[DEBATE] : (Fwd) Mbeki's latest talk left - on Lesotho corruption

[Patrick Bond]

(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 
and consciously.

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 
stick together...

"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 
Lesotho...

"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.