Canadian Engineering Firm Found Guilty of Bribery in Lesotho

Friday, September 20, 2002

Company May Face Disbarment by World Bank

The Lesotho High Court today convicted Acres International, a Canadian engineering consulting firm, of paying bribes to win contracts on a multi–billion dollar dam project. Acres had been charged with paying nearly $266,000 to Mr. Masupha Sole, the former chief executive of the Lesotho Highlands Water Project. Sentencing will take place on October 7 and 8.

Acres’ defense was that they were not responsible for the payments to Mr. Sole as these were made via an intermediary through a "representation agreement." Chief Justice Lehohla described this arrangement as a deliberate strategy to cover up the bribe payments.

"The Acres’ verdict throws into doubt the legitimacy of their involvement in other dam projects throughout the world," said Ryan Hoover of International Rivers. "The fate of hundreds of thousands of dam–affected people depends on the integrity of Acres’ work. It can no longer be assumed that they are an accountable, responsible firm. All of the feasibility and environmental impact studies they have performed should now be reviewed."

Acres has worked on several controversial World Bank–funded dams. They are currently involved in the Bujagali Dam in Uganda and Nam Theun 2 Dam in Laos, both of which are set to receive World Bank funding. They also participated in the massive Three Gorges Dam Project in China.

The judgment could have serious repercussions for Acres’ consulting work throughout the world. One of the potential repercussions could be disbarment from any further involvement in World Bank–financed contracts. The Bank’s policy on corruption states that it will disbar any firm guilty of corruption on a Bank–financed contract. This spells trouble for Acres, which executed a World Bank contract in Lesotho.

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

If the World Bank declared Acres ineligible to receive contracts, it would most likely cause other development banks to follow suit.

The World Bank has stated that corruption is the ‘single greatest obstacle to economic and social development.’ The case is an embarrassment to the Bank because its responsibilities on the LHWP included financial oversight of the project, yet it apparently was unaware of the bribery until the middle of 1999. An internal investigation completed earlier this year concluded that there was insufficient evidence to punish Acres for corruption in Lesotho.

Mr. Masupha Sole, the former chief executive, has already been convicted of 13 counts of bribery and sentenced to 18 years in prison for taking more than $2 million in bribes from intermediaries representing 12 of the world’s largest construction firms over a ten–year period. Acres was the first of the implicated companies to be prosecuted in the lengthy trial, which began in 1999.

The other companies facing prosecution and potential disbarment from World Bank contracts include France’s Spie Batignolles and Dumez International, and Italy’s Impregilo. The next company to stand trial is Germany’s Lahmeyer International, accused of paying Mr. Sole just over $250,000. Observers have expressed concerns that the other companies may escape judgment as the Lesotho Attorney General may run out of funding to finance its case.

The Lesotho Highlands Water Project directly affected approximately 27,000 people in Lesotho. It displaced hundreds of subsistence farming households, and dispossessed many more of their land.