Information in: Español - Français - Deutsch - Português - Russian - Japanese - Svenska - Italiano - Suomi

Corruption & Transparency

PRESS RELEASE - THE CORNER HOUSE
FOR IMMEDIATE RELEASE

Canadian Company Found Guilty of Bribery in UK-Supported Dam Project: Major Questions for World Bank & UK Export Credit Guarantee Department

September 18, 2002 - In a landmark decision, the High Court in Lesotho has convicted Acres International, a Canadian engineering consulting firm, of paying bribes to win contracts on the multi-billion dollar Lesotho Highlands Water Project (LHWP).[1] Sentencing will take place on October 7th and 8th.

Acres was found to have paid $266,000 in bribes to Masupha Sole, the former chief executive of the LHWP. Earlier this year, Sole was sentenced to 18 years in prison for receiving bribes from Acres and a number of other multinationals, including the consortium of which Balfour Beatty, the UK construction giant, was a part. Spie Batignoles, the lead company in the consortium, is due to appear in court on bribery charges next year. Balfour Beatty received financial support from the UK Export Credits Guarantee Department.[2] The UK also supported the project through the European Union [3] and the World Bank.

Acres' defense was that it was not responsible for the payments made to Mr Sole, since these were made by an intermediary, Mr. Bam, with whom the company had a "representation agreement." [4] In his verdict, Judge Lehohla, dismissed this defence, stating that the representation agreement was a "sham". Mr Bam could not be called a "local" agent since, at the time, he was employed in Botswana, thousands of miles from Lesotho. The Judge also ruled that there was no evidence that Bam had provided any service to Acres. The inescapable inference was that the representation agreement was a conduit for bribes - and that Acres knew this to be the case.

Germany's Lahmeyer International is currently also on trial. Other companies facing prosecution include Italy's Impregilo and France's Dumez International. However, there are fears that Lesotho, one of Africa's poorest countries, will not have the financial resources to complete the prosecutions.

"The judgment is a landmark", says Nicholas Hildyard of the Corner House, a UK human rights and development group. "The UK talks about cleaning up corruption but has never prosecuted a company for bribing officials abroad, despite numerous allegations. But Lesotho, despite its poverty, has acted where others have only talked. The international community must provide the resources for Lesotho to finish what it has begun."

Campaigners internationally are now demanding that the World Bank make good on its promise to crack down on corrupt corporations by debarring Acres from future contracts.[5] "The Bank must act swiftly to implement its
anti-corruption procedures," says Alex Wilks of the Bretton Woods Project, an NGO which monitors the Bank. "The Bank had financial oversight for the project. It must explain why it failed to prevent corruption from taking place ."

UK campaigners are also demanding that the Export Credits Guarantee Department release the results of any investigations it has made into the allegations surrounding the consortium of which Balfour Beatty was a part. "The ECGD's ethical and financial credibility rests on the public being assured that it takes corruption seriously. Release of the investigation documents is a minimum," says Mark Thomas of the Ilisu Dam Campaign.

Acres has implied that it did not receive a fair trial. But David Lawson, a lawyer who observed the judgment being delivered, states: "Whilst Acres may object to Judge Lehohla's conclusions, it would be entirely offensive to suggest that the due process of law in Lesotho has in any way been compromised."

For further information, contact:
Nicholas Hildyard: 01258 473795 (email: nick@fifehead.demon.co.uk)

To contact the lead prosecutor:
Mr. Guido Penzhorn, Tel: +27 31 301 1741

Editor's Notes:

[1] The project involved a series of large dams. It directly affected
approximately 27,000 people and displaced hundreds of subsistence farming households, many of which have never been properly compensated.

[2] The ECGD's support for the project amounted to 㿮 million and
went in loan guarantees to five UK companies. The companies were: Balfour Beatty, Kier International, Stirling International, Kvaerner Boving and ABB Generation's UK subsidiary.

[3] The EU supported the project through the European Investment Bank
(122.5m Euros) and the European Development Fund (59.8m Euros).

[4] Such agreements, according to Acres, are common practice for
companies competing for business internationally. The agreement generally employs a "local" person to safeguard and promote the interests of the company concerned in negotiations. In some cases, the agreement stipulates that money will only be paid if the company secures a contract.

[5] The World Bank has a policy in place of declaring a firm
"ineligible" for World Bank contracts, either indefinitely or for a stated period of time, if the Bank determines that the firm has engaged in corrupt or fraudulent practices.