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dam-l Canadian article on LHWP corruption/LS
>From The National Post (Ontario, Canada), Friday, August 20, 1999
http://www.nationalpost.com/network.asp?f=990820/58674.html
Foreign aid corruption case puts
Canada on trial
Patricia Adams
"Corruption has to be tackled head on,"
declared Diane Marleau, Canada's minister for
foreign aid this spring, two months after
Canada adopted the OECD's anti-corruption
convention by making bribery of foreign
public officials a criminal offence. But on the
eve of the world's first foreign aid-related
corruption court case -- one involving
Canadian engineering giant Acres
International -- the government agencies concerned
mostly appear to be abdicating responsibility.
On Aug. 31 in Lesotho, a tiny country
landlocked within South Africa, Masupha Sole,
the former CEO of a $2.4-billion (all figures
in U.S. dollars) dam-building
development scheme called the Lesotho
Highlands Water Project, will stand trial on
charges of taking some $2-million in bribes
from Acres International and 11 other
international dam-building companies,
including the Swiss-Swedish giant ABB,
Italy's Impregilo, and Germany's ED Zueblin.
Although the alleged bribes were
probably paid before the Corruption of
Foreign Public Officials Act, Canada's freshly
minted anti-corruption legislation, came into
effect, Canada's response to the
allegations involving Acres will demonstrate
just how tough -- or not -- Canada will
get with allegations of corruption. Acres
denies making any payments to Mr. Sole, and
has not been charged.
South African and Lesotho officials, who are
working closely together on the case,
informed the Canadian High Commissioner at a
recent briefing session that the
government of Lesotho was intending to press
charges against Mr. Sole. Lesotho and
South Africa then asked Canada for assistance
of a "general nature, to pave the way for
future requests for co-operation," according
to Mike Muller, director-general of the
South African Department of Water Affairs and
Forestry. That future co-operation is
far from assured, despite the OECD
convention's requirement that countries "provide
prompt and effective legal assistance . . .
for the purpose of criminal investigations."
When I asked Department of Foreign Affairs
and International Trade officer Richard
Chappell how the Canadian government was
treating this case, he stated that it is "not
treating this issue at all," adding that this
is the "first I've heard there is any media
interest in this." When I asked if Canada
would give Lesotho "mutual legal assistance"
in collecting evidence for this case, as
legislation provides, the Department of Justice's
senior counsel in the international
assistance group, Kimberly Prost, had "no
comment." When I asked the Canadian
International Development Agency, which paid
more than $100,000 to Acres International for
its work on the Lesotho dam project,
what it would do should wrongdoing be
established -- CIDA has a formal
anti-corruption policy -- it said it would
consult the appropriate Canadian authorities,
presumably the same Departments of Foreign
Affairs and Justice that are sitting on
their hands.
Before the trial surfaced, the Canadian
government decried corruption and its evils,
calling it "a blight on our efforts to
achieve sustainable development [that] deters
investors, limits competition . . .
undermines the morale of people . . . and makes the
public cynical." Now, when faced with a live
case, the government seems inert. Even
if the alleged offences had occurred after
the anti-corruption act was in place, Foreign
Affairs spokesman Sean Rowan reasons, the law
has limited applicability outside the
country. Canada would be obliged to act, he
explained, only if a foreign public official
-- say, an ambassador -- was bribed in
Canada. If the alleged crime took place outside
its borders, the law might not apply.
This is confirmed in an analysis by Canadian
criminal lawyers Edward Greenspan and
Don Jack, who explain that the U.S., along
with many European countries, base their
jurisdiction on the offender's nationality
rather than the location of the offence.
"Parliament could have, but did not, deem
activities which occur abroad to have
occurred in Canada, as it did in the area of
war crimes, air piracy and the protection of
nuclear material," Mr. Greenspan said.
While Canada is doing its utmost to stay mum,
Switzerland's highest court, acting on a
request from the government of Lesotho,
decided on May 20 to give that country legal
assistance in its case against Mr. Sole. The
Swiss did so after ordering an investigation
by the district attorney in Zurich, which
found that 12 firms had paid money directly to
the Zurich and Geneva bank accounts of Mr.
Sole, or to bank accounts of third parties.
Because Mr. Sole could not give reasonable
answers to questions about the nature of
the money, the court ruled that the suspicion
against Mr. Sole and the 12 firms
warranted the Swiss authorities' assistance
in this case. The Swiss court documents,
when publicly disclosed, blacked out the
names of the 12 firms.
Even the World Bank -- once notorious for
turning a blind eye to corruption -- has
commended the Lesotho and South African
governments for taking this matter to
court, and offered to help investigate the
allegations. The World Bank, which has
financed some $155-million of this dam
scheme, will also launch its own internal
investigation to see if corruption occurred
in its contracts. If it did, under the World
Bank's new campaign of zero-tolerance, the
corrupt companies could be barred from
bidding on future World Bank contracts. Since
the 12 firms implicated in the Lesotho
trial are among the world's leading large dam
builders and the World Bank is the
world's leading financier of large dams, this
outcome could seriously stem their
revenue stream.
If the World Bank sticks to its guns, credit
must go to James Wolfensohn, the World
Bank president. In 1995, when Mr. Wolfensohn
took over the World Bank, its general
counsel told him he could not use the "C"
word -- "corruption" -- because if he did, he
would have a terrible time with his board of
executive directors. Nevertheless, Mr.
Wolfensohn embarked on a campaign to rid the
world of the "cancer of corruption."
As if to pressure him to stop, last week the
World Bank's acting general counsel,
Daoud Khairallah, told The Washington Post
that the bank would bar firms only if it
could prove that World Bank funds had been
tampered with; simply being found guilty
of corruption on a World Bank-financed
project would not be enough.
Around the world, those fighting corruption
are engaging in this debate, recognizing
that the Lesotho trial could be a landmark in
setting standards for appropriate conduct.
Transparency International, the
non-governmental organization credited with
pressuring governments to stamp out
corruption, is incredulous that the World Bank
and government organizations such as CIDA
might continue awarding contracts to
companies found guilty of corruption.
Concludes TI executive director Jeremy Pope:
"If you're bribing, you're bribing; and if
you're unfit to be bidding for business,
you're unfit."
Patricia Adams is an economist and executive
director of Probe International, a
Toronto-based organization that monitors aid
and trade relations.
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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
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