Acres and acres of graft

Eric Reguly
The Globe and Mail
September 24, 2004

The Acres Group has gone from the illustrious to the notorious. The 80-year-old engineering firm has helped build some of Canada’s greatest hydroelectric and water treatment facilities, including the R.C. Harris Filtration Plant, Toronto’s art-deco masterpiece. But Acres is now an international pariah. Convicted of bribery in an African court in 2002, the firm was slapped with sanctions this July by the World Bank, the mother of all development agencies. Acres’ overseas business is withering. The company has been savaged before a U.S. Senate committee and in the press. Even the British satirical magazine Private Eye has taken a whack at it.

Enough punishment, Acres cries. But has the company been punished enough? The feds, through the Canadian International Development Agency (CIDA) and Export Development Canada (EDC), haven’t blacklisted Acres. Both agencies consider corruption—bribery, that is—a disease. But the message from this case is that the Canadian government, while officially concerned about corruption, is not so concerned that it will deliver the ultimate message.

Acres was founded by hydroelectric power expert Henry G. Acres in 1924, and it has engineered enormous civil projects ranging from the Grand Falls hydro development in New Brunswick that opened in 1928, to the restart of Ontario’s Bruce A nuclear plant. Starting in the 1950s, Acres went overseas and designed power plants and airports in Pakistan, Nepal, South Korea and Iran. In the mid-1980s, Acres got involved in the $8-billion (U.S.) Lesotho Highlands Water Project in southern Africa, which was partly financed by the World Bank. The dams will supply water to South Africa’s Gauteng province, and hydropower to Lesotho. Yet Lesotho isn’t mentioned on Acres’ website under “Our History” or “Business Integrity.” Here are the highlights of Acres’ low life:

In 1987 and 1991, Acres received contracts, one worth about $17 million, to provide technical help to the Lesotho Highlands Development Authority. In the mid-’90s, Lesotho’s government suspected money diversion was a secret component of the water diversion plan. The project’s chief executive, Masupha Sole, was fired; a lawsuit ensued, and his Swiss bank accounts were discovered. Some money in Sole’s accounts came from Zalisiwonga Bam, an engineer who happened to be Canada’s honorary consul to Lesotho and Acres’ local water-project representative.

Bam died of a heart attack in March, 1999, shortly before the allegations against Acres and other firms surfaced. Sole was convicted in Lesotho and sentenced to 15 years in prison. Acres, in turn, was the first of 11 multinational companies to stand trial for bribery. The World Bank also reopened a corruption probe.

In 2002, the High Court of Lesotho found Acres guilty on two bribery counts. In 2003, the Court of Appeal upheld one count, and Acres was fined $3 million. A German consulting firm and a French construction firm also got nailed.

Investigations continue. In July, the Lesotho government’s counsel, Guido Penzhorn, told the U.S. Senate Foreign Relations Committee that the bribery scandal was “unprecedented in southern Africa.”

Had the World Bank stayed on the sidelines, Acres might have been able to dismiss the criminal conviction – which vice-president John Ritchie says was “based entirely on circumstantial evidence” as bad luck or bad justice. Also, in June, Acres accepted a takeover offer from Mississauga-based Hatch, a firm that has collaborated with Acres on several projects. Meanwhile, the World Bank completed its probe and then went nuclear. In July, the bank declared Acres ineligible for any new World Bank-financed contracts for three years, making the firm non grata on the global development scene.

Ritchie is responsible for Acres’ new compliance and integrity programs. Employees must sign a code of conduct, and learn the nuances of U.S. and Canadian anti-bribery legislation. Contracts are subject to strict internal audits. The EDC says it is satisfied with the company’s integrity initiatives. CIDA says it will assess Acres’ progress if it comes looking for funding for another project. Neither of them has punished the company, though the EDC says the firm was “effectively debarred” while the agency monitored Acres’ cleanup.

You could argue Acres has done its penance. You could argue Canadian agencies shouldn’t automatically follow the World Bank. But, in essence, Acres won a get-out-of-jail-free card from the feds. Not going after the company in spite of the ample evidence that it sinned tells the world that if the corruption does not happen on home soil, it will be tolerated.

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