German firm barred by World Bank for bribery in Lesotho project

Odious Debts Online
November 7, 2006

The World Bank has suspended contracts to the German engineering firm, Lahmeyer International, after finding the company guilty of paying bribes in the multi-billion dollar Lesotho Highlands Water Project (LHWP).

The World Bank’s sanctions committee found that Lahmeyer had engaged in corrupt activities by bribing the Lesotho Highlands Development Authority’s chief executive, Mr Masupha Sole, the government official responsible for contract award and implementation under the LHWP, in violation of the Bank’s procurement guidelines.

But the decision to debar Lahmeyer for bribery – a crime for which it was indicted in 1999, and convicted and affirmed on appeal in 2004 – has been too long in coming, said Patricia Adams of the Canadian-based foreign aid watchdog, Probe International.

“It sends the wrong signal to other corporate bribers,” said Ms Adams. “In those seven years since the original indictment, Lahmeyer was able to carry on business as usual. Rather, the Bank should have taken swift action and suspended the company’s right to do business with the Bank when they were originally indicted – as is allowed for under the U.S. Foreign Corrupt Practices Act – pending a decision by the Lesotho courts.”

Declaring the Bank’s support for Lesotho’s lead in holding corporate bribers to account, World Bank President Paul Wolfowitz said:

“The Government of Lesotho has shown courage and leadership in successfully prosecuting its own officials and several large foreign companies for corruption. Institutions like the World Bank, and the governments of rich countries, should support the bold stance of poor countries like Lesotho which are working to make sure that precious public resources go to help the poor, for whom they are intended.”

In its statement announcing the debarment, however, the World Bank said the period of Lahmeyer’s ineligibility to bid on Bank-financed contracts could be reduced by four years if the company introduced a “satisfactory corporate compliance and ethics program” and disclosed any other past misconduct, presumably under the Bank’s new Voluntary Disclosure Program (or VDP ) [PDFver here].

Despite the Bank’s outward appearance of support for Lesotho’s actions, the protection offered by Bank programs like the VDP are ultimately “bad for developing country citizens and taxpayers, and the rule of law,” said Ms Adams.

“The VDP program allows ‘confessors’ confidentiality and thus allows the Bank to cover-up its own negligence or complicity, which undermines the administration of justice in countries where it is a criminal offense to bribe a foreign official,” she said – the same stance the Bank is publicly congratulating Lesotho for.

In addition to debarment from World Bank contracts, Lahmeyer was fined $10 million rand ($1.63 million) in 2003 after being found guilty of bribing Masupha Sole in relation to the Lesotho project, touted as southern Africa’s largest water scheme undertaking to date.

Three other companies previously charged by the Lesotho courts for paying bribes to win contracts for the Lesotho Highlands Water Project are Impregilo, an Italian construction company, and engineering firms Acres International, based in Canada, and the French company, Spie Batignolles.

The official World Bank statement regarding Lahmeyer’s debarment:

Categories: Africa, Lesotho, Odious Debts

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