The Canadian connection

(June 27, 2002) A corruption trial in Lesotho should be forcing Canadian agencies to re-examine their relationships with firms that engage in bribery. Instead, the indifference it is being greeted with indicates little has changed.

Canada’s John Manley and the other G7 finance ministers met in Halifax last week to deplore Africa’s corruption and its role in that continent’s failure to develop itself. Today, Jean Chretien and other leaders of G8 governments are meeting in Kananaskis, Alta., to deliberate further on how to eliminate the scourge of corruption and poor governance that keeps Africa poor. “Growing poverty, famine, disease, war, debt, corruption — these are the millstones of Africa,” Mr. Chretien recently told the Organization of African Unity. Too often, Western governments have paid lip service to the need for fundamental reform. Said Mr. Chretien: “I prefer action to rhetoric.”

Meanwhile, in the tiny southern African country of Lesotho, 12 of the world’s largest engineering firms, most of them from G8 countries, face trial for corruption in the construction of the Lesotho Highlands Water Project (LHWP), one of the largest in the world. The five dams in this $12-billion water project, which will redirect water from Lesotho to South Africa, are all being financed by G8 countries or agencies they control. Yet most G8 countries have done nothing to help in the investigation and act as if they wished the Lesotho corruption trials would just go away. And one country in particular — Canada — may soon distinguish itself for its indifference to corruption, and for having the most culpable company of the lot.

The Lesotho trials — one is completed, two are in progress, and several others will soon get underway — represent the most important international corruption cases in the world today. They involve the world’s pre-eminent development agency – the World Bank – as well as its sister agency, the African Development Bank and the European Development Fund. They involve financing from the U.K., France, Germany and other leading financiers of foreign aid and export credit. But no Western company plays a larger role in this unhappy tale than Canada’s multinational engineering firm, Acres International, headquartered in Oakville, Ont.

The first trial found the project’s chief executive, Masupha Sole, guilty of 13 counts of fraud and taking bribes from international consultants and contractors. Count 9 in the charge sheet involved 20 payments by Acres International into Swiss bank accounts over a period of six years. The usual pattern had Acres making quarterly payments to the Swiss bank account of an agent called Zaliswonga Bam, a local engineer who was also Canada’s Honorary Consul in Lesotho until he died in 1999. Mr. Bam then transferred 60% of each payment to Sole’s Swiss bank accounts.

“I am satisfied beyond reasonable doubt, as the only reasonable inference, that in the 12 counts of bribery involved, the accused and the relevant Consultant/Contractor in each count, unlawfully, intentionally and corruptly entered into a corrupt agreement, whereby the accused agreed to further the private interests of that Consultant/Contractor in its involvement with the LHWP, pursuant to which agreement the Consultant/Contractor paid the accused the particular sum of money which I have previously specified under each count,” wrote Justice Brendan Cullinan, a former Lesotho Chief Justice, in his draft judgment.

In sentencing Sole earlier this month to serve 18 years behind bars, Justice Cullinan identified Acres — which he said was involved in 20 bribes over a period of six years, far more than any other party — as the firm most responsible for the time Sole would have to serve. “It will be seen that the accused was thus involved, over a period of nine years, in 48 corrupt or fraudulent transactions including the acceptance of 46 bribes. Quite obviously, the greater the bribe, the greater the gravity. Other factors of aggravation are the period involved and the number of bribes received therein.”

For these reasons, Justice Cullinan sentenced Sole to 12 years in jail for his role with Acres, the longest sentence he imposed.

Acres was not a defendant in the trial of Sole. Instead, Acres is being prosecuted in a separate trial, where it strongly denies any wrongdoing: It describes its payments to Mr. Bam as normal business transactions for which Mr. Bam rendered services. But Acres may have difficulty making its arguments stick, and not only because of Justice Cullinan’s findings. In his judgment, Justine Cullinan indicated that Sole, who received his engineering degree from Ottawa’s Carleton University, showed little remorse for having accepted bribes. “He submitted that ‘the scale of the bribery is related to the scale of the Project,” stated Justice Cullinan. “He submitted that his contribution to the Project ‘far outweighs the crime, the good is much more than the bad.” Blaming the scandal of the trial, rather than his conduct, Sole said “Bribery happens elsewhere, a bigger picture view should have been taken.”

