[DEBATE] : (Fwd) Mbeki's latest talk left - on Lesotho corruption
pbond at mail.ngo.za
Sat Aug 19 13:28:10 BST 2006
(This anti-corruption rave is rather like Paul Wolfowitz's: a
distraction. It comes from a leader who welcomed the water privatisers
to SA in 1999, one of which - Suez - is being prosecuted for its
subsidiary's role in Lesotho dams corruption during the period 1988-98.
He then welcomed the water privatisers into Africa via NEPAD and W$$D
Type 2 deals. The next easy questions for some journalist are: Why isn't
the SA government debarring the companies that bribed Sole, as the World
Bank was compelled to do? What officials from DWAF and TCTA - the two SA
agencies that have most control over LHDA - have been investigated,
given their power over so many details of the project, including
financing? And coincidentally, why does Mbeki not want SA to learn of
his own dealings with French arms contractors?)
www.anc.org.za, 18 August 2006
Letter from the President
Lesotho says No to corporate corruption!
As we publish this edition of ANC TODAY, the 2006 annual Southern
African Development Community (SADC) Summit will be taking place in the
Kingdom of Lesotho. Hopefully, as planned, the delegates will have an
opportunity to visit the Lesotho Highland Water Project and gain the
necessary insight about this enormous and awe-inspiring engineering
construct, with all its positives and negatives.
If time allows, hopefully the delegates would also be exposed to the
instructive story of the corruption that is now part of the history of
this major project, and the extraordinary story of what the Government
of Lesotho has done to confront this curse. This is a story that should
be of interest to the rest of Africa as well.
The 2003 2nd African Union Assembly of Heads of State and Government,
held in Maputo, Mozambique, adopted the African Convention on Preventing
and Combating Corruption (ACPCC). The Convention provides that it would
come into force once it is ratified by 15 African States Parties, and
the instruments of ratification deposited with the AU at its
Headquarters in Addis Ababa.
Algeria deposited these instruments at the AU Headquarters in Addis
Ababa a little more than a month ago, on 6 July this year. Because it
was the 15th African Member State to do so, this means that the ACPCC
has now come into force, binding all Member States of the AU to take the
necessary steps to accede to it, and ensure its implementation.
For its part, Lesotho ratified the Convention on 26 October 2004 and
deposited the ratification instruments in Addis Ababa on 5 November
2004. This was a full year ahead of our own processes as the Republic of
South Africa. We ratified the Convention on 11 November 2005, and
deposited the ratification instruments on 7 December 2005.
The day after the ACPCC came into force, on 7 July this year, the
website "Onlinenigeria: Daily News" said: "The Convention requires
African government officials to declare their assets, adhere to ethical
codes of conduct, provide citizens' access to government information
about budget spending and to protect those who blow the whistle on state
fraud...The convention establishes procurement standards, accounting
standards, transparency in the funding of political parties and
recognises the need for civil society participation. It also requires
African countries to establish as criminal offences, bribery, diversion
of property, trading in influence, illicit enrichment, money laundering
and concealment of property."
The Government of Lesotho had to deal with the challenges posed by these
requirements of the ACPCC long before this Convention was adopted by the
AU. This was occasioned by corrupt activities initiated by some of the
construction companies involved in the Highland Water Project. Put
simply, some of these companies took the decision that they would offer
bribes at least to the CEO of the Project, a citizen of Lesotho, to
ensure their participation in this multi-billion-dollar Project.
In a speech at the South African Institute of International Affairs on
19 July 2004, the Attorney General of Lesotho, Mr Fine Maema, said: "An
audit by the accountants Ernst & Young in the early 1990s uncovered
irregularities in the LHDA, (Lesotho Highlands Development Authority),
the parastatal charged with administering the LHWP (Lesotho Highlands
Water) Project, and more particularly the Chief Executive, Mr M E Sole.
This in turn led to disciplinary hearings against Mr Sole and, after his
dismissal, civil proceedings against him. During these latter
proceedings bank records were discovered in Lesotho and South Africa
which in turn pointed to Mr Sole having bank records in Switzerland.
