Emad Mekay
Inter Press Service
March 23, 2004

Watchdog groups are urging the World Bank to conclude an internal investigation on debarring Acres International, a major Canadian construction company, after a court in the African kingdom of Lesotho found the firm guilty of bribery and corruption.

“This is a monumental case for the future of corruption in international development projects, especially World Bank projects, but it is really a moment of truth, I think, for the World Bank,” said Patricia Adams of Canadian group Probe International.

The bank reportedly said two weeks ago it was re-investigating the firm, based in Ontario province, which was convicted last year in the High Court of the southern African nation of paying bribes to win contracts on a multi-billion-dollar dam project financed by the World Bank.

Acres lost its appeal of the decision in August after arguing that it won the controversial contract in a competitive bidding process supervised by the governments of Lesotho and South Africa and under the review and approval of the bank.

The company was convicted of paying nearly 266,000 U.S. dollars to the former chief executive of the controversial Lesotho Highlands Water Project, Masupha Sole, who was convicted in 2002 of 13 counts of bribery and sentenced to 18 years in prison.

Nearly a dozen other firms were implicated, including South African companies Concor and Group Five; British firms Keir International and Stirling International; and German company Hochtief.

The case quickly became a litmus test for the rhetoric that the World Bank, other international financial institutions (IFIs) and western governments deliver to developing countries – that they must adhere to due process and fight corruption.

“Not only was this the clearest case of a national-level prosecution involving World Bank-related corruption, it was one of the first instances of an impoverished developing country prosecuting a major multinational company for bribing one of its own officials,” said Soren Ambrose of the Washington-based 50 Years Is Enough Network, in an email interview.

That a developing nation could stand up to the financial might of a western company is also a rare occurrence, says Ryan Hoover of the Californian-based development group International Rivers Network (IRN).

“This case shows that the bribe payer is just as culpable as the bribe takers,” Hoover said. “That’s something that hasn’t really happened before, where a country has had the courage to take on these large companies and their huge legal teams.”

The World Bank’s investigative unit says it is studying the case and will later transfer it to the institution’s sanctions committee.

Neither the bank nor Acres returned repeated phone calls from IPS for details on the investigation procedure.

Since the sanctions committee was established in November 1998, the bank has declared at least 95 firms and individuals ineligible for Bank-financed contracts, either permanently or for a period of time, most of them small firms in developing nations.

The bank’s corruption policy states the public funder will cut ties with any firm guilty of corruption on a bank-financed contract.

But the watchdog groups are worried that the bank’s political masters, which include Canada, one of the powerful group of seven (G-7) most industrialised nations, could twist that policy and let the company off the hook.

Canadian officials have stated previously that they will stand behind their firm.

Anti-corruption activists also point with concern to a report commissioned by the bank from the U.S. law firm Arnold and Porter, which found “reasonably sufficient” evidence to indicate that Acres engaged in a corrupt practice; yet the sanctions committee later said there was inadequate proof to discipline Acres for corruption in Lesotho.

“In recent years the World Bank has been bragging a great deal about how it has been focusing on corruption,” Ambrose said. “Given those claims, it has been curious to see how slowly it reacted.”

Other activists share this view. “This process has gone on for a long time now and it needs to be drawn to a conclusion,” said Hoover.

Another reason suggested for the bank’s delay in resolving the matter is that Canada, the World Bank and other countries involved in the project are apprehensive about the implications for the dam industry, since 12 companies were implicated in the corruption scandal.

“These are the who’s who list of the big players in the dams industry,” Hoover said.

“If these companies are debarred by the World Bank, that’s going to put a real hurt on the dam industry because there are just not many companies that are in the place to do what they do.”

The activists predict a battle before the company is outlawed by the bank.

“I am certain that the governments of those companies are going to do everything they can to protect those companies,” said Adams, whose group has been following the case closely.

“And that is where the problem lies. Will the bank succumb to that pressure? I don’t know. I followed the bank for so many years and nothing would surprise me.”

But she urged the institution to stick to its policies and rhetoric, use the evidence from the Lesotho court and expel the company.

“At this point, I think the bank has no alternative but to debar Acres,” said Adams.

“To my mind the case fits all the qualifications of the bank’s policy, which is that Acres engaged in corrupt activity on a World Bank project in order to get a World Bank contract. It is as clear as the day that they have violated bank policy and that they should be debarred.”

Acres is currently involved in the Bujagali Dam in Uganda and the Nam Theun 2 project 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 failure to take a position could have serious repercussions on those projects, on Lesotho, on the global fight against corruption, according to Adams.

“It would be a slap in the face for the Lesotho government. I think it would really be an extraordinary dismissal of the exercise of due process in a borrower country. I also think that it would send a very clear signal to companies that it’s business as usual at the bank.”