[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

dam-l Corruption on LHWP involves "Who's who" of dam industry/LS

PRESS RELEASE
August 2, 1999
Lori Pottinger
Africa Campaigns
(510) 848-1155
lori@irn.org



Bribes by Major International Dam-building Companies
Taint World Bank-Funded Lesotho Water Project

A dozen major international dam-building companies involved in the World
Bank-funded Lesotho Highlands Water Project (LHWP) have lavishly bribed at
least one top official on the project, allegedly giving nearly US$2 million
in bribes over ten years, reports the South African newspaper Business Day.
The information was revealed as part of a court case for the bribed
official.

Patrick McCully, Campaigns Director of International Rivers Network, says:
    "Bribery has long distorted the decision-making process on large dams.
The international dam industry should be held accountable for its corrupt
practices."

The following list of companies and the reported bribe amounts paid was
published in the July 29, 1999, edition of Business Day:

*  ABB (Swedish/Swiss) - Ff 250000 (US$40,410);
*  Acres International (Canadian) - C$279539 (US$185,002);
*  Impregilo (Italy) - US$250,000;
*  Spie Batignolles (French) - Ff 738630 (US$119,393);
*  Sogreah (French) - Ff 84000 (US$13,578);
*  Dumez International (French) - Ff 509905,62 (US$82,422).
*  Lahmeyer Consulting Engineers (German) - DM 16000 (US$8674);
*  ED Züblin (German) - DM 819862 (US$444,466);
*  Diwi Consulting (Germany) - DM 4500 (US$2439);
*  LHPC Chantiers (international consortium) - R392967 (US$63,959);
*  Highlands Water Venture (international consortium, including Impregilo,
the German firm Hochtief, the French firm Bouygues, the UK firms Keir
International and Stirling International, and South African firms Concor
and Group Five) - $733,404;
*  Lesotho Highlands Project Contractors (international consortium which
includes Balfour Beatty, Spie Batignolles, LTA, Züblin) - DM 105639
(US$57,269).

Patrick McCully of IRN says:
    "This list of corrupt companies reads like a who's who of the
dam-building industry."

All of the companies implicated in this scandal are from countries that
have signed the Organization for Economic Cooperation and Development's
convention on corruption and bribery. The OECD Convention obliges
signatories to adopt national legislation which makes it a crime to bribe
foreign public officials (www.oecd.org/daf/nocorruption). The OECD
convention imposes forfeiture of a contract's total value in instances of
proven corruption, according to the Financial Times (June 25, 1999).

On July 29, the Lesotho government charged the former CEO of the
multi-billion-dollar LHWP, Masupha Sole, with fraud, perjury and taking
bribes. The international project to bring water from Lesotho to South
Africa is managed by the Lesotho Highlands Development Authority and
overseen by the governments of Lesotho and South Africa. Construction on
one dam is completed and a second dam is underway in the 5-dam scheme,
which is the largest infrastructure project under construction in Africa
(for more information on the project visit www.irn.org or
www.metsi.com/dwaf/).

The charge sheet states that Sole "did unlawfully, intentionally and
corruptly accept bribe moneys, over the period February 1988 to December
1998, from Lesotho Highlands Water Project contractors." Sole, appointed
CEO of the LHWP in 1986, was suspended in December 1994 and dismissed from
his position in 1995. The Lesotho government alleges he continued to accept
bribes after that. One source told Business Day that contractors paid
bribes directly into Swiss and French bank accounts in Sole's name.

The World Bank has lent over $150m for the project. Its involvement obliges
the bank to apply its operational regulations -- including those on fraud
and corruption -- to project contractors. The bank's procurement guidelines
state: "The bank will declare a firm ineligible, either indefinitely or for
a stated period of time, to be awarded a bank-financed contract if it at
any time determines that the firm has engaged in corrupt or fraudulent
practices in competing for, or in executing, a bank-financed contract." A
bank "sanctions committee" decides on these matters, and maintains a
comprehensive list of debarred firms (called the Listing of Ineligible
Firms). The list is not publicly available. Many of the firms implicated in
this scandal have been involved in numerous dam projects funded by the
World Bank.

