World Bank penalizes Canadian company

Karen MacGregor and Karen Howlett
The Globe and Mail
July 24, 2004

Durban and Toronto: The World Bank has, for the first time, levied penalties against a Western company for corruption, banning prominent Canadian engineering firm Acres International Ltd. from bidding on bank-financed projects for three years.

The World Bank said yesterday the ban relates to a bank-financed contract on one of the world’s biggest water projects, in Africa. It’s the latest blow for the Oakville, Ont., company, which was earlier fined the equivalent of $2.8-million for bribery related to the project.

The Washington-based World Bank has sanctioned scores of obscure firms and posted their names on its website. But Acres is the first major international firm to be sanctioned.

Acres said yesterday it is “deeply disappointed” with the decision. It said the events date back more than a decade and it has since imposed strict new guidelines for supervising contractors and employees. Acres “remains firmly committed to the highest standards of integrity for all employees and contractors,” it said.

John Ritchie, an Acres vice-president, said the firm expects to complete the few small bank-financed contracts it is working on. He said Acres’ involvement with bank-financed projects has declined in recent years, partly because of the cloud over the company.

“The publicity has certainly hurt us and that’s affected our business with the bank,” he said.

The company, which traces its roots to Niagara power projects designed 80 years ago, has about 700 employees and annual revenue of about $100-million. The bulk of that revenue comes from projects in North America, Mr. Ritchie said.

The African case involves Acres’ work on the $12-billion Highlands Water Project. Financed partly by the bank, the project will generate electricity in Lesotho, an impoverished mountain kingdom, and channel water to South African cities. The first phase opened in March.

Acres, which did about $21-million worth of engineering work on the project, was found guilty of bribery in 2002, involving about $680,000 paid into the Swiss bank accounts of a local agent and his wife. Much of the money ended up in the hands of project chief Masupha Sole, who was sentenced to 18 years in prison for accepting the equivalent of $1.5-million in bribes from various contractors and consultants.

In an appeal last year, Acres won a reversal of its conviction on one of two counts and had its fine reduced to $2.8-million from $4.2-million.

The World Bank said in a statement that its sanctions committee found Acres “engaged in corrupt activities for the purpose of influencing the decision-making” of the jailed executive. It said the sanctions against Acres are part of the bank’s anti-corruption efforts.

The World Bank’s sanction was welcomed by Probe International, a Toronto-based lobby group that has criticized the Lesotho project.

“Corporates beware,” said Patricia Adams, the group’s executive director. “This is a sad day for Acres employees but an important precedent and a strong signal that corruption doesn’t pay.”

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