Canada: Firm Paid Bribes to Win Lesotho Dam Job

MASERU, Lesotho -- Advocates of corporate accountability are pointing to the sweeping implications of a landmark verdict delivered Tuesday by the High Court in the tiny kingdom of Lesotho that a Canadian multinational company was guilty of paying bribes to win contracts on a dam project.

Probe International said that Tuesday's conviction on corruption charges of engineering firm Acres International, based in Ontario, Canada, could change the way in which multinational companies undertake projects, such as building dams, in developing countries.

"The Lesotho verdict is significant and has sweeping implications, including the potential to eradicate the widespread corruption we see happening in large-scale development projects involving multinational firms in developing countries," Probe's executive director Patricia Adams said Tuesday from the organization's Toronto office.

Following a seven month trial and a judgment that took three days to read out, Acres was convicted by Lesotho's Chief Justice Lehohla on two counts of bribing an official to secure contracts on a multibillion dollar dam scheme in the impoverished Southern African country.

Acres was found guilty of paying over US$260,000, through an agent, to Masupha Sole, the former chief executive of Lesotho's Highland Water Project. Acres will be sentenced on October 7.

Sole was convicted earlier this year of receiving the bribes during his tenure at the World Bank funded $8 billion project, one of Africa's biggest engineering works involving dams and tunnels to divert water to neighboring South Africa and generate electricity.

In a press statement issued Tuesday Acres said it was "shocked" by the decision and continues to "strongly declare its innocence of the charges." The company said it will take "vigorous action to protect its good name" and would immediately begin an appeal.

Acres's defense is that it had no knowledge that its agent was passing on money to Sole, a claim rejected by Judge Lehohla as a strategy to cover up bribery.

The firm's lawyer Milos Barutciski criticized the verdict for running counter to a two and a half year World Bank investigation which concluded in February by dismissing corruption claims due to lack of evidence.

"The Lesotho court went to extraordinary lengths to act in complete disregard of a massive volume of evidence collected during the World Bank's extensive and thorough investigation that found that Acres was not guilty of corruption," said Barutciski.

Campaigners are now demanding that the World Bank, which funded the Lesotho water project, follow through on its own promises to get tough on companies found guilty of corruption by striking Acres off its list of approved contractors. Bank policy prevents it from doing business with any firm found guilty of corruption on one of its contracts.

"We expect the Bank to disbar Acres now that they have been found guilty of corruption on a World Bank contract," said Ryan Hoover of the Berkeley based International Rivers Network. "Anything less than disbarment would undermine not only the World Bank's own corruption policy, but also its poverty alleviation objectives."

Acres was the first of several Western contractors to enter the dock in the high profile corruption trial first brought by Lesotho authorities in 1999. Two other firms, Germany's Lahmeyer International GmbH and French firm Spie Batignolles, have been charged with bribery and are awaiting trial.

The Lesotho Highlands Water Project, one of the world's largest infrastructure projects, is a multi-purpose undertaking between the mountainous Kingdom of Lesotho and South Africa which completely surrounds the smaller country.

More water is needed by South Africa's arid Gauteng province, which is expanding rapidlybut has only the single source, the Vaal River. Johannesburg is located in Gauteng, over 40 percent of the country's population lives in the province, and some 60 percent of all industrial and 80 percent of all mining output is generated there.

The Lesotho Highlands Water Project is reversing the flow of the Sengu/Orange river in the rainy highlands of Lesotho directing the water into the Vaal River. This is being accomplished by means of five dams, 200 kilometers (124 miles) of tunnels blasted through the Maluti Mountains, and a 72 megawatt hydropower plant.

Construction began in 1984, and the first dam, Katse, began delivering water in 1998. Mohale, the second dam, is now in the final phases of construction. The entire project is expected to cost US$8 billion by the time of its completion in 2020.

Current donors and lenders include the World Bank, Development Bank of South Africa, African Development Bank, the European Development Fund, various export credit agencies, and European commercial banks.

The Lesotho verdict comes in a week when the newly formed African Union is meeting in the Ethiopian capital of Addis Ababa to draw up a pan-African blueprint to fight corruption, which it says costs the continent an estimated $150 billion each year.

Original story written by Penny Dale. Published in cooperation with the OneWorld Network.

• 194 World Financial Institutions