute with the Australian Securities & Investments Commission about lodging accounts.
As a large privately held company, it must lodge accounts with ASIC, but in January last year Brightstar sought an exemption on the basis that it had only one customer, Telstra. The Australian understands the request was declined by ASIC but the company has not yet lodged any accounts for the past three years.
According to KMPG audit documents seen by The Australian and company sources, in 2007 Brightstar made an estimated profit after tax of $45 million on revenue of $137 million. It is believed to have made a similar profit last year. In 2007, Mr Winn said Telstra had "saved" $250 million through its relationship with Brightstar.
Telstra buys and retains ownership of more than $1 billion worth of handsets and accessories that Brightstar distributes each year on Telstra's behalf. Telstra also provides Brightstar's warehouse premises and paid the company $7 million in 2006 and 2007 to build a global information technology platform.
Brightstar's Australian business has been valued at $US100 million in documents lodged with ASIC last month. The documents reveal that Brightstar Corp will buy, for $US40 million, the 40 per cent of its Australian arm it does not already own from Japan's Mitsui Corp.
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