Acres’ partners in crime

(August 23, 2003) Was Canada’s federal government determined to see justice prevail? Just the opposite.

By Lawrence Solomon, published by the National Post on August 23, 2003

A Canadian multinational working on an international development project in Africa has been convicted of corruption. Why can’t its backers accept the verdict?

The most important case of corruption in the history of international development has just concluded. For the first time, a multinational operating in a Third World country has been brought to trial, has been convicted of corruption, has exhausted its appeals and faces a financial crisis. The guilty multinational — the first of 12 leading Western engineering firms to be charged — is Acres International, a once-venerable Canadian engineering company.

Bribery is a “corrupt and ugly offence, striking cancerously at the roots of justice and integrity,” wrote the Court of Appeal in Lesotho, a tiny country surrounded by South Africa, in its judgment on Aug. 15. Acres’ “cynical exploitation” of Africa’s largest international development project “motivated as it was by greed, is the more reprehensible.”

The appeal court called Acres’ conduct “this premeditated and carefully planned criminal act.” The appeal court’s affirmation of guilt, which followed a trial that Acres’ own lawyers readily agreed was fair, is final.

But Acres was not alone in its cynical manipulation of the foreign aid system. The rot also infects the World Bank and the Canadian International Development Agency, two foreign aid agencies that funded the development project and Canada’s Department of Foreign Affairs and International Trade, which spearheaded a behind- the-scenes defence of Acres. Lesser players in the Acres support group included Export Development Canada and the Canadian embassy in Washington.

The corruption cases involve the Lesotho Highlands Water Project (LHWP), an immense $12-billion effort to redirect water from the mountains of tiny Lesotho, population 2.2 million, to parched South Africa. Acres was found guilty of bribing Masupha Sole, the project’s chief executive officer, through numerous payments during the 1990s. Typically, Acres made quarterly payments to the Swiss bank account of an agent it hired, called Zalisiwonga Bam, a local engineer. Bam then transferred 60% of each payment to Mr. Sole’s Swiss bank accounts. (The appeal court upheldAcres’ conviction of bribes through Bam but set aside a second conviction involving payments by Acres into the Swiss bank account of Margaret Bam, Bam’s wife.)

Bam, however, was no ordinary Lesotho engineer in Acres’ pay, hired to represent Acres’ interests. He also held a patronage position awarded by our federal Cabinet — Canada’s honorary consul in Lesotho — and had a duty to represent Canada’s trade interests in Lesotho. The conduit for Acres’ bribes was thus an official of our federal government, and one with an unsavory reputation at that. According to an internal World Bank investigation of Acres’ relationship with Bam conducted in 2000, Bam was a thoroughly corrupt individual who clandestinely approached numerous firms with offers to peddle influence. Among its conclusions: “Mr. Bam’s interaction with [European engineering firm] ABB also reflects a corrupt intent,” “Mr. Bam’s wire transfers to Mr. Sole themselves establish his corrupt intent,” “There is no legitimate explanation for [Acres’] large payments to Mr. Bam.” The World Bank report also decried Mrs. Bam’s receipt of payments from Acres. Mrs. Bam by then had succeeded her husband, who died in 1999, with an appointment as Canada’s acting honorary consul in Lesotho.

Was our federal government determined to see justice prevail during the Lesotho trials, given its appointments of the Bams, given that Mrs. Bam had been indicted in the Lesotho courts, given that Mr. Sole had been convicted of accepting bribes from Acres in a Canadian-funded project for which Canada had a fiduciary responsibility?

Just the opposite. Despite federal government pledges to crack down on international corruption, and despite a 1989 Auditor- General’s report that warned of poor oversight by the Canadian government of its honorary consuls, the government paid short shrift to its obligations to Canadian taxpayers. Instead it sprang to Acres defence, becoming its surreptitious lobbyist behind closed doors, all the while publicly proclaiming its fidelity to clean government and the rule of law. The briefing notes that the Department of Foreign Affairs and International Trade prepared for its staff and ministers were largely lifted out of Acres own documents, the spin intact. One example that captures the flavour: “The Company has an unblemished record and a strict code of ethics, which all of its officers must sign each year. Acres’ president denies it has ever paid bribes, and has ordered an independent forensic audit to prove that the Company has acted ethically.” When an encouraging development lifted Acres’ prospects, government officials sent each other a congratulatory e-mail.

Rather than making the administration of justice paramount, the Canadian government seemed more concerned with Acres’ financial health. Under World Bank rules, companies corruptly involved in World Bank projects are debarred from receiving future World Bank contracts. Other foreign aid agencies will then be expected to follow the World Bank’s lead. As explained by a Canadian official at the World Bank several weeks ago, “If the World Bank debars Acres, it will go bankrupt [since] most of Acres’ contracts are with the World Bank and other international agencies.” Canada would resist that outcome. Since “there is corruption with courts in the Third World,” he explained, it would be a travesty to ruin Acres on the basis of a verdict from Lesotho.

Acres, likewise, would resist that outcome. “Acres continues to contend it is innocent,” maintains Acres’ spokesman George Soteroff of GPC International, a public relations firm. But even if the World Bank does debar it — a “speculative and conjectural” question, he says — Acres is not about to go bankrupt: It would carry on in business, providing services to its many other clients.

What would Canada do in the event of a conviction? Ask Acres not to bribe again, says Export Development Canada. The Canadian International Development Agency isn’t saying. And the World Bank? Although Lesotho is a World Bank member state, the World Bank has so far refused to confirm that it would accept the verdict of the Lesotho criminal justice system. This despite Acres’ own admission at the Lesotho Court of Appeal that it had received a fair trial and despite the finding by the World Bank’s own investigators that “the evidence is reasonably sufficient to conclude that respondent Acres engaged in a corrupt practice by paying monies to Mr. Sole through Mr. Z. M. Bam so that Acres could influence Mr. Sole and the LHDA [Lesotho Highlands Development Authority] in connection with work being performed by Acres on the LHWP.”

The West has long lectured Third World nations to clean up their corruption. In Lesotho, we have a little country that has found the courage to do just that. Now it is the Western countries and Western institutions like the World Bank, long on lip-service over corruption but short on action, that must muster their courage.

Categories: Lesotho, Odious Debts

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