U.S. asks Lesotho bribe prosecutor to attend inquiry

Wiseman Khuzwayo
Business Report (South Africa)
July 18, 2004

Johannesburg: Durban senior advocate Guido Penzhorn, who has been successfully prosecuting mutinationals for corruption in Lesotho, has been invited to appear before the US foreign relations committee on Wednesday in its hearings on corruption in World Bank-funded projects.

In a letter to World Bank president James Wolfensohn, senator Richard Lugar, the committee’s chairman, noted that three multinational contractors on the World Bank-funded Lesotho Highlands Water Project had been found guilty of bribery, yet none of them had been blacklisted by the bank.

The committee has oversight responsibility for international institutions receiving more than $1 billion (R6 billion) in US funding.

The committee began its hearings on May 13 and adjourned until July 21. Projects under review are the Lesotho Highlands Water Project, the Yacyreta Dam on the border between Argentina and Paraguay, and projects in Cambodia.

Wolfensohn has already declined an invitation to appear, citing the established practice of bank officials not to testify before the legislatures of its numerous member countries.

In his letter of invitation to Penzhorn, Lugar said: “We strongly support the World Bank’s mission to fight poverty and improve living conditions in developing countries.

“Our goal is to ensure that all World Bank funding reaches its intended targets.

“Any corruption linked to the World Bank’s important work impedes our collective fight against poverty and undermines public confidence in the bank’s mission.”

Regarding the Lesotho corruption, Lugar requested of Penzhorn: “Specifically, please describe the Lesotho government’s campaign against corruption, note the findings of the Lesotho courts on World Bank-related cases and highlight the response of the World Bank to the findings of the Lesotho courts. From your perspective, how has the World Bank’s response impacted on Lesotho?”

Penzhorn has successfully prosecuted all three cases involving mutinationals in bribery in the Lesotho Highlands Water Project.

Lahmeyer International, the biggest engineering consulting group in Germany, was initially fined R10.5 million for violations. On appeal, this was increased to R12 million.

Acres International, a Canadian engineering and construction firm was fined R10 million.

French company Schneider Electric pleaded guilty and was fined R10 million.

Impregilo, one of Italy’s biggest construction firms, is under investigation.

At the hearings, Lugar said: “Corruption thwarts development efforts in many ways. Bribes can influence important bank decisions on projects and on contractors. Misuse of funds can inflate project costs, deny needed assistance to the poor and cause projects to fail.

“Stolen money may prop up dictatorships and finance human rights abuses. Moreover, when developing countries lose development bank funds through corruption, the taxpayers in those countries are still obligated to repay the development banks.

“So, not only are the impoverished cheated out of development funds, they are left to repay the resulting debts to the banks.”

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