According to a July 30 article in Business Day, the World Bank will wait
until the outcome of Sole's court case before contemplating action against
any of the companies named on the charge sheet. Meanwhile, South Africa's
new Water Affairs and Forestry Minister, Ronnie Kasrils, said the conduct
of implicated companies which were still involved in the project was being
"closely scrutinized on an ongoing basis." (For full story:
www.bday.co.za/99/0730/news/news1.htm)

Several of the companies involved in this case are closely involved with
the World Commission on Dams (WCD), which is analyzing the development
effectiveness of dams worldwide (see www.dams.org for more information).
The CEO of ABB is one of the WCD's 12 commissioners, and ABB and other
industry firms have funded the WCD.

Juliette Majot, Executive Director of IRN, says:
     "The close connection between these companies and the WCD threatens to
compromise its ability to frankly assess the role of corruption in the dam
industry. This issue will provide a serious test of the commission's
integrity."

Corruption scandals such as this have played an important role in the
ongoing problem of cost overruns on large dams. The World Bank has
estimated that more than 70 percent of the dams it has built since 1960
have had cost overruns of over 30 percent. The bank also estimates that the
sums distributed world-wide each year as bribes total US$80 billion. The
OECD calls this figure is just "the tip of the iceberg."


FOR MORE INFORMATION:
Lori Pottinger, IRN, Berkeley, California +1 510 848 1155; email: lori@irn.org

Note: All press clippings and photos of the project are available from IRN.

----------------------------
BACKGROUND ON PREVIOUS CORRUPTION INVOLVING THESE COMPANIES

The companies implicated in this scandal are no strangers to allegations of
corruption. Spie Batignolles and Sogreah were involved in Kenya's Turkwell
Gorge Dam which, because of bribes reportedly paid to Kenya's president and
energy minister, cost more than twice what the European Commission said it
should have. A March 1986 "Financial Times" story said Kenyan officials
involved were "fully aware of the disadvantages of the French deal Š but
they nevertheless accepted because of high personal advantages."  (1)

Impregilo, Dumez and Lahmeyer were three of the leading firms involved in
the Yacyretá Dam in Argentina and Paraguay, which Argentina's President
Carlos Menem has called a "monument to corruption." The process for
awarding contracts on the $11.5 billion Yacyretá Dam included "influence
peddling, graft, presidential tippling and Š virtually every kind of
chicanery imaginable." (2)

Lahmeyer and Impregilo also had contracts on Guatemala's Chixoy
Hydroelectric Project; various sources estimate that between $350 and $500
million dollars were lost to corruption on this project. "The dam was the
biggest gold mine the crooked generals ever had," according to Rafael
Bolanos, dean of the School of Civil Engineering at Guatemala's San Carlos
University. (3)

ABB and Dumez worked on Itaipú Dam (Brazil/Paraguay), which has been
described as "possibly the largest fraud in the history of capitalism."(4)
The dam was originally projected to cost $3.4 bn, but skim-offs brought the
final cost to around $20 bn.

ABB also worked on Tucuruí Dam in Brazil, another project tainted by major
corruption. "Testimony at the Parliamentary Commission of Inquiry on
Tucuruí, held in the Para State Legislative Assembly in 1991, accused some
of the most powerful men in Brazil of corruption in arranging the foreign
financing and purchase contracts for Tucuruí," according to Philip
Fearnside, a researcher based in Brazil.(5)




1 "Silenced Rivers" (Patrick McCully, Zed Books, 1996)
2 World Bank Annual Meeting News, Oct. 13, 1991. Yacyreta's projected cost
was $2.7bn; the final cost was $11.5bn.
3  "A People Dammed: The Impact of the World Bank Chixoy Hydroelectric
Project in Guatemala" by Witness for Peace (1995).
4  P.R. Schilling and R. Canese, "Itaipú: Geopolitica e Corrupçãu, CEDI,
Sao Paulo, 1991.
5  "Brazil's Tucuruí Dam: Presentation to the World Commission on Dams," by
Philip Fearnside, 15 June 1999.

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
      Lori Pottinger, Director, Southern Africa Program, 
        and Editor, World Rivers Review
           International Rivers Network
              1847 Berkeley Way, Berkeley, California 94703, USA
                  Tel. (510) 848 1155   Fax (510) 848 1008
                        http://www.irn.org
::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::