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DAM-L Latest on Lesotho Corruption Trial - 2 Articles (fwd)
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Date: Tue, 19 Jun 2001 09:54:47 -0700
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From: Ryan Hoover <ryan@irn.org>
Subject: Latest on Lesotho Corruption Trial - 2 Articles
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R10,4m bribery trail led to Sole court told
Clive Rubin - Business Report
June 17 2001 at 07:39AM
After 18 months of legal wrangling, Ephraim Sole, the former chief
executive of the Lesotho Highlands Development Authority (LHDA), rose in
Maseru's high court and pleaded "not guilty" to 16 criminal charges of
bribery and two counts of fraud before Judge Brandon Cullinan.
The prosecution alleged that over a period of 10 years Sole had illegally
amassed R10,4 million, or the equivalent of 2 600 years of work for the
average Lesotho citizen. (The figure of 2 600 years was calculated using
data in the most recent Least Developed Countries Report by the United
Nations, which puts Lesotho's average annual income at less than $500, or
R4 000.)
Yet in a cruel twist of fate, Sole has had to apply for legal aid to pay
for his legal defence. His local assets, including property and bank
accounts believed to amount to several millions of rands, have been
attached by order of the civil court, following a separate trial relating
to civil claims.
This is despite Sole confiding that he is still earning income by doing
"some consulting work privately".
Over the first three days of the trial, which is expected to last several
months, the prosecution presented, in detail, its allegations and testimony
of the first of several expert witnesses.
Evidence was presented seeking to prove that Sole had received payments
from companies involved with the bidding for contracts to manage and
construct parts for the Lesotho Highlands Water Project (LHWP).
"Payments made their way from Switzerland to South Africa E some of it made
its way to (him) in Lesotho," said Guido Penzhorn, the senior counsel for
the prosecution.
The payments, Penzhorn said, generally coincided with companies or
consortiums pre-qualifying. They had tendered for and were awarded
contracts for the multibillion-dollar LHWP, one of the largest
international donor-funded dam building projects in the world.
The prosecution alleged the funds transited Union Bank of Switzerland
account 60518360J. Evidence of the existence of this account surfaced with
the co-operation of federal authorities in Switzerland after a request from
the South African public prosecutor.
South African and Swiss authorities intervened because money was
transferred from Switzerland to Sole's Standard Bank account in Ladybrand,
before in some instances being transferred to Sole's account at Barclays
Bank in Lesotho.
Before furnishing details, Swiss authorities had to be satisfied that there
was a suspicion of impropriety by Sole and that a crime recognised under
the Swiss penal code had been committed. A Swiss investigating magistrate
instructed Union Bank of Switzerland to furnish proof of the existence of
Sole's account. This included signatures, photocopies of identity documents
and a letter written on LHDA stationery proving that the account belonged
to Sole.
A succession of deposits and transfers from intermediaries on 18 occasions
could be traced to companies that were involved with the LHWP.
It is alleged that, beginning in 1988, Sole benefited from payments from
candidate companies that submitted tenders or companies that were awarded
contracts.
Sogreah, an engineering concern that supervised contractors, paid amounts
totalling Ff808 270 (R850 000) over three years until 1991. Spie
Batignolles, a construction firm, transferred Ff941 882 over a similar period.
A consortium known as Highlands Water Venture, consisting of Impregilo of
Italy, Hochtief of Germany, Bouyges of France, Stirling and Kier
International of the UK and Concor and Group 5 of South Africa, is alleged
to have paid $375 000 from 1991 to 1993. It won the Katse Dam contract.
Another group known as the Lesotho Highlands Project Contractors,
consisting of Spie Batignolles, Balfour Beatty of the UK, Campenon Bernard
of France, ED Zublin of Germany and LTA of South Africa, won major building
and tunnelling contracts. Over a similar period it is alleged to have paid
amounts varying from Ff4,6 million to P140 000.
In June 1994 a group with a similar composition, MuelaHPC, won contract
129a, although Skanska, a Swedish company, had provided a lower tender.
However, MuelaHPC later modified its tender to make it lower than
Skanska's. As a result, the African Development Bank decided to withdraw
funding of contract 129a, and commercial finance had to be arranged from
the Bank of Lesotho.
When the work was completed, MuelaHPC made additional claims and was paid
close to 75 percent more than the revised lower tender.
According to one expert, this was the moment when the rot set in.
