Lesotho Highlands Bribes Trial Starts

Nicol Degli Innocenti - Financial Times
Monday, June 5, 2000

The Lesotho Highlands Water Project corruption trial begins on Monday, with some of the world’s largest construction companies among the accused. 

It started as a run–of–the–mill trial against one greedy individual in a tiny African state but has since snowballed into a court case that implicates some of the world’s largest and best–known construction companies. The Lesotho Highlands Water Project bribery and corruption trial begins on Monday at the Lesotho High Court in the capital, Maseru.

Several companies, including Sir Alexander Gibb & Partners of the UK, ABB, the Swiss–Swedish group, Impregilo of Italy, Acres International of Canada and Sogreah, Dumez and Cegelec of France, are accused of paying bribes to the then chief executive of the project, either directly or though intermediaries.

The $8bn construction project, one of the largest in the world, involves building a series of dams and tunnels that will eventually transfer 1bn cubic meters of water a year from land–locked, water–rich Lesotho to the industrial, densely–populated area around Johannesburg in South Africa.

The charges relate to the first phase of the project, the building of the Katse dam, now complete. The criminal trial arose out of the civil case brought against Masupha Sole, former chief executive of the Lesotho Highlands Water Project (LHWP), which ended last year with his conviction. He was dismissed from the Lesotho Civil Service, had to surrender his passport and was ordered to repay over $1m to his former employers.

After securing with some difficulty the co–operation of the Swiss authorities, Guido Penzhorn, a Durban barrister, who was appointed senior counsel for the prosecution by the Lesotho authorities, was able to trace Sole’s secret bank accounts in Geneva and Zurich, where over $2m were deposited between 1988 and 1998. Penzhorn believes Sole abused his position by demanding bribes from companies in exchange for favourable contract decisions.

All the companies involved emphatically deny the charges. In Toronto, Oskar Sigvaldson, president of Acres International, said: "We are not guilty and we are confident that we will be cleared of all allegations." In the UK, Peter Brettell, managing director of Sir Alexander Gibb, said: "We will be vigorously defending our position and we deny all the charges." In Zurich, ABB said they were co–operating with the authorities. In Milan, Impregilo said it was "absolutely confident the judge will clear us of any wrong–doing".

The prosecution is confident it has a strong case. "We would not show up in court if we did not feel we had an ace up our sleeve," said one prosecution source. "If the companies involved say they have no recollection of the events, we will show them the payment slips and the bank records. Then I think they will remember."

The companies have a lot at stake. If found guilty, they could be barred from all World Bank–financed projects. The bank only contributed $150m to the LHWP but it played a key role in its approval in 1986, guaranteeing the financial feasibility of the project at a time when Lesotho was under military rule and South Africa under the apartheid regime.

The World Bank is now eager to be seen acting against corruption. Its procurement guidelines state clearly that a company guilty of "corruption or fraudulent practices" will be declared "ineligible to be awarded a bank–financed contract". International Rivers, the US–based environmental group, and other NGO’s had asked that the companies involved be suspended from receiving World Bank contracts while under investigation.

The World Bank, the European Union and the South African government have all offered assistance to the Lesotho government for what is expected to be a very complex and costly trial. The EU delegation in Maseru estimates that the trial could last years and cost $5m a year but, like the South African government, it says it has received no official request for financial assistance from the Lesotho government.

The prosecution expects the companies’ legal representatives to challenge the jurisdiction of the Lesotho High Court, as the bribes were allegedly paid in Switzerland. Penzhorn is bracing himself for a tough fight he is determined to win. "But it is a small government taking on some of the world’s most powerful companies. It is a David versus Goliath scenario," says one Maseru–based diplomat.