Sole’s arguments are unlikely to help Acres in its own, almost-completed trial, where the lawyers are making their final arguments this week. African countries have come to see their reputation for corruption and poor governance as a major stumbling block to their development. The G8’s focus on Africa this week did not originate with Mr. Chretien but with the new generation of African leaders, particularly South Africa’s Thabo Mbeki, who will address the G8 leaders today at Kananaskis. At last year’s G8 meeting in Genoa, Africa’s leaders proposed tying further aid and investment to the progress that African government make in stamping out corruption and bringing in good governance. “It’s a performance contract,” a United Nations Development Program official explained. “They will be more accountable, less corrupt, more democratic. In return, they want more assistance, trade and development.”

But to succeed in this quest for good governance, and to attract the foreign investment Africa so desperately needs, African leaders want the West to clean up its own act as well. “It takes two to tango,” states Pakalitha Mosisili, Lesotho’s Prime Minister. “It takes a corruptor and a corruptee to practice corruption. They are equally culpable.” To pressure the West to see that the problem of corruption as shared, tiny Lesotho is taking on all corrupt parties. “That is why we are prosecuting both, the officer and the multinational company,” he explained. “There is a case in court now against Acres International and many others will follow.”

The West, Mr. Mosisili and Mr. Mbeki believe, must stop its practice of publicly condemning bribes while privately winking at them. African leaders want sanctions against bribing companies, such as barring them from bidding on official contracts. And African leaders want prosecutions for corruption when laws are broken.

In Mr. Chretien’s Canada, Africa’s leaders face indifference instead of resolve. With convictions in the Lesotho trials looming and the need to grapple with Western company corruption no longer a theoretical exercise, Canada is back-pedalling on its commitment to take corruption seriously.

Exhibit A: Export Development Canada, the federal government’s largest financier of foreign contracts, which is instituting an anti-corruption program and says it “treats the matter of corruption very seriously.” Would EDC refuse to finance future contracts involving Acres or another company should it be found guilty of corruption? Not if the corrupt company promised to reform. “The critical factor would be whether the company had changed its culture and practices so as to no longer represent a risk of corruption,” explains Yolanda Banks, EDC’s Corporate Social Responsibility Advisor.

Exhibit B: The Canadian International Development Agency, which has provided Acres with over $100-million in contracts over the years, also talks tough on corruption. Will it rule out doing business with Acres or other companies, should they be convicted of corruption? Since that question “is purely hypothetical,” CIDA replied, “we do not wish to comment.”

A generation ago, Canada openly accepted bribery as a fact of life. Mr. Chretien, then trade minister, scoffed at involvement in bribery by Canada’s Atomic Energy of Canada Limited in selling reactors to Third World countries: “Commercial practices in other countries sometimes are different from ours. I am not about to condemn the morals of anybody. It would be very presumptuous for Canadians to tell other people how to conduct their morals,” he said, adding that Canadians shouldn’t put their “heads in the sand” if that would cost us overseas contracts.

That was then. Mr. Chretien’s government has changed, in that it is now prepared to tell other people how to conduct their morals. What has not changed is Canada’s tolerance of corruption by Canadian companies. African countries need action from Mr. Chretien, not rhetoric.

Patricia Adams, an economist and the executive director of Probe International, is the author of Odious Debts: Loose Lending, Corruption, and the Third World’s Environmental Legacy.

The full judgment against Mr. Sole, who was accused of bribery in the Lesotho Highlands Water Project, can be read in .pdf format at:

Read Acres’ reply to this article,The Canadian Challenge.”

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