In addition, and on separate occasions up to 1995, payments relating to
some of the 200-plus tenders and contracts for work on the LHWP known as
phase 1a (including the commissioning of the 55m Muela Dam, a railhead for
cement, border crossing facilities, a bridge with a span of 420m, a 24MW
hydropower station consisting of three turbines, 82km of tunnels, 120km of
tarred roads and supervisory consulting engineer contracts) resulted in
Asea Brown Boveri (ABB) Germany, ABB Sweden, Lahmeyer International of
Germany, Acres International of Canada, Sir Alexander Gibb and Partners,
Cegelec and Coyne et Bellier and Dumez depositing amounts ranging from $7
978 to Ff6 539 840 over seven years. This constituted the R10,4 million
that flowed through Sole's account.
Many of the payments were one-offs, but others appear to have been paid in
monthly instalments or retainers.
In the case of the allegations of fraud, Sole is alleged to have claimed
expenses from the LHDA for supposedly attending a conference in Vienna in
June and July 1991, while it is alleged that Sole visited Paris instead, at
the behest of the contractor Dumez, which paid his expenses directly into
his Swiss bank account.
The prosecution alleges that at around the same time as the meeting in
Paris, cost overruns by Dumez for a road building contract resulted in a
dispute.
However, at a meeting in Paris, Sole and Martin Schutte, an engineer
employed by Van Wyk and Louw who was later dismissed for admitting to
accepting $20 000 from Dumez, renegotiated Dumez's original memorandum of
understanding from 54 million maluti and raised to "in excess of 56 million
maluti". (The currency of Lesotho is pegged at parity with the rand.)
After arbitration and on the basis of the renegotiated Paris agreement, the
LHDA settled its claim with Dumez in 1994 by "ultimately paying an
additional 40 million maluti" over and above the original tender, for which
Dumez had not originally reached the pre-qualifying stage.
Penzhorn alleged that the money and the method of payment used a
"laundering technique" enabled by middlemen or consultants who included
Zalisiawonga Bam, who until his death was a Lesotho-based engineer, his
wife, Margaret Bam, Mikael du Plooy of Bloemfontein and a Mr Cohen.
They allegedly transferred money via Switzerland, which Penzhorn said was
"illogical". It appeared that in return for transferring payments, these
intermediaries deducted an amount that "varied from 40 to 60 percent".
Tsebang Putsoane, a Lesotho citizen and trained civil engineer, was the
prosecution's first expert witness. He rose from the position of engineer
at the inception of the LHWP to that of acting chief executive while Sole
was suspended and the disciplinary hearings that culminated in his
dismissal were completed. He told the court he "could not think of any
reason why Bam or his wife should receive what amounted to a monthly retainer".
Nor was he aware of any arrangements or agreements under which Du Plooy,
Cohen or the Bams possessed written contracts with the LHDA while he was
acting chief executive of the organisation.
In the case of Du Plooy, Putsoane asserted that he was unaware of his
existence until his name appeared on bank records.
Penzhorn added that the World Bank, which had directly funded a contract
obtained by Acres International, a Canadian firm of consulting engineers
that ran and oversaw several technical departments of the LHDA, "was not
aware that Acres were paying Mr Bam a very substantial amount" and it was
not aware of payments to any of the other intermediaries.
Later Penzhorn will call a forensic accountant from PriceWaterhouseCoopers
to testify. In addition he will call two managers overseeing the project on
behalf of the World Bank.
Lesotho tries to end corruption culture: Kingdom breaks the mould by
putting western contractors on trial for bribery
The Guardian - United Kingdom; Jun 19, 2001
BY CHRIS MCGREAL IN MASERU
Multinational companies are about to go on trial in Lesotho accused of
paying huge bribes to a local official, a case virtually unprecedented in
Africa.
European and Canadian engineering companies, four of them British, are
alleged to have paid an official about pounds 3m for contracts for one of
the continent's biggest engineering projects, the pounds 1bn construction
of huge dams to supply water and electricity to South Africa, which
entirely surrounds the mountainous kingdom.
The British companies - Balfour Beatty, Sir Alexander Gibb and Co, Stirling
International Civil Engineering and Kier International - are charged either
individually or as members of consortiums created for the project.
Corruption trials are rare in sub-Saharan Africa, where oil companies
routinely greased the palms of Nigeria's military dictatorships and diamond
dealers ensured that President Mobutu Sese Seko of Zaire got his cut.
Officials in Kenya or Ghana may occasionally be hauled before the courts to
give the illusion that the government was fighting corruption, but trial
for those believed to have paid the bribes is unheard of.
The Lesotho attorney general, Fine Maema, said in an interview before the
trial: 'We have taken the big companies by the horns. We cannot say because
of the bigness of these companies they should not be prosecuted.
'People are quick to point the finger at Africa but if someone is taking
the money then someone is paying it and they must be held accountable too.
You can see from this case that it is not only Africa that is corrupt.'
If convicted, the companies will almost certainly be barred from bidding
for contracts funded by the World Bank and the European Union, and these
are the main sources of income for some of them.
