Lesotho tries to end corruption culture

Chris McGreal
Guardian (U.K.)
June 19, 2001

Multinational companies are about to go on trial in Lesotho accused of paying huge bribes to a local official, a case virtually unprecedented in Africa.

European and Canadian engineering companies, four of them British, are alleged to have paid an official about £3m for contracts for one of the continent’s biggest engineering projects, the £1bn construction of huge dams to supply water and electricity to South Africa, which entirely surrounds the mountainous kingdom.

The British companies – Balfour Beatty, Sir Alexander Gibb and Co, Stirling International Civil Engineering and Kier International – are charged either individually or as members of consortiums created for the project.

Corruption trials are rare in sub-Saharan Africa, where oil companies routinely greased the palms of Nigeria’s military dictatorships and diamond dealers ensured that President Mobutu Sese Seko of Zaire got his cut.

Officials in Kenya or Ghana may occasionally be hauled before the courts to give the illusion that the government was fighting corruption, but trial for those believed to have paid the bribes is unheard of.

The Lesotho attorney general, Fine Maema, said in an interview before the trial: “We have taken the big companies by the horns. We cannot say because of the bigness of these companies they should not be prosecuted.

“People are quick to point the finger at Africa but if someone is taking the money then someone is paying it and they must be held accountable too. You can see from this case that it is not only Africa that is corrupt.”

If convicted, the companies will almost certainly be barred from bidding for contracts funded by the World Bank and the European Union, and these are the main sources of income for some of them.

The case began last week with the trial of Masupha Sole, who has pleaded not guilty to 16 counts of bribery and fraud.

Mr Sole was appointed chief executive of the Lesotho highlands development authority in 1986 when the dam project began. His primary responsibility was to award contracts worth hundreds of millions of pounds to foreign construction companies.

According to the indictment, the accused companies paid him about £3m over a period of 10 years.

It says: “The evidence will show that not only were payments involving millions of maluti [the currency of Lesotho] made by the contractors through the intermediaries to Accused 1 [Mr Sole] secretly, but also that they coincided with events leading up to the award of major contracts.

“The court will be asked to draw the inescapable conclusion that the payment of these monies to Accused 1 by the other accused were intended and constituted bribe money.”

Mr Sole allegedly maintained at least three Swiss bank accounts. The variety of currencies deposited – sterling, French francs, German marks, US and Canadian dollars – reflects the extent of the alleged conspiracy.

The prosecution says the companies were connected by a web of corruption and collusion and that graft became a standard practice in awarding contracts for the Lesotho dams.

The biggest bribes were allegedly paid by the Lesotho Highlands Project consortium, in which Balfour Beatty was a partner. The consortium is accused of depositing more than £1m in Mr Sole’s accounts over three years. The first payment, in 1991, was made weeks after it won a contract worth £135m. A fortnight before it won another contract, for £41m, another big deposit was made.

Two other British firms – Kier International and Stirling International – are members of another consortium, Highlands Water Venture, alleged to have paid Mr Sole £250,000. Sir Alexander Gibb and Co is accused of paying £51,478.01.

Canadian, French, German, Italian, Swiss and South African companies are also charged.

The companies are accused of using middlemen – two South Africans and a Frenchman – to move the money through front companies registered in Panama.

The companies and their alleged intermediaries will be tried once Mr Sole’s case has been heard. They have not yet been asked to plead but, in public statements, have strenuously denied paying bribes.

The prosecution says the onus is on the accused to establish that the transfers were not bribes.

Although the evidence of a link between the payments and contracts is circumstantial and largely based on coinciding dates, the prosecution argues that it was illegal for Mr Sole to hold the Swiss accounts and a breach of contract by the accused companies to make payments to Lesotho officials connected with the project.

Apartheid’s legacy

The dams have been controversial from their conception 16 years ago by the South African apartheid regime. International funding was initially routed through hidden accounts to disguise the fact that it was going to a racist government.

Thousands of people who lost grazing land and their homes to the project have complain of inadequate compensation. Few of those who live under the huge pylons carrying power to South Africa have electricity themselves.

The prosecution has the backing of the EU and World Bank, but both have played equivocal roles in the case. When the allegations first came to light the World Bank, which lent about £100m for the construction project, suggested that no action should be taken for fear of undermining the scheme.

“When they heard we were going to do it, they actually doubted it,” Mr Maema said.

“Through various meetings we had with them, you could tell people were doubting whether that would be a reality. We were not under anyone’s pressure at all.”

The case is likely to increase the pressure on European countries to enforce international conventions aimed at holding companies that pay bribes responsible in their own countries.

Britain has one of the worst records for combating corruption by its companies overseas, and is the only European country not to implement the Organisation for Economic Cooperation and Development’s convention against corruption.

“This is a test case of the will of these countries to take own companies to court,” said Stiaan van der Merwe, southern Africa representative of the anti-corruption organisation Transparency International.

“It is covered by the OECD convention on the bribery of foreign public officials. The case has implications for the effectiveness and political will on bribery of foreign officials.

“I think this case will undoubtedly change the kaleidoscope on corruption internationally. If it is easily said governments in the south are corrupt, what is the moral judgement that should go to countries in the north to address this problem? Let the north not be so pontificating.”

Others may follow Lesotho’s lead. The trial in Maseru coincides with public hearings in South Africa on alleged corruption by European armaments companies and politicians and officials in connection with a £4bn order.

Companies in the dock

  • Balfour Beatty

Partner in the Lesotho Highlands Project consortium, which is accused of depositing more than £1m in Mr Sole’s account over three years

  • Sir Alexander Gibb & Co

Accused of paying Mr Sole more than £51,000

  • Stirling International Civil Engineering • Kier International

Members of the Highlands Water Venture consortium which is accused of paying £250,000 to Mr Sole

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