"The (Lesotho) law office then...appl(ied) for the release of Mr Sole's
bank records in Switzerland. This application was later expanded to
cover other bank accounts, i.e. those of various contractors and
consultants engaged on the water project and also three middlemen
through whom the funds were channelled. These applications were all
granted by the local examining magistrate in Zurich. All those holding
bank accounts then appealed her decision firstly to the High Court in
Zurich and thereafter to the Swiss Federal Court. Our lawyers were
successful in these appeals and in June 1999 the bank records were
delivered in Maseru.
"The picture that then emerged was of corruption quite unprecedented in
the history not only of Lesotho but, at that time, also of Southern
Africa. Over a number of years and in fact since shortly after the
inception of this project overseas contractors and consultants had been
paying enormous amounts of money to Mr Sole through intermediaries in
Switzerland. These payments coincided with these contractors/consultants
seeking contracts on the water project. The contractors/consultants
include those engaged on all the major phases of the water project,
including the building of the Katse Dam, the transfer tunnels taking the
water to South Africa, the hydro-power station, and so on.
"Prosecutions then followed, firstly against Mr Sole in July 1999 and
thereafter against the others involved, that is the
contractors/consultants paying either Sole directly or through
intermediaries as well as the intermediaries themselves. In December
1999 the accused were all served with a High Court indictment, the joint
trial being set down before Mr Acting Justice Cullinan, a former Chief
Justice of Lesotho...Every legal stratagem was employed on behalf of the
contractors/consultants, as well as Mr Sole, to derail these prosecutions."
Despite these legal stratagems, and in spite of the severely limited
resources of the Kingdom of Lesotho, the Lesotho law-enforcement
authorities managed to secure convictions against the wrong-doers. The
Attorney General quoted the Chief Justice of Lesotho as having said:
"Thus having cast caution to the winds and shown reckless disregard for
the peace of mind enjoyed from turning an honest penny, world renowned
companies were put to shame when they were caught with their hand in the
cookie jar. The lead companies in the who's who of the corporate
brotherhood of the world found themselves in the seething quagmire of
shame and scandal - naked without a fig leaf to hide their glaring nudity."
Attorney General Maema also said: "The first prosecution was against the
recipient of the bribes, Mr M E Sole. This trial was concluded in 2003
with Mr Sole being convicted on a number of counts of bribery and
sentenced to an effective 18 years imprisonment, (which was reduced on
appeal to 15 years)...The second case involved the international
engineering consultancy from Canada, Acres International where Acres was
convicted of bribing Mr Sole and sentenced to a fine of some...R15
million...The third case is that against the largest engineering
consultancy in Germany, Lahmeyer International. The trial Court
convicted Lahmeyer on 7 counts of bribery and sentenced it to a fine of
R10.6 million...which on appeal was increased to R12 million...The Court
of Appeal in its judgment addressed specific comments to the
International Community and particularly the funding agencies."
Of course what these bribes were about is securing contracts with the
aim of making as much profit as possible. What went on suggests that for
some business people, this becomes such an overriding preoccupation that
all sense of morality, of ethical conduct, is abandoned, deliberately
In an article entitled "Enron Ethics", Robert W. Tracinski wrote: "A
writer in the New York Times quotes a colleague's summary of the true
'Vision and Values' statement of any big corporation: 'Why not just come
right out and say it? 'We will strive to make as much money as we can
without going to prison.''
"As philosopher Harry Binswanger points out, the premise behind this
statement is that lying, cheating, and stealing is the best way to make
money and be selfish - and the fear of prison is the only disincentive
for wholesale fraud and looting. Professor Binswanger goes on to point
out that this statement reflects a whole approach to morality. To be
principled and moral, in this view, means to sacrifice one's interests
by, say, going into social work or taking a vow of poverty. The logical
flip-side is that to be self-interested, to pursue wealth and happiness
- well, that requires no principles or morality at all, just a random,
range-of-the-moment grab for whatever one can get one's hands on.
"This is the predominant moral outlook today, especially on the left.
Ironically, Enron seems to have implemented this view of morality to a
T. To enrich themselves, Enron's executives lied to shareholders and
cooked the books to produce fake profits, ignoring the company's
long-term financial problems."
