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dam-l FTimes on Lesotho corruption case/LS



 Lesotho Highlands bribes trial  starts
 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 Network, 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.

 Nicol Degli Innocenti, Financial Times

 5-6-2000




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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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