Private Sector


Acres debarment: Litmus test for Bank on corruption

5 April 2004

The Bank’s sanctions committee has reopened the debarment case against Acres International, a Canadian firm whose conviction for bribing an official was upheld by the Lesotho appeals court last August. The glacial pace at which the World Bank has conducted its investigation into the case has brought into question president Wolfensohn’s campaign to deal with “the cancer of corruption” when it concerns northern companies rather than southern governments.

An independent investigation into the Bank-funded Lesotho Highland Waters Project commissioned by the World Bank in 2001 concluded that “the evidence is reasonably sufficient to establish that Acres was paying not for information, but for influence”. Despite this finding, the Bank’s sanctions committee postponed debarment, saying there was “insufficient evidence”.

After the appeals court decision, the Bank said it would examine “the court records of the criminal case to determine if there is new evidence that should be brought to the attention of the Sanctions Committee.” In the meantime, Acres continued its work for the World Bank, winning over $300,000 in new contracts in Tanzania and the West Bank and Gaza in 2003. Acres is currently involved in the Bujagali Dam in Uganda and the Nam Theun 2 project in Laos, both of which are set to receive World Bank funding.

The manner in which the Lesotho authorities have handled this project has ensured increased investor confidence.

Seven months after the appeals court decision, the probe is finally complete. The investigations unit has sent undisclosed recommendations to the Bank’s sanctions committee. The committee can impose penalties ranging from a reprimand to temporary or permanent debarment. The committee has sent the company a notice that its debarment case has been reopened. Acres can make written or oral arguments.

Damian Milverton, a World Bank communications officer, said it is unclear how quickly the sanctions committee will reach a decision but the investigators’ recommendations will remain secret in the meantime. “If this were a court process, the investigations unit would be the prosecutors and the sanctions committee would be the judge.”

Let the weak pay

Lesotho has been widely praised for its efforts to eradicate corruption in the project. South African president Thabo Mbeki, speaking at the opening of the first phase of the project, the 144m high Mohale dam, confirmed that “the manner in which the Lesotho authorities have handled this project has ensured increased investor confidence in present and future major development programmes that are undertaken in this part of the world.”

The costs of the litigation have now run into the millions. According to Lesotho attorney-general Fine Maema, when Lesotho began its mammoth investigation into corruption at the water project it believed it would be receiving international assistance, following promises by the World Bank, European Investment Bank, European Union and representatives from South Africa and Britain at a meeting in Pretoria in 1999. This funding was never provided. A World Bank representative in Maseru has denied that financial pledges were ever made. To add insult to injury, Acres has said it will pay its fines in instalments.

As the judicial process in Lesotho continues, the Bank’s sanctions committee will face similar decisions on the debarment of companies from across Europe. In February, Schneider Electric South Africa, which took over the business of Spie Batignolles, pleaded guilty to 16 counts of bribery and was fined over $1.5 million. Schneider has since been taken over by British firm AMEC. The civil engineering firms involved make up a who’s who of dam builders and include UK firms – and Bank contractors – Stirling International and Balfour Beatty.

The Bank’s reluctance to respond assertively to corporate corruption may be behind survey results which show that fewer than 1 in 5 “opinion-formers” believe the Bank is doing a good job in reducing corruption. From Uganda – where the Bank failed to investigate AES after it was revealed that its main contractor had bribed an official – to Peru – where the IFC refused to investigate allegations of corruption against Newmont Mining Corporation’s involvement in the Yanacocha gold mine despite the presence of a “smoking gun” according to NGOs – the Bank’s actions against corporate corruption have often failed to match that taken against Southern governments.