The British "Guardian" commented on 30 November 2001 that, "Losers
apart, there will be many dancing on Enron's grave. In the US, it had
attracted a degree of notoriety for its part in the bungled
privatisation of California's electricity, which led to black-outs
earlier this year. But it was in the developing world that Enron had a
near unparalleled reputation for corporate irresponsibility. It has been
the only company to warrant an entire Amnesty International report, a
chilling catalogue of human rights abuses from India to Latin America.
The anti-corporate movement accused Enron of subverting the political
process of virtually every country in which it operated to advance its
interests. Enron was in the thick of one of India's biggest corruption
scandals in which huge sums were paid to politicians in the
privatisation of electricity firms."
In a Commentary in "BusinessWeek" on 11 April 2002, Heesun Wee said:
"After the dust from the Enron collapse settles, one positive outcome
may arise. CEOs, take note: The energy trader's demise provides an
important lesson in the value - the necessity, really - of having a
corporate conscience and a culture built around knowing the difference
between right and wrong.
"It's tempting to brush aside business ethics as a nebulous,
well-intentioned subject suitable for Business School 101 but of little
practical value in the real world. Big mistake. A 2000 survey by the
Ethics Resource Center found that 43% of respondents believed their
supervisors don't set good examples of integrity. The same percentage
felt pressured to compromise their organisation's ethics on the job.
That's a startling number, two years before Enron imploded."
To come back to our continent, the "Financial Times" of 8 August 2006
reported that, "The investigation by the UK's Serious Fraud Office into
an alleged Nigerian bribery scandal involving a Halliburton subsidiary
is the latest twist in a case that exemplifies the lucrative, murky and
highly political world of western oil interests in Africa...
"The SFO probe comes after criticism that London was doing little on the
case even though a British-based company and a British lawyer were
allegedly at the centre of a plot to pay more than $170 million of
bribes to win $7 billion of building contracts.
"(Commenting on notes taken at a meeting of the companies under
investigation), Halliburton itself has admitted that the notes show the
building consortium had 'considered payments to Nigerian
officials'...The big money, high politics and strategic oil interests
involved in the SFO's case could be a quintessential test of the
credibility of Britain's anti-corruption pledge."
In the speech to which we have already referred, the Attorney General of
Lesotho also said: "Bribery involves two parties, the briber and the
bribee. Therefore in a given situation it is normally difficult to
establish who initiated the corrupt transaction. There seems to be a
perception in the first world, in casu in the context of construction
contracts, that in the third world the initiative comes from the bribe
taker rather than the bribe giver. In the African context this has been
described as 'the Africa problem'. This has however not been the
evidence in the present prosecutions in Lesotho. The evidence has shown
that Mr Sole's first Swiss accounts were opened for him by the
intermediary acting on behalf of French contractors...
"The purpose of these prosecutions has not only been to get convictions.
The objective has also been to get to the bottom of this problem and to
seek to prevent it from recurring. To this end overtures have been made
to various persons or entities involved to rather cooperate with the
prosecuting authorities, in return for possible exemption from
prosecution. All this has fallen on deaf ears. Even Mr Sole, now
languishing in jail, has chosen to remain silent. Perhaps the reason why
no-one speaks out is because those that know about the bribery normally
have something to hide themselves. It may perhaps not be this particular
bribery transaction, but another...Those involved in bribery tend to
"What needs to be done then is firstly to create an atmosphere in which
bribery is not allowed to thrive. One must make it known to the ordinary
people that those involved in bribery are not latter day Robin Hoods but
are actually stealing mostly from the poor in the country, because the
bribes paid out could have been utilised for their benefit. This, I am
happy to say, is indeed a perception that is starting to take hold in
"The lesson to be learnt is that international corporations wherever
they operate, and particularly in Africa, must make their profits with
integrity. If they do not, we will go after them and we will urge the
World Bank and others to debar them. A clear message coming from the
Mountain Kingdom is that 'the rules of the game have changed; it is no
longer business as usual.'"
All of us as Member States of the African Union would do well to draw on
Lesotho's example and experience of challenging corporate immorality, as
we honour our obligations as spelt out in the AU Convention on
Preventing and Combating Corruption and the benchmarks set by the
African Peer Review Mechanism.
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