Lesotho: Foreign Contractors Put on Trial for Bribery

Publisher Name: 
The Guardian

MASERU -- Multinational companies are about to go on trial in Lesotho accused of paying huge bribes to a local official, a case virtually unprecedented
in Africa.

European and Canadian engineering companies, four of them British, are
alleged to have paid an official about 3m for contracts for one of
the continent's biggest engineering projects, the 1bn construction of
huge dams to supply water and electricity to South Africa, which
entirely surrounds the mountainous kingdom.

The British companies - Balfour Beatty, Sir Alexander Gibb and Co,
Stirling International Civil Engineering and Kier International - are
charged either individually or as members of consortiums created for
the project.

Corruption trials are rare in sub-Saharan Africa, where oil companies
routinely greased the palms of Nigeria's military dictatorships and
diamond dealers ensured that President Mobutu Sese Seko of Zaire got
his cut.

Officials in Kenya or Ghana may occasionally be hauled before the
courts to give the illusion that the government was fighting
corruption, but trial for those believed to have paid the bribes is
unheard of.

The Lesotho attorney general, Fine Maema, said in an interview before
the trial: "We have taken the big companies by the horns. We cannot
say because of the bigness of these companies they should not be
prosecuted.

"People are quick to point the finger at Africa but if someone is
taking the money then someone is paying it and they must be held
accountable too. You can see from this case that it is not only Africa
that is corrupt."

If convicted, the companies will almost certainly be barred from
bidding for contracts funded by the World Bank and the European Union,
and these are the main sources of income for some of them.

The case began last week with the trial of Masupha Sole, who has
pleaded not guilty to 16 counts of bribery and fraud.

Mr Sole was appointed chief executive of the Lesotho highlands
development authority in 1986 when the dam project began. His primary
responsibility was to award contracts worth hundreds of millions of
pounds to foreign construction companies.

According to the indictment, the accused companies paid him about 3m
over a period of 10 years.

It says: "The evidence will show that not only were payments involving
millions of maluti [the currency of Lesotho] made by the contractors
through the intermediaries to Accused 1 [Mr Sole] secretly, but also
that they coincided with events leading up to the award of major
contracts.

"The court will be asked to draw the inescapable conclusion that the
payment of these monies to Accused 1 by the other accused were
intended and constituted bribe money."

Mr Sole allegedly maintained at least three Swiss bank accounts. The
variety of currencies deposited - sterling, French francs, German
marks, US and Canadian dollars - reflects the extent of the alleged
conspiracy.

The prosecution says the companies were connected by a web of
corruption and collusion and that graft became a standard practice in
awarding contracts for the Lesotho dams.

The biggest bribes were allegedly paid by the Lesotho Highlands
Project consortium, in which Balfour Beatty was a partner. The
consortium is accused of depositing more than 1m in Mr Sole's
accounts over three years. The first payment, in 1991, was made weeks
after it won a contract worth 135m. A fortnight before it won another
contract, for 41m, another big deposit was made.

Two other British firms - Kier International and Stirling
International - are members of another consortium, Highlands Water
Venture, alleged to have paid Mr Sole 250,000. Sir Alexander Gibb and
Co is accused of paying 51,478.01.

Canadian, French, German, Italian, Swiss and South African companies
are also charged.

The companies are accused of using middlemen - two South Africans and
a Frenchman - to move the money through front companies registered in
Panama.

The companies and their alleged intermediaries will be tried once Mr
Sole's case has been heard. They have not yet been asked to plead but,
in public statements, have strenuously denied paying bribes.

The prosecution says the onus is on the accused to establish that the
transfers were not bribes.

Although the evidence of a link between the payments and contracts is
circumstantial and largely based on coinciding dates, the prosecution
argues that it was illegal for Mr Sole to hold the Swiss accounts and
a breach of contract by the accused companies to make payments to
Lesotho officials connected with the project.



Apartheid's Legacy

The dams have been controversial from their conception 16 years ago by
the South African apartheid regime. International funding was
initially routed through hidden accounts to disguise the fact that it
was going to a racist government.

Thousands of people who lost grazing land and their homes to the
project have complain of inadequate compensation. Few of those who
live under the huge pylons carrying power to South Africa have
electricity themselves.

The prosecution has the backing of the EU and World Bank, but both
have played equivocal roles in the case. When the allegations first
came to light the World Bank, which lent about 100m for the
construction project, suggested that no action should be taken for
fear of undermining the scheme.

"When they heard we were going to do it, they actually doubted it," Mr
Maema said.

"Through various meetings we had with them, you could tell people were
doubting whether that would be a reality. We were not under anyone's
pressure at all."

The case is likely to increase the pressure on European countries to
enforce international conventions aimed at holding companies that pay
bribes responsible in their own countries.

Britain has one of the worst records for combating corruption by its
companies overseas, and is the only European country not to implement
the Organisation for Economic Cooperation and Development's convention
against corruption.

"This is a test case of the will of these countries to take own
companies to court," said Stiaan van der Merwe, southern Africa
representative of the anti-corruption organisation Transparency
International.

"It is covered by the OECD convention on the bribery of foreign public
officials. The case has implications for the effectiveness and
political will on bribery of foreign officials.

"I think this case will undoubtedly change the kaleidoscope on
corruption internationally. If it is easily said governments in the
south are corrupt, what is the moral judgement that should go to
countries in the north to address this problem? Let the north not be
so pontificating."

Others may follow Lesotho's lead. The trial in Maseru coincides with
public hearings in South Africa on alleged corruption by European
armaments companies and politicians and officials in connection with a
4bn order.



Companies in the Dock

  • Balfour Beatty

    Partner in the Lesotho Highlands Project consortium, which is accused
    of depositing more than 1m in Mr Sole's account over three years

  • Sir Alexander Gibb & Co

    Accused of paying Mr Sole more than 51,000

  • Stirling International Civil Engineering . Kier International

    Members of the Highlands Water Venture consortium which is accused of
    paying 250,000 to Mr Sole

AMP Section Name:World Financial Institutions
  • 194 World Financial Institutions