convicted in African bribery case
Engineering firm shocked; plans appeal
By KAREN MACGREGOR
to The Globe and Mail
Wednesday, September 18, 2002 - Print Edition,
A major Canadian engineering firm has been
convicted in Africa of bribery in an attempt to win contracts for a $2.4-billion
(U.S.) water project funded by the World Bank.
Toronto-based Acres International Ltd. was
convicted yesterday of bribing the former head of the water project in the
southern African kingdom of Lesotho, in return for contracts worth about
Acres, the first of three global contractors
to go on trial for bribery in the case, will be sentenced next month by the
High Court in Maseru, capital of the impoverished nation of two million people.
In June, the court sentenced Masuphe Sole, the former chief of the Lesotho
Highlands Water Project, to jail for 18 years for accepting bribes from a
Acres said it was shocked by the ruling and
plans to appeal. "Acres continues to strongly declare its innocence of the
charges and will take vigorous action to protect its good name," the company
International development observers say the
verdict will send shivers through transnational companies, some of which
have escaped punishment for bribery in the past because authorities have
focused on officials who took bribes instead of the companies paying the
"The guilty verdict in Lesotho raises serious
questions about how contracts for these megaprojects get awarded," said Pam
Foster, co-ordinator of the Halifax Initiative, an Ottawa-based advocacy
"Acres should be barred from receiving any
financial support from public institutions such as the World Bank and Export
Acres is likely to face a big fine next month,
and its chances of winning future contracts from institutions like World
Bank, which are major financers of projects in the developing world, could
be at risk.
Caroline Anstey, chief spokeswoman for the
bank, said it is studying the verdict. "We will obviously want to take a
look at the High Court decision and transcript of the judgment to decide
whether any future action
by the bank will be taken," she said.
The World Bank has held off adding companies
involved in the Lesotho scandal to its blacklist of firms implicated in corruption
because it wants to study the evidence presented to the court.
Acres expressed dismay yesterday that the
Lesotho court "somehow arrived at a decision which is directly opposite to
that of the World Bank sanctions committee." That committee dismissed charges
against Acres in
February after an "exhaustive" investigation.
High Court Chief Justice Mahapela Lehohla
found Acres guilty on two counts of bribery. He ruled the Canadian firm paid
about $674,000 over seven years into the Swiss bank account of its Lesotho
agent, Zalisiwonga Bam (who has since died) and his wife Margaret. About
60 per cent of the money found its way into Swiss accounts held by Mr. Sole,
who in June was convicted of accepting $1.1-million (U.S.) of bribes in return
for contracts on the project.
The Lesotho Highlands Water Project involves
dams and tunnels that supply electricity to Lesotho and water to the parched
industrial hinterland of the surrounding economic giant South Africa. The
court heard that Mr. Sole, as head of the project, was in a position to influence
the awarding of contracts and make them "sweet."
Acres said it paid its agent, a respected
engineer who was briefly Canada's honorary consul in Lesotho, 3.6 per cent
of the $21-million that the Lesotho contract was worth. This was in line
with the practice recommended by development banks and Ottawa.
"Without Acres' knowledge, the representative
was secretly paying part of his fee to the director of the water project.
Acres had no knowledge or suspicion of these payments, could not have anticipated
them, had no motive for them, and received no benefit," Acres said yesterday.
The company argues that it won its initial
Lesotho contract following a competitive bidding process supervised by the
governments of Lesotho and South Africa, and reviewed by the World Bank.
A second contract was "also subject to a multitiered
Acres argued in court that it believes Mr.
Bam may have been paying Mr. Sole to ensure that firms he represented got
steady work on the project and kept paying his fees, or that Mr. Sole may
have extorted money from Mr. Bam, or that they may have been involved
in a local conspiracy to divide up illicit earnings from the project.
Judge Lehohla disagreed. He found, in a 300-page
judgment, that Acres had intended to bribe Mr. Sole and that its agreement
with its agent was struck in order to cover the bribe.
The head of the Crown's prosecution team,
Guido Penzhorn, said yesterday: "We expected the verdict. As far as we were
concerned, it was a clear-cut case of bribery."
The Lesotho government, which also has Germany's
Lahmeyer International and France's Spie Batignolles on trial, is still deciding
whether others among the dozen international companies will be charged.
George Soteroff, senior counsel for GPC International
and a spokesman for Acres in Africa, said yesterday that the company believed
that the Lesotho court had failed to understand international business practice.
Acres was taking the matter to the appeal court "expecting that it will validate
our belief in our innocence," the company said.