Lesotho: Corruption Trials Keep Rolling Along
Few would have predicted that a small, impoverished mountainous kingdom in southern Africa would set new precedents in the global fight against corruption, but, against all odds, the government of Lesotho continues to do just that. For the past five years, Lesotho has been doggedly prosecuting multinational companies who paid approximately $2 million in bribes to the former chief executive of the World Bank-funded Lesotho Highlands Water Project, a massive dam scheme that affected thousands of rural families. Their efforts have been remarkably successful. The former chief executive was sentenced to 12 years in prison; a South African man pled guilty to acting as a conduit for the bribes; and, most importantly, three multinational companies have been convicted and fined.
Lesotho Corruption Trials Keep Rolling Along
World Bank to Make Debarment Decision on Acres International
by Ryan Hoover
Few would have predicted that a small, impoverished mountainous kingdom in southern Africa would set new precedents in the global fight against corruption, but, against all odds, the government of Lesotho continues to do just that.
For the past five years, Lesotho has been doggedly prosecuting multinational companies who paid approximately $2 million in bribes to the former chief executive of the World Bank-funded Lesotho Highlands Water Project, a massive dam scheme that affected thousands of rural families. Their efforts have been remarkably successful. The former chief executive was sentenced to 12 years in prison; a South African man pled guilty to acting as a conduit for the bribes; and, most importantly, three multinational companies have been convicted and fined.
The latest company to be brought to book, Schneider Electric (formerly known as Spie Batignolle), pled guilty in February to all charges and was fined US$1.5 million. The appeal hearing of Germany’s Lahmeyer International, which was convicted of paying over half a million dollars in bribes, was underway at press time. Prosecutions against additional companies, including Italy’s Impregilo, could begin shortly.
But the cost of prosecuting these companies has been high. According to the Lesotho Attorney General, Fine Maema, the court cases have cost the government $4.3 million thus far – 2% of the country’s annual budget for public services. Lesotho believed that international donors like the World Bank had promised to provide financial assistance to fund the cases, but no such funding has been given to date, and the World Bank denies that it ever promised to help in that way. To make matters worse, Acres International, a Canadian engineering firm convicted of bribery in 2002, has thus far failed to pay its fine of $2 million, insisting that it be allowed to pay in installments, a condition unacceptable to the Lesotho government. In 2002, Acres posted revenue of US$83 million.
Fortunately for Lesotho, the South African Minister of Water Affairs, Ronnie Kasrils, has recently pledged to provide funds to Lesotho to continue its prosecution. These costs will come out of the LHWP budget.
As convicted companies like Acres and Lahmeyer lose their appeal hearings in Lesotho, attention is quickly turning to the World Bank and other international donors. World Bank policy prescribes debarment from future World Bank contracts for companies that are found to have acted corruptly, but never before have such large, renowned companies been convicted. It is unclear if the Bank can muster the political will to debar some of its most favored contractors (Acres has participated in 15 World Bank contracts since 1995).
After initially declaring that there was too little evidence to debar Acres International, the Bank re-opened its debarment investigation in August 2003. It is unclear when it will reach a final decision, but the world is watching with interest.
* Ryan Hoover
* This article is reused with permission from the April 2004 issue of the International Rivers Network's bimonthly magazine, World Rivers Review, http://www.irn.org/pubs/wrr/