Acres found guilty of bribery African court ruling is warning for foreign firms

Susan Pigg
Toronto Star
September 18, 2002

Oakville-based Acres International Ltd. has become the first international company to be convicted of bribery by a foreign government in a landmark ruling yesterday that could have major implications for how business is done in developing nations.

The conviction yesterday on two counts of bribery “shocked” officials at the venerable Canadian company, which plans to appeal the ruling and what is expected to be a hefty fine to be handed down by an African court next month. “This decision sets a dangerous precedent that, if allowed to stand, will greatly increase the risk to companies (consulting engineers, contractors, suppliers etc.) who do business in developing countries,” Acres said in a statement.

The engineering firm was accused of directing $320,000 (U.S.) to Masupha Ephraim Sole, a Canadian-trained engineer who oversaw the $6 billion Lesotho Highlands Water Project during the 1980s and ’90s. The money was said to be funnelled through Zalisiwonga Bam, a local engineer Acres hired as its representative in the politically unstable country.

The High Court of Lesotho ruled yesterday that the “representative agreement” between Acres and Bam was a ruse to hide bribes.

Acres officials said the court didn’t find “one shred of evidence” that anyone at the company knew, sanctioned or should have known that bribes were being paid. In fact, Acres was cleared of any wrongdoing after two other investigations, one by the World Bank and one by the Canadian International Development Agency (CIDA) — both of which recommend that international companies doing development work hire local agents to act as guides in gaining a “secure foothold” in unknown and unstable countries, Acres said.

“The Lesotho court somehow arrived at a decision which is directly opposite to that of the World Bank Sanctions Committee, which dismissed the same charges against Acres in February, 2002.”

But others praised the conviction, saying it sends a strong message to Western nations that bribery should no longer be the basis of business dealings in impoverished countries.

“I think we always used to think that corruption was the fault of Third World nations. What Lesotho has said is that it takes two to tango,” said Patricia Adams, executive director of Probe International, a Toronto-based organization that monitors Canada’s aid and trade.

“I think the long-term consequences will be very good. I think businesses will look at Lesotho and say, ‘We don’t have to engage in criminal activities in order to get contracts. We prefer to do business in countries like that.’

“I think other countries will see that there’s a very big upside to honesty and to enforcing the rule of law.”

The decision should go a long way to ending the “overseas perception” that companies are “almost obliged” to pay locals bribes to gain contracts, said Lesotho prosecutor Guido Penzhorn.

“This decision has shown that this is not so, that overseas companies came here and offered bribes.”

Officials at CIDA and the World Bank couldn’t be reached for comment, but have been under pressure to declare companies convicted of such illegal business practices “ineligible” for international development funding.

“Acres continues to strongly declare its innocence of the charges and will take vigorous action to protect its good name,” the company said.

Acres was among 12 international companies accused of paying bribes in the project, but the first to go on trial.

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