Globe and Mail
September 18, 2002
A major Canadian engineering firm has been convicted in Africa of bribery in an attempt to win contracts for a $2.4-billion (U.S.) water project funded by the World Bank.
Toronto-based Acres International Ltd. was convicted yesterday of bribing the former head of the water project in the southern African kingdom of Lesotho, in return for contracts worth about $21-million (Canadian).
Acres, the first of three global contractors to go on trial for bribery in the case, will be sentenced next month by the High Court in Maseru, capital of the impoverished nation of two million people. In June, the court sentenced Masuphe Sole, the former chief of the Lesotho Highlands Water Project, to jail for 18 years for accepting bribes from a dozen firms.
Acres said it was shocked by the ruling and plans to appeal. “Acres continues to strongly declare its innocence of the charges and will take vigorous action to protect its good name,” the company said.
International development observers say the verdict will send shivers through transnational companies, some of which have escaped punishment for bribery in the past because authorities have focused on officials who took bribes instead of the companies paying the money.
“The guilty verdict in Lesotho raises serious questions about how contracts for these megaprojects get awarded,” said Pam Foster, co-ordinator of the Halifax Initiative, an Ottawa-based advocacy group.
“Acres should be barred from receiving any financial support from public institutions such as the World Bank and Export Development Canada.”
Acres is likely to face a big fine next month, and its chances of winning future contracts from institutions like World Bank, which are major financers of projects in the developing world, could be at risk.
Caroline Anstey, chief spokeswoman for the bank, said it is studying the verdict. “We will obviously want to take a look at the High Court decision and transcript of the judgment to decide whether any future action by the bank will be taken,” she said.
The World Bank has held off adding companies involved in the Lesotho scandal to its blacklist of firms implicated in corruption because it wants to study the evidence presented to the court.
Acres expressed dismay yesterday that the Lesotho court “somehow arrived at a decision which is directly opposite to that of the World Bank sanctions committee.” That committee dismissed charges against Acres in February after an “exhaustive” investigation.
High Court Chief Justice Mahapela Lehohla found Acres guilty on two counts of bribery. He ruled the Canadian firm paid about $674,000 over seven years into the Swiss bank account of its Lesotho agent, Zalisiwonga Bam (who has since died) and his wife Margaret. About 60 per cent of the money found its way into Swiss accounts held by Mr. Sole, who in June was convicted of accepting $1.1-million (U.S.) of bribes in return for contracts on the project.
The Lesotho Highlands Water Project involves dams and tunnels that supply electricity to Lesotho and water to the parched industrial hinterland of the surrounding economic giant South Africa. The court heard that Mr. Sole, as head of the project, was in a position to influence the awarding of contracts and make them “sweet.”
Acres said it paid its agent, a respected engineer who was briefly Canada’s honorary consul in Lesotho, 3.6 per cent of the $21-million that the Lesotho contract was worth. This was in line with the practice recommended by development banks and Ottawa.
“Without Acres’ knowledge, the representative was secretly paying part of his fee to the director of the water project. Acres had no knowledge or suspicion of these payments, could not have anticipated them, had no motive for them, and received no benefit,” Acres said yesterday.
The company argues that it won its initial Lesotho contract following a competitive bidding process supervised by the governments of Lesotho and South Africa, and reviewed by the World Bank.
A second contract was “also subject to a multitiered approval process.”
Acres argued in court that it believes Mr. Bam may have been paying Mr. Sole to ensure that firms he represented got steady work on the project and kept paying his fees, or that Mr. Sole may have extorted money from Mr. Bam, or that they may have been involved in a local conspiracy to divide up illicit earnings from the project.
Judge Lehohla disagreed. He found, in a 300-page judgment, that Acres had intended to bribe Mr. Sole and that its agreement with its agent was struck in order to cover the bribe.
The head of the Crown’s prosecution team, Guido Penzhorn, said yesterday: “We expected the verdict. As far as we were concerned, it was a clear-cut case of bribery.”
The Lesotho government, which also has Germany’s Lahmeyer International and France’s Spie Batignolles on trial, is still deciding whether others among the dozen international companies will be charged.
George Soteroff, senior counsel for GPC International and a spokesman for Acres in Africa, said yesterday that the company believed that the Lesotho court had failed to understand international business practice. Acres was taking the matter to the appeal court “expecting that it will validate our belief in our innocence,” the company said.