Speaking Out: Not Guilty

For the past two years Acres International of Toronto, one of Canada’s oldest consulting engineering firms, has been embroiled in legal action in Lesotho in southern Africa over charges of bribery and corruption.

Acres is involved in a massive 30-year project to divert water from the mountainous, impoverished country of two million people to South Africa, the country which surrounds it on all sides. Lesotho is to receive royalties in return for the water and power generated.

The allegations against Acres and several other big international engineering companies were that they had funneled payments through a local agent to Masupha Sole, the Lesotho government official in charge of the project, with the implication that they received commissions in return. In June, Sole was convicted and sentenced to 18 years’ imprisonment for accepting bribes.

Following is from an article that Acres’ former president and current chairman published in the National Post setting out the company’s position. The article was written in response to an earlier article by the director of Probe International, a Toronto-based non-governmental organization that has consistently criticized Canadian engineering firms involved in large dam projects in developing countries.

In September, Acres was found guilty of two counts of bribery in the Lesotho High Court. The company has vowed to appeal the decision in courts in South Africa.

National Post – July 19, 2002

The Canadian challenge – by Oskar T. Sigvaldason

Canadian firms face many competitive challenges when carrying on business overseas, especially in developing countries where firms have to deal with the inherent risks of political instability and corruption. As chairman of Acres International, a leading Canadian firm of consulting engineers, I am proud of our 78-year history of successfully completing hundreds of projects in more than 110 countries around the world.

Against this background, it is troubling to have to respond once again to Patricia Adams’ distorted and highly selective account of Acres’ role in a World Bank-funded water development project in the small African country of Lesotho (“The Canadian Connection” June 27). Ms. Adams is the executive director of Probe International, a non-governmental organization that has been an outspoken critic of the Lesotho water project for many years.

Ms. Adams’ accusations regarding Acres follow the recent conviction of a Lesotho government official, Masupha Sole, for corruption in connection with the water project. … Ms. Adams reaches her categorical conclusions regarding Acres without making reference to the evidence and arguments that Acres presented at its own trial.

More importantly, Ms. Adams was aware of, but astonishingly made no reference to, the fact that the World Bank dismissed the same charges against Acres in February, 2002. The World Bank’s decision was made after a thorough investigation by a former U.S. prosecutor from a prominent New York law firm who conducted an exhaustive review of the same evidence that was available to the Lesotho prosecution.

Acres co-operated fully with the World Bank’s investigation, disclosing thousands of internal documents and sworn statements from senior executives. The investigation culminated in a hearing before the Bank’s Sanctions Committee, which dismissed the charges.

In fact, the World Bank’s investigation was the third time that Acres’ conduct in relation to the Lesotho project has been comprehensively reviewed. Upon learning of the allegations in 1999, the company immediately instructed independent counsel in Canada, Lesotho and South Africa to review all of the relevant evidence and report their findings. In addition, the Canadian International Development Agency, which also provided funding for Acres’ involvement in the Lesotho water project, conducted its own forensic audit of that portion of the project funded by CIDA. In both cases, Acres was cleared of any wrongdoing.

After a four-and-a-half-month trial, the Lesotho prosecution has not brought forward any new evidence and, in particular, any evidence of wrongdoing by any manager or employee of Acres.

Acres remains convinced that an impartial review of the facts before the Lesotho court will clear its name. We believe an objective court seized with the evidence will reach the same conclusion as the World Bank and dismiss the allegations.

Ms. Adams’ selective version of events can be contrasted with a review of the actual facts. Briefly, Mr. Sole was convicted of accepting bribes from more than a dozen international engineering and consulting firms and their Lesotho representatives. In the case of Acres, the allegations stem from payments allegedly made to Mr. Sole by Acres’ local representative, Zaliswonga Bam.

Lesotho was and remains a volatile and politically unstable country. During the time that Acres worked on the water project, the country endured military coups, army and police mutinies, riots over alleged election frauds, and intervention by the South African army to restore civil peace.

Local knowledge and expertise is vital to conducting business overseas and the eventual success of a project, particularly in countries with a history of volatility. For this reason, international lending agencies and national governments, including the World Bank and the government of Canada, strongly recommend the use of local representatives when doing business in developing countries. The use of local representatives is also strongly endorsed by leading business organizations such as the International Federation of Consulting Engineers.

Given the situation in Lesotho, Acres’ decision to retain a local representative was clearly warranted and consistent with international best practices as recognized by governments and international organizations.

Mr. Bam, as a respected local businessman and a Berkeley-educated civil engineer, was eminently well qualified for the role of local advisor on a 13-year project in Lesotho’s challenging environment. He was managing director of the leading local engineering company and very familiar with the water project. Acres also had first-hand experience of his professional competence, having worked side by side with him a few years earlier as sub-contractors on another project.

Mr. Bam was not a shadowy middle-man of no evident use aside from his political connections. Indeed, he was not known to have any political affiliations, whereas his technical competence was widely acknowledged. His fee was at the low end of industry norms for representation agreements. Mr. Bam was also Canada’s Honorary Consul to Lesotho, and his role as Acres’ representative was publicly known to Lesotho business and government officials, as well as to the government of Canada.

Acres was successful in winning the initial Lesotho contract following a competitive bidding process supervised by the governments of Lesotho and South Africa, review and approval by the World Bank, and a detailed peer review conducted by a respected international firm of consulting engineers. A second follow-on contract was subject to the same multi-tiered approval process.

After the allegations arose, Acres made efforts to find out whether Messrs. Bam and Sole had any prior relationship. Our own investigation of decades-old corporate records in Lesotho uncovered the fact that Mr. Sole was a founding director of Mr. Bam’s engineering company. This information was disclosed to the World Bank and the Lesotho prosecutors, who were not aware of the relationship.

Could this have been the basis for any payments? We may never know, since Mr. Sole is silent and Mr. Bam cannot explain as he, unfortunately, died in 1999.

Acres has a long history of commitment to corporate responsibility in international development. In 1978, Acres was an international leader in adopting a formal code of business conduct that explicitly prohibited corrupt practices, including the payment of bribes, long before Canada, the OECD, the World Bank and other international organizations adopted laws and policies against corruption of fo
reign officials. Both before and after that time, Acres has received numerous awards and accolades for its work in developing countries.

Unfortunately, our extensive efforts to maintain high standards of corporate social responsibility have not prevented the Lesotho matter from turning into a substantial drain on our financial and managerial resources, let alone the impact on our reputation.

This merely highlights the increasing risks Canadian companies face overseas, and the need to ensure that they receive a fair hearing, due process and an impartial judicial system when operating in developing countries.