Acres’ reputation at risk in African bribery trial

Karen Macgregor and John Saunders
Globe and Mail
May 27, 2002
MASERU, LESOTHO and TORONTO — Acres International Ltd., one of the great names in Canadian engineering, is nearing the end of a criminal trial in an impoverished African kingdom on charges that could stain its reputation and show the risks of using far-off agents.

Acres is accused of bribing the former head of one of Africa’s biggest public projects, a system of dams and tunnels to divert water from Lesotho’s mountains to thirsty South African cities and generate electricity in the process.

The Oakville, Ont., firm has done about $21-million worth of work on the $12-billion project.

The disgraced bureaucrat, Masupha Ephraim Sole, has already been convicted of taking well over $1-million from foreign interests through middlemen, including hundreds of thousands of dollars from Acres. He is to be sentenced tomorrow if his health permits.

Acres maintains it is innocent of bribery and may be declared so in its own trial in Lesotho High Court, where the last of the evidence is to be presented as early as this week.

The firm says it does not know why some of the fees it paid its Lesotho agent, an engineer named Zalisiwonga Bam, ended up in the project chief’s bank account. Mr. Bam, who has since died of a heart attack, also worked for other firms entangled in the case and was Canada’s honorary consul in the kingdom.

Speaking through a Toronto publicist, Acres says it was standard practice to have “somebody local, on the ground,” to advise the firm and represent its interests. It says that Mr. Bam was paid no more than was reasonable for the work and Acres officials are baffled as to why he split some of his cheques with Mr. Sole.

“It came as a surprise to them, a shock, that there was anything happening,” the publicist, George Soteroff, said last week. “They were making payments to their agent. They have agents all over the world who do this sort of thing.”

Lesotho is a landlocked kingdom of two million people (gross domestic product: $860 a head) surrounded by South African territory. It passed one hurdle on Saturday when parliamentary elections were held peacefully. The last elections, in 1998, degenerated into an attempted coup.

In the bribery case, Acres was charged along with British, French, German, Italian and Swedish firms in December, 1999, but appears headed for a verdict before the others. Its trial began in February.

Acres’ challenge is to persuade the court that even if the project chief received some of its money doesn’t necessarily mean he was being paid on Acres’ behalf.

The risks of the case include being blacklisted from work financed by the World Bank. The bank is a backer of the Lesotho Highlands Water Project, which Mr. Sole headed from 1986 to 1995.

It is an ugly situation for a firm that traces its roots to Niagara power projects designed more than 75 years ago under founder H.G. (Harry) Acres, one of the leading engineers of his day. It now boasts 1,200 employees and a corporate slogan, “Engineering for a Better World.” Its current president, Oskar Sigvaldson, did not respond to requests for an interview.

Speaking for the firm, Mr. Soteroff said Acres has an unblemished record in 45 years of Third World work. “It strongly declares its innocence of all charges and totally denies that it engaged in any corrupt practices.”

When Mr. Sole faced his judgment a week ago today, he was wheeled into court on a hospital bed because of spinal injuries he suffered in a car accident.

Judge Brendan Cullinan, an Irish-born former Lesotho chief justice brought out of retirement to hear the case, acquitted Mr. Sole on five criminal counts and found him guilty on 13 others. One of the 13 involved money he allegedly received from Acres via the late Mr. Bam. A second Acres-related count was thrown out because the money trail was unclear.

Meanwhile, Acres is on trial in the same court. Prosecutor Guido Penzhorn, a South African lawyer flown in to handle the case, said in an interview last week that the alleged bribery involved two steps: Acres paid Mr. Bam, its agent, a total of about $720,000, and Mr. Bam and his wife passed about $400,000 to Mr. Sole through Swiss bank accounts.

Acres replies that:

It got its contracts through international agencies, not through Mr. Sole, and had no reason to try to influence him;

It has had a formal code of conduct banning bribery and other corrupt practices since 1978 and adheres to it rigidly;

The fees it paid Mr. Bam were modest, amounting to about $70,000 a year over about a decade, and he was not intended to share the money with anyone;

It has learned that Mr. Bam and Mr. Sole once had dealings in a private engineering-consulting business;

It thinks the payments to Mr. Sole could have arisen from that business or from arrangements Mr. Bam had with other foreign clients;

It cannot entirely dispel the mystery because Mr. Bam is dead and Mr. Sole has provided no explanation in his own defence. Up to now, Canadian firms have generally avoided controversy on overseas projects.

The world is becoming a more suspicious place, however.

In 1999, the World Bank began building a list of firms and people barred from its projects under anti-corruption rules. There are now scores of entries, two of them Canadian: Canadax Technologies Inc. of Verdun, Que., and its president, Pierre Savignac. Both were barred after being accused of using forged letters of credit to win a contract to supply computers to Argentine schools.

In Washington, World Bank chief spokeswoman Caroline Anstey said the bank has investigated the Lesotho bribery case and has blacklisted a French consultant and three of his companies as a result. It has yet to find enough evidence to bar anyone else but will watch what emerges in the trials, she said. — Karen MacGregor is a writer based in Durban, South Africa.

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