The case began last week with the trial of Masupha Sole, who has pleaded
not guilty to 16 counts of bribery and fraud.
Mr Sole was appointed chief executive of the Lesotho highlands development
authority in 1986 when the dam project began. His primary responsibility
was to award contracts worth hundreds of millions of pounds to foreign
construction companies.
According to the indictment, the accused companies paid him about pounds 3m
over a period of 10 years.
It says: 'The evidence will show that not only were payments involving
millions of maluti [the currency of Lesotho] made by the contractors
through the intermediaries to Accused 1 [Mr Sole] secretly, but also that
they coincided with events leading up to the award of major contracts.
'The court will be asked to draw the inescapable conclusion that the
payment of these monies to Accused 1 by the other accused were intended and
constituted bribe money.'
Mr Sole allegedly maintained at least three Swiss bank accounts. The
variety of currencies deposited - sterling, French francs,German marks, US
and Canadian dollars - reflects the extent of the alleged conspiracy.
The prosecution says the companies were connected by a web of corruption
and collusion and that graft became a standard practice in awarding
contracts for the Lesotho dams.
The biggest bribes were allegedly paid by the Lesotho Highlands Project
consortium, in which Balfour Beatty was a partner. The consortium is
accused of depositing more than pounds 1m in Mr Sole's accounts over three
years. The first payment, in 1991, was made weeks after it won a contract
worth pounds 135m. A fortnight before it won another contract, for pounds
41m, another big deposit was made.
Two other British firms - Kier International and Stirling International -
are members of another consortium, Highlands Water Venture, alleged to have
paid Mr Sole pounds 250,000. Sir Alexander Gibb and Co is accused of paying
pounds 51,478.01.
Canadian, French, German, Italian, Swiss and South African companies are
also charged.
The companies are accused of using middlemen- two South Africans and a
Frenchman - to move the money through front companies registered in Panama.
The companies and their alleged intermediaries will be tried once Mr Sole's
case has been heard. They have not yet been asked to plead but, in public
statements, have strenuously denied paying bribes.
The prosecution says the onus is on the accused to establish that the
transfers were not bribes.
Although the evidence of a link between the payments and contracts is
circumstantial and largely based on coinciding dates, the prosecution
argues that it was illegal for Mr Sole to hold the Swiss accounts and a
breach of contract by the accused companies to make payments to Lesotho
officials connected with the project. Apartheid's legacy
The dams have been controversial from their conception 16 years ago by the
South African apartheid regime. International funding was initially routed
through hidden accounts to disguise the fact that it was going to a racist
government.
Thousands of people who lost grazing land and their homes to the project
have complain of inadequate compensation. Few of those who live under the
huge pylons carrying power to South Africa have electricity themselves.
The prosecution has the backing of the EU and World Bank, but both have
played equivocal roles in the case. When the allegations first came to
light the World Bank, which lent about pounds 100m for the construction
project, suggested that no action should be taken for fear of undermining
the scheme.
'When they heard we were going to do it, they actually doubted it,' Mr
Maema said.
'Through various meetings we had with them, you could tell people were
doubting whether that would be a reality. We were not under anyone's
pressure at all.'
The case is likely to increase the pressure on European countries to
enforce international conventions aimed at holding companies that pay
bribes responsible in their own countries.
Britain has one of the worst records for combating corruption by its
companies overseas, and is the only European country not to implement the
Organisation for Economic Cooperation and Development's convention against
corruption.
'This is a test case of the will of these countries to take own companies
to court,' said Stiaan van der Merwe, southern Africa representative of the
anti-corruption organisation Transparency International.
'It is covered by the OECD convention on the bribery of foreign public
officials. The case has implications for the effectiveness and political
will on bribery of foreign officials.
'I think this case will undoubtedly change the kaleidoscope on corruption
internationally. If it is easily said governments in the south are corrupt,
what is the moral judgement that should go to countries in the north to
address this problem? Let the north not be so pontificating.'
Others may follow Lesotho's lead. The trial in Maseru coincides with public
hearings in South Africa on alleged corruption by European armaments
companies and politicians and officials in connection with a pounds 4bn
order. Companies in the dock
Balfour Beatty
Partner in the Lesotho Highlands Project consortium, which is accused of
depositing more than pounds 1m in Mr Sole's account over three years
Sir Alexander Gibb & Co
Accused of paying Mr Sole more than pounds 51,000
Stirling International Civil Engineering
Kier International
Members of the Highlands Water Venture consortium which is accused of
paying pounds 250,000 to Mr Sole.
Ryan Hoover
Africa Campaigns
1847 Berkeley Way
Berkeley, CA 94703
USA
Phone: (510) 848-1155 Fax: (510) 848-1008
www.irn.org
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