Emad Mekay
IPS
September 18, 2002

Washington: Development activists are calling on the World Bank and other international lenders to penalise a Canadian engineering company after the firm was found guilty of corruption by a Lesotho court Tuesday. Acres International, a Canadian engineering consulting firm, was convicted in Lesotho High Court of paying bribes to win contracts on a multi-billion-dollar dam project.

Acres was accused of paying nearly 266,000 U.S. dollars to the former chief executive of the controversial Lesotho Highlands Water Project, Masupha Sole.

Sentencing is scheduled to take place on Oct. 7 and 8.

Sole was convicted in June of 13 counts of bribery and sentenced to 18 years in prison for taking more than two million dollars in bribes over 10 years from mediators representing 12 of the world’s largest construction firms.

“Acres’ reputation has taken a severe blow,” said Ryan Hoover of U.S.-based development group International Rivers Network (IRN). “The verdict throws into doubt the legitimacy of their involvement in other dam projects throughout the world. Their environmental and social feasibility studies should be brought into question now.”

The next company to stand trial will be Germany’s Lahmeyer International, accused of paying Sole just over 250,000 dollars.

IRN, which has been fighting to end many dam projects, says that the fate of hundreds of thousands of dam-affected people depends on the integrity of Acres’ work, and that the Ontario-based firm can no longer be assumed to be a “responsible”.

“All of the feasibility and environmental impact studies they have performed should now be reviewed,” Hoover said.

Acres International denied the charges Tuesday, and said it will take action to protect its name.

In a statement sent to IPS, the company said it was successful in winning the initial Lesotho contract following a competitive bidding process supervised by the governments of Lesotho and South Africa and under the review and approval of the World Bank, one of the main funding partners. A company official said he was “shocked” by the court’s decision and that Acres would immediately begin an appeal, adding that the firm had a 78-year record of unblemished, ethical business practices.

Acres has worked on several controversial World Bank-funded dams before but this case has attracted international attention because of the high-profile companies involved.

A lawyer attending the trial in Lesotho told IPS by telephone that senior representatives from the U.S. embassy and the British embassy, along with the World Bank, were attending.

Acres is currently involved in the Bujagali Dam in Uganda and the Nam Theun 2 Dam in Laos, both of which are set to receive World Bank funding. It also participated in the massive Three Gorges Dam Project in China.

The Bank’s corruption policy states that it will cut ties with any firm guilty of corruption on a Bank-financed contract.

“We expect the Bank to disbar Acres now that they have been found guilty of corruption on a World Bank contract,” said Hoover. “Anything less than disbarment would undermine not only the World Bank’s own corruption policy, but also its poverty alleviation objectives.”

But the Bank says that its own investigation completed in February concluded there was inadequate proof to discipline Acres for corruption in Lesotho.

A World Bank official said his organisation might re-examine the matter to see if it merits a new investigation.

But Raymond Toye warned that if a new probe was to take place, it would be carried out under the Bank’s own anti-corruption guidelines, rather than according to Lesotho domestic rules. In other words, Acres could be cleared and continue to receive the Bank’s funding, added Toye.

Acres has argued that it did not make the payments and that its officials had no knowledge of any improper transactions.

The company says that its local 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 haveanticipated them, had no motive for them, and received no benefit. The unlawful payments were entirely between the now-deceased representative and the project director,” the statement said.

The engineering firm warned that today’s decision could mean that Canadian and other developed country firms could be found guilty of crimes “without any clear evidence showing that they had reason to know of or participated in the illegal actions of their independent representative”.

“Acres firmly believes that the decision is wrong at law and incorrect in its assessment of the evidence, and that an impartial and fair review of the case by the appeal court will vindicate the company,” the statement added.

But a watchdog group said the Canadian government should also act against Acres.

“If Western governments get tough with convicted bribers, multinational firms will get the message that corruption is costly, and that will spell the end of corruption on Third World development projects,” said Toronto-based Probe International.

“If Western governments don’t get tough, corruption will continue to thrive. We in the West will be seen as hypocrites who preach clean government to the Third World while tolerating corruption among our own corporations,” it added.

The other companies facing prosecution include France’s Spie Batignolles and Dumez International, and Italy’s Impregilo.

But IRN has warned that the other firms could escape judgment because the Lesotho attorney general’s office may run out of money to prosecute the cases.

According to IRN, the Lesotho Highlands Water Project directly affected about 27,000 people, displacing hundreds of subsistence farming households, and dispossessing many people of their land.