CIOB International News (The Chartered Institute of Building)
August 2, 2004
As the Lesotho prosecutor Guido Penzhorn told the U.S. Senate Foreign Relations Committee, facing up to the consequences of corruption requires strong resolve. Initiation of the proceedings over what was happening on the Lesotho Highlands Water Project was met with praise at first from the role players involved and the countries from which they came. That praise was however coupled with a fair degree of scepticism.
“The thinking seemed to be”, he said, “that the prosecutions would be confined to the demand side, i.e. the chief executive Mr. Sole. Once he had been duly punished the point would have been made and everybody could go on with their business. When however the prosecutions moved on to the international contractors/consultants involved and it was shown that the Lesotho authorities were serious about prosecuting these companies, there was a discernable change in attitude. This was even more so when convictions followed and these convictions were confirmed on appeal by the highest court in Lesotho.”
This initial phase was also accompanied by offers of assistance. The offers and the actual assistance, he said, should firstly be seen against the mounting resistance to the pending prosecutions in Lesotho once word leaked out about the application to the Swiss bank authorities relating to Sole’s bank records.
“The institution of these prosecutions was questioned for instance by suggesting that they were unlikely to succeed, that they were too expensive and so on. Such resistance only quietened down once the convictions started coming in.
“These attempts to undermine the prosecutions in my view illustrate the very insidious nature of the crime of bribery. It may well be that certain prominent persons genuinely questioned the prosecutions because they thought they were too expensive or they thought they were unlikely to succeed.
‘Impenetrable wall of silence’
“It is also possible that the criticisms stemmed from a desire to keep a lid on things. The point is that one simply does not know. When prosecuting bribery, and this is what these cases have taught us, one is met with an almost impenetrable wall of silence. Even Sole, who is now serving his time in prison,. is still not willing to come forward and place it all on the table despite a clear indication to him that this could well result in a reduction of sentence.
“The prosecutions were and still are largely based on bank records received in terms of the Swiss mutual assistance legislation. The Lesotho government approached the Swiss federal authorities in Berne for assistance, which in turn referred the application to Zurich where it was dealt with. The prompt and efficient manner in which the Swiss authorities dealt with what eventually became a complex and multi-layered application contributed immeasurably to the successful outcome of these prosecutions. Without this prompt response and continued co-operation which kept the momentum going, these prosecutions may well have been scuttled at a very early stage.”
Apart from the Swiss authorities, said Mr. Penzhorn, the prosecution team received considerable assistance from OLAF [the European Commission’s Anti-Fraud Office based in Brussels]. Over the last year or so, he said, OLAF had given them enormous support, support which for instance has impacted directly on the conviction of Schneider Electric SA.
“At about the time the bribery scandal surfaced in Lesotho”, he continued, “several overseas companies that were involved in the water project changed their corporate structure. Despite what the companies may say, we believe that this may well have been done in order to evade prosecution. One such company was Spie Batignolles.
“OLAF helped us to access its company records in order to ascertain the nature and effect of its merger with Schneider Electric SA on criminal liability. But for the help of OLAF we would not have been able to show that Spie Batignolles, which was involved as lead partner of one of the consortia, in fact survived the merger with Schneider Electric SA. Together with OLAF we are presently investigating other companies that we are considering prosecuting and good progress is being made here as well.
“The point is that for a small country like Lesotho, with its limited resources to investigate matters such as these, without the assistance of institutions such as OLAF is quite simply not feasible.”
World Bank’s response to prosecutions
Senator Lugar’s committee is investigating among other things the work of the multilateral development banks, so Mr. Penzhorn’s observations on the role of the World Bank in these investigations would have been of particular interest to them.
He said that as a major sponsor of the Lesotho Highlands Water Project, in which World Bank funding was involved, the bank took an interest in these prosecutions from early on. Its own interests and those of the prosecuting authority largely coincided and this resulted in close co-operation between the two.
“The resulting benefits were considerable. On the one hand the World Bank lawyers had access to our documentation and witnesses which they could use in proceedings against the contractors/consultants involved, and we had similar access to World Bank documentation as well as any responses by the contractors/consultants in answer to the charges levelled against them by the Bank.”
Assistance by the European Union and the individual countries from where the accused came was far less encouraging, he said. “Initial approaches for assistance from the Maseru office of the EU came to nothing. In fact, our approaches were met with what bordered on suspicion.”
Mr. Penzhorn recalled that the European Union had sent out a team a few years previously to investigate the involvement of European companies. They largely gave the European companies a clean bill of health. This included Lahmeyer which was convicted and Spie Batignolles which pleaded guilty.
“We also noted”, he said, “a reluctance on the team’s part to give us the evidential material which led to their findings. I regret to say that they left us with the impression that they were not so much concerned with helping us than with white-washing EU spending.”
In November 1999, the World Bank called a meeting to discuss the pending prosecutions in Lesotho and the ways in which the African kingdom might be assisted by the international community. It was attended by representatives from South Africa, the United Kingdom, the European Union and the European Investment Bank among others.
At that meeting, various promises of assistance were made. “The official minutes of the meeting also record such promises, such as the representative of the European Union undertaking to ‘contribute to the cost of the process’, and the British High Commissioner in Lesotho saying ‘that the Department for International Development could possibly offer direct assistance, even though a part of the EU’.
“The World Bank representative who chaired this meeting assured the Lesotho Attorney-General in the context of assistance that ‘the World Bank has deep pockets’. Unfortunately”, said Mr. Penzhorn, “none of this help has been forthcoming. I can only surmise that someone higher up in the World Bank did not share Pamela Cox’s willingness to assist.”
The funding question was also raised when he addressed the EU Committee on Development and Co-operation last year, but nothing came of this. Faced with its own economic and social problems, he said, Lesotho cannot afford the costs incurred in these prosecutions. It has done what it had to do, but he regretted that they saw no such commitment on the part of other countries apart from Switzerland and South Africa, especially those whose companies were involved in the water project.