Italian firms in Lesotho dam corruption case

Estelle Ellis
Independent Online (South Africa)
November 14, 2004

Italy’s biggest construction company, Impregilo, was hauled before the Lesotho High Court this week as authorities launched their sixth corruption prosecution relating to the multibillion-dollar Lesotho Highlands Water Project.

And as if taking on one corporate giant was not enough, the latest court indictment also links multinational giant Fiat, through its shareholding, to bribery claims.

In July, Fine L Maema KC, the attorney-general of Lesotho, commenting on the series of prosecutions of individuals and multinational companies that brought his country worldwide respect for its dedication and commitment, said: “This was the beginning of a biblical story of David and Goliath.”

He said it was possible to change First-World perceptions about the commitment of African states to combating corruption.

‘Payments of bribes were clothed with respectability’ According to the indictment, Impregilo faces five charges of bribery. Its trial has been set down for April.

The series of prosecutions deals with bribes allegedly paid to Jacobus Michiel du Plooy, a businessman from the small Free State town of Ficksburg; Masupha Ephraim Sole, the former boss of the Lesotho Highlands Water Project; and with those who allegedly paid the bribes.

It is led by Durban senior counsel Guido Penzhorn.

The Lesotho Highlands Water Project is one of the biggest dam projects in the world, with contracts estimated at $8-billion (about R50-billion).

In the early 1990s questions were being raised about the project’s administration, especially the part played by Sole after chartered accountants Ernst & Young uncovered a number of irregularities.

Sole was eventually dismissed, but not before authorities uncovered his Swiss bank accounts. Penzhorn was then asked to follow the money trail.

After he and his team secured the release of Sole’s bank records by Swiss authorities, they discovered that contractors and consultants had been paying enormous amounts of money to Sole through agents. One of these was Du Plooy.

According to the indictment the Impregilo bribe, paid into a Swiss bank account held by Du Plooy, totalled about $750 000. Du Plooy admitted that he had paid half of this sum to Sole.

He pleaded guilty to a charge of corruption and was fined R500 000.

After a long trial, Sole was also convicted of corruption and imprisoned for 15 years. Three companies have also been convicted of paying bribes through their agents to Sole.

They are the German consulting firm Lahmeyer, which pleaded not guilty and was fined R10 million; Canadian firm Acres International, which pleaded not guilty and was fined about R15 million; and French engineering firm Spie Batignolles, which pleaded guilty and was fined R10-million.

In Lahmeyer’s case the Lesotho Supreme Court of Appeal made the following comment: “It is also incumbent on the international community and particularly the funding agencies to revisit those practises and procedures it has in place and to use those sanctions it has the power to impose whenever contraventions of the kind proved in respect of this project occur.

“One of the devices employed in the various cases . . . was the use of ‘representative agreements’.

“They were used extensively as mechanisms through which payments intended as bribes were clothed with contractual respectability.

“They were in fact, in all the cases before us, used as cloaks to disguise and obfuscate the money trail.

“It required intensive research, expensive court procedures across international boundaries and tiresome and time-consuming efforts to obtain the necessary information to unravel the complex evidential strands required to determine and thus to provide the necessary evidence. Above all it required political will and the provision of the necessary resources.

“To their credit the Lesotho authorities did this in full measure. They should be commended for their resolve.”

Impregilo is the lead partner in a consortium known as the Highlands Water Venture (HWV). Impregilo maintained that it paid no money to Sole and had no knowledge of money paid to Sole by its agent, in this case Du Plooy.

The indictment contradicts this. According to the charge sheet, the bribe was paid by the “old” Impregilo, which had meanwhile merged with Cogefar-Impresit Costruzioni Generali.

The state will say that a representative of Impregilo, Romano Allione, concluded a “consultancy agreement” with Du Plooy in October 1990.

This, it will argue, served as the means to conclude a bribe agreement with Sole for the contract to build the Katse Dam.

The money was paid into Du Plooy’s Swiss bank accounts and he transferred half of it to Sole. The indictment accuses Sole of then promising to use his influence to help Impregilo win contracts for the project.

It says he disclosed the competition’s price structures and tenders, besides sharing details of the deliberative process with Impregilo and asking the board to give HWV the Katse Dam contract.

The state makes it clear in the indictment that it holds the new Impregilo responsible for the bribe because its merger partner knew what had transpired. According to the indictment, Fiat held an effective 33,34 percent shareholding in the pre-merger Impregilo.

The indictment said those in charge of the new Impregilo had “recklessly associated” themselves with the old firm’s actions, “knowing what it had done”.

The state further claims that Allione falsely denied all knowledge of the bribery when confronted with it in 1998.

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