Africa

R10,4m bribery trail led to Sole court told

Clive Rubin
Business Report
June 17, 2001

After 18 months of legal wrangling, Ephraim Sole, the former chief executive of the Lesotho Highlands Development Authority (LHDA), rose in Maseru’s high court and pleaded “not guilty” to 16 criminal charges of bribery and two counts of fraud before Judge Brandon Cullinan.

The prosecution alleged that over a period of 10 years Sole had illegally amassed R10,4 million, or the equivalent of 2 600 years of work for the average Lesotho citizen. (The figure of 2 600 years was calculated using data in the most recent Least Developed Countries Report by the United Nations, which puts Lesotho’s average annual income at less than $500, or R4 000.)

Yet in a cruel twist of fate, Sole has had to apply for legal aid to pay for his legal defence. His local assets, including property and bank accounts believed to amount to several millions of rands, have been attached by order of the civil court, following a separate trial relating to civil claims.

This is despite Sole confiding that he is still earning income by doing “some consulting work privately”.

Over the first three days of the trial, which is expected to last several months, the prosecution presented, in detail, its allegations and testimony of the first of several expert witnesses.

Evidence was presented seeking to prove that Sole had received payments from companies involved with the bidding for contracts to manage and construct parts for the Lesotho Highlands Water Project (LHWP).

“Payments made their way from Switzerland to South Africa E some of it made its way to (him) in Lesotho,” said Guido Penzhorn, the senior counsel for the prosecution.

The payments, Penzhorn said, generally coincided with companies or consortiums pre-qualifying. They had tendered for and were awarded contracts for the multibillion-dollar LHWP, one of the largest international donor-funded dam building projects in the world.

The prosecution alleged the funds transited Union Bank of Switzerland account 60518360J. Evidence of the existence of this account surfaced with the co-operation of federal authorities in Switzerland after a request from the South African public prosecutor.

South African and Swiss authorities intervened because money was transferred from Switzerland to Sole’s Standard Bank account in Ladybrand, before in some instances being transferred to Sole’s account at Barclays Bank in Lesotho.

Before furnishing details, Swiss authorities had to be satisfied that there was a suspicion of impropriety by Sole and that a crime recognised under the Swiss penal code had been committed. A Swiss investigating magistrate instructed Union Bank of Switzerland to furnish proof of the existence of Sole’s account. This included signatures, photocopies of identity documents and a letter written on LHDA stationery proving that the account belonged to Sole.

A succession of deposits and transfers from intermediaries on 18 occasions could be traced to companies that were involved with the LHWP.

It is alleged that, beginning in 1988, Sole benefited from payments from candidate companies that submitted tenders or companies that were awarded contracts.

Sogreah, an engineering concern that supervised contractors, paid amounts totalling Ff808 270 (R850 000) over three years until 1991. Spie Batignolles, a construction firm, transferred Ff941 882 over a similar period.

A consortium known as Highlands Water Venture, consisting of Impregilo of Italy, Hochtief of Germany, Bouyges of France, Stirling and Kier International of the UK and Concor and Group 5 of South Africa, is alleged to have paid $375 000 from 1991 to 1993. It won the Katse Dam contract.

Another group known as the Lesotho Highlands Project Contractors, consisting of Spie Batignolles, Balfour Beatty of the UK, Campenon Bernard of France, ED Zublin of Germany and LTA of South Africa, won major building and tunnelling contracts. Over a similar period it is alleged to have paid amounts varying from Ff4,6 million to P140 000.

In June 1994 a group with a similar composition, MuelaHPC, won contract 129a, although Skanska, a Swedish company, had provided a lower tender.

However, MuelaHPC later modified its tender to make it lower than Skanska’s. As a result, the African Development Bank decided to withdraw funding of contract 129a, and commercial finance had to be arranged from the Bank of Lesotho.

When the work was completed, MuelaHPC made additional claims and was paid close to 75 percent more than the revised lower tender.

According to one expert, this was the moment when the rot set in.

In addition, and on separate occasions up to 1995, payments relating to some of the 200-plus tenders and contracts for work on the LHWP known as phase 1a (including the commissioning of the 55m Muela Dam, a railhead for cement, border crossing facilities, a bridge with a span of 420m, a 24MW hydropower station consisting of three turbines, 82km of tunnels, 120km of tarred roads and supervisory consulting engineer contracts) resulted in Asea Brown Boveri (ABB) Germany, ABB Sweden, Lahmeyer International of Germany, Acres International of Canada, Sir Alexander Gibb and Partners, Cegelec and Coyne et Bellier and Dumez depositing amounts ranging from $7 978 to Ff6 539 840 over seven years. This constituted the R10,4 million that flowed through Sole’s account.

Many of the payments were one-offs, but others appear to have been paid in monthly instalments or retainers.

In the case of the allegations of fraud, Sole is alleged to have claimed expenses from the LHDA for supposedly attending a conference in Vienna in June and July 1991, while it is alleged that Sole visited Paris instead, at the behest of the contractor Dumez, which paid his expenses directly into his Swiss bank account.

The prosecution alleges that at around the same time as the meeting in Paris, cost overruns by Dumez for a road building contract resulted in a dispute.

However, at a meeting in Paris, Sole and Martin Schutte, an engineer employed by Van Wyk and Louw who was later dismissed for admitting to accepting $20 000 from Dumez, renegotiated Dumez’s original memorandum of understanding from 54 million maluti and raised to “in excess of 56 million maluti”. (The currency of Lesotho is pegged at parity with the rand.)

After arbitration and on the basis of the renegotiated Paris agreement, the LHDA settled its claim with Dumez in 1994 by “ultimately paying an additional 40 million maluti” over and above the original tender, for which Dumez had not originally reached the pre-qualifying stage.

Penzhorn alleged that the money and the method of payment used a “laundering technique” enabled by middlemen or consultants who included Zalisiawonga Bam, who until his death was a Lesotho-based engineer, his wife, Margaret Bam, Mikael du Plooy of Bloemfontein and a Mr Cohen.

They allegedly transferred money via Switzerland, which Penzhorn said was “illogical”. It appeared that in return for transferring payments, these intermediaries deducted an amount that “varied from 40 to 60 percent”.

Tsebang Putsoane, a Lesotho citizen and trained civil engineer, was the prosecution’s first expert witness. He rose from the position of engineer at the inception of the LHWP to that of acting chief executive while Sole was suspended and the disciplinary hearings that culminated in his dismissal were completed. He told the court he “could not think of any reason why Bam or his wife should receive what amounted to a monthly retainer”.

Nor was he aware of any arrangements or agreements under which Du Plooy, Cohen or the Bams possessed written contracts with the LHDA while he was acting chief executive of the organisation.

In the case of Du Plooy, Putsoane asserted that he was unaware of his existence until his name appeared on bank records.

Penzhorn added that the World Bank, which had directly funded a contract obtained by Acres International, a Canadian firm of consulting engineers that ran and oversaw several technical departments of the LHDA, “was not aware that Acres were paying Mr Bam a very substantial amount” and it was not aware of payments to any of the other intermediaries.

Later Penzhorn will call a forensic accountant from PriceWaterhouseCoopers to testify. In addition he will call two managers overseeing the project on behalf of the World Bank.

Leave a Reply

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

WordPress.com Logo

You are commenting using your WordPress.com 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