Corruption: Canada backs firm banned by World Bank

by Marty Logan, Inter Press Service (Johannesburg), July 30, 2004.

It is business as usual between Canadian government agencies and a local company barred from World Bank contracts after being convicted of bribery in Africa.

In September 2002, engineering firm Acres International was found guilty in the High Court in the southern African nation of Lesotho for trying to bribe the official responsible for the multi-billion-dollar World Bank-financed Lesotho Highlands Water Project (LHWP).

Acres, based in Oakville in the province of Ontario, appealed and last year had one charge dropped. But the conviction was maintained on the second count and the firm was fined the equivalent of two million U.S. dollars.

Three other international companies working on the project have also been convicted in the Lesotho courts, and the World Bank said Thursday it is considering debarment proceedings against one of them, Lahmeyer International.

Last week the World Bank, which contributed 90 million dollars to the LHWP, announced it will not award new contracts to Acres for three years. But that mark against the firm's name will not affect its relationship with Canadian agencies.
 
"We have met with them, we have discussed with them, and we have been assured by Acres International that they have put internal systems in place that are designed to prevent this kind of occurrence in the future," Andre Lemay, spokesperson for Canada's department of foreign affairs and international trade told IPS.

"There's no reason to believe they wouldn't live up to their commitment," he added.

Asked if the government should not be sending a stronger signal that it will not tolerate corruption at home or abroad, Lemay added, "from what we've seen, from what we've discussed, from what we've analysed, our decision was that having the World Bank debar (Acres) for at least three years, that is basically the punishment they're getting. As far as Canada is concerned, we're satisfied."

Similar comments were made by spokesmen from the Canadian International Development Agency (CIDA) and Export Development Canada (EDC).

EDC's Glen Nichols told IPS his agency had hired experts to examine internal changes Acres made after being indicted in the Lesotho court in 1999.
 
"The company . . . came back and said 'yes,' so on the basis of that and discussions with Acres at that time we decided we could do further business with them," he added in an interview.

EDC has no projects with Acres at the moment, said Nichols.

One critic calls Acres new safeguards inadequate because they do not include external oversight. The firm had internal mechanisms in place while working in Lesotho but they did not prevent the bribery, added Patricia Adams of Toronto-based Probe International.

"(The corruption) was secret, it was premeditated, it was deliberate; it went right to the top of Acres. So I don't see why an internal procedure that is a self-regulating system that does not have external, independent forensic auditors checking – the way you have when you go through a court proceeding – I don't see what good it's going to do," she told IPS.

"The Canadian government in this particular case has a lot to hide as well, because the agent that Acres used and other companies used as well, was Canada's honorary consul. He was a civil servant, he was a federal cabinet appointee."

Adams also suggests the World Bank's blacklisting of Acres was in response to external pressures – particularly an ongoing probe by the U.S. Congress into corruption in international funding agencies – and does not reflect a strengthened resolve within the Washington-based agency to fight corruption.

"The bank is obliged to the laws of no land. It is above the law and it can do what it wants. The only risk it takes is that it loses public support in OECD countries and that it loses its budget."

Adams added: "I do believe that the reason there is so much corruption in the Third World is because of the (practice) of transferring money through these big institutions, bilateral aid agencies, the multilateral aid agencies and export credit agencies. It's a perfect environment for corruption."
 
But a spokesman says World Bank President James Wolfensohn has acted strongly to stamp out corruption since 1996. "He has made a very clear case that corruption does get in the way of development; it does hurt the poor," the spokesman Damian Milverton said in an interview.

While the bank communicated its decision on Acres to Ottawa, he said "we don't go out there with an agenda to influence governments to act as we do."

Milverton said the bank awarded four contracts to Acres while the Lesotho case was moving through the courts. To exclude the firm from the work would have been unfair, he argued.

"If a company has been found innocent and we've denied them work during that particular period in time, we may have hurt them financially, and also damaged their reputation."

CIDA Spokesman Steven Morris told IPS that his agency, the government's international cooperation arm, has three current contracts with Acres: one in India worth 3.5 million dollars and two others, in China and Central America, in which Acres is a member of a multi-firm consortium.

All of the government spokesmen stressed that Canada was a party to the 'Convention Against Bribery of Foreign Public Officials in International Business' (1999) of the Organisation for Economic Cooperation and Development (OECD), and noted that Ottawa had passed its own anti-corruption law, the Corruption of Foreign Public Officials Act, in 1999.

"We have been and continue to be, as a nation, strongly committed to combating corruption. We're committed to making sure that everything is transparent, and we've been promoting the rule of law, democracy and human rights," said Lemay.

Testifying before a committee of the U.S. Congress last week, the lead prosecutor in the Lesotho case said few of the governments whose companies were charged with bribery – which are all outspoken opponents of corruption – assisted the prosecution.

"Apart from Switzerland, and to some extent France, which helped with an application for mutual legal assistance, no assistance was received from any other overseas country," Guido Penzhorn told the Senate's foreign relations committee.

"There is a lingering impression in Lesotho, as well as in South Africa, that the interest of First World countries in the present prosecutions lies not so much in the successful outcome of these prosecutions but rather in protecting the interests of its companies that are involved. Hopefully this impression will in time prove to be not correct," he added.