Acres accused of still owing $2-million in fines

Karen MacGregor and John Saunders
Globe and Mail
July 19, 2004

Durban and Toronto: The prosecutor who won a precedent-setting bribery case against Acres International Ltd. in the African kingdom of Lesotho says the Canadian engineering firm has yet to pay the bulk of its fine and owes the equivalent of nearly $2-million.

Acres, based in Oakville, Ont., says it is paying in stages because it could not pay the full amount at once. Its new parent, Hatch Ltd. of Mississauga, which acquired Acres in June, is silent on whether it will pay if Acres does not.

“Lesotho considers Acres delinquent on its fine and will seek to recover the outstanding 9 million rand [$1.98-million] through the Canadian courts,” Guido Penzhorn, a South African lawyer serving as chief prosecutor in a series of corruption trials in Lesotho, told The Globe and Mail. “We have no alternative.”

Acres holds the unwanted distinction of being the first prominent Western engineering firm — although not the last — convicted of bribing an official on an internationally funded development project. The Washington-based World Bank is weighing whether to bar it from future projects, but had no comment on the dispute over the fine. “I can only say that the [debarment] review process is going on and we expect something shortly,” said Damian Milverton, a bank communications officer.

John Ritchie, an Acres vice-president, said the 80-year-old firm “certainly made a public commitment to pay the fine and the only matter is over what period. Our commitment was made in accordance with what we were capable of paying.”

The fine is 15 million South African rand. Mr. Ritchie confirmed that Acres has so far paid 6 million rand, about $1.3-million at current exchange rates.

He would not say how soon the fine will be paid in full or who authorized Acres to pay in instalments. “We believe we have an agreement with the Lesotho authorities,” he said, declining to elaborate except to say the firm received no notice from Lesotho that it is in default.

Mr. Penzhorn denied that the government made a deal with Acres on payment terms.

The firm was convicted in 2002 of bribing the head of a World Bank-backed water diversion project in Lesotho, an impoverished mountain enclave surrounded by South African territory. Acres did about $21-million worth of work on the project, which provides power for Lesotho and water for South Africa.

The South African currency has strengthened since the fine was set, so it may cost Acres considerably more in Canadian dollars than if it had been paid earlier.

Initially 22 million rand, the fine was cut to 15 million on appeal last year when Acres won a reversal of its conviction on one of two bribery counts. At that time, 15 million rand was equivalent to $2.8-million. It is now about $3.3-million.

Acres, famous especially for hydroelectric work, quietly accepted a takeover on June 1 by Hatch, a bigger Ontario firm known for mining and steel mill engineering, among other specialties. With about 700 employees, it brought Hatch’s total to about 5,000. It now operates as a wholly owned Hatch subsidiary.

Hatch marketing director Tom Reid said he was unaware that part of the fine was unpaid and did not know whether the subject was covered in a takeover agreement between the two firms. He could not say whether Hatch would pay the fine on Acres’ behalf, he said. He stressed that key executives, including Hatch president Kurt Strobele, were on vacation or otherwise unavailable.

The Lesotho trials have focused on how contractors and consultants dealt with former project chief Masupha Sole, who was jailed for 18 years for accepting bribes. After Acres’ conviction, a German firm was found guilty and fined 12 million rand and a French firm pleaded guilty and was fined 10 million. Both have paid their fines in full, Mr. Penzhorn said.

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