- After it was convicted over bribery in Lesotho Highlands Water Project (LHWP), the World Bank finally debarred the German engineering firm, Lahmeyer, for a corruption case stemming back to 1999. Lesotho is praised by the Bank for prosecuting its own state officials and corrupt foreign companies.
Lahmeyer International has now been branded ineligible to be awarded further World Bank-financed contracts for a period of seven years. However, the Bank says this period could be reduced to four years if it determines that the German company is meeting specific compliance conditions and fully cooperates with the bank in disclosing past sanctionable misconduct.
In a statement, the Bank's sanctions committee said it had proved that Lahmeyer officials bribed the Chief Executive of Lesotho Highlands Development Authority, Masupha Sole, who is the government official responsible for contract award and implementation at the LHWP. The Bank saw this as a violation of its procurement guidelines.
The LHWP is a massive, multi-billion dollar water transfer and hydropower project implemented by governments of Lesotho and South Africa. The project is designed principally to transfer water from the Maluti Mountains in eastern and central Lesotho to the populous Gauteng Province of South Africa, which includes the city of Johannesburg.
Lahmeyer had received two World Bank contracts pertaining to the water transfer component that related to detailed design work, construction supervision, project studies and technical assistance in connection with the Water Delivery Tunnel South and the Mohale Tunnel.
Also, in July 2004, the World Bank had debarred Acres International, another firm convicted of paying bribes under the LHWP, for a period of three years. Two other European firms were also convicted in Lesotho in relation to the LHWP, although they were not involved in the Bank-financed portions of the project.
"The government of Lesotho has shown courage and leadership in successfully prosecuting its own officials and several large foreign companies for corruption," noted World Bank President Paul Wolfowitz in a statement.
"Institutions like the World Bank, and the governments of rich countries, should support the bold stance of poor countries like Lesotho which are working to make sure that precious public resources go to help the poor, for whom they are intended," he added.
The World Bank only followed debarment proceedings against Lahmeyer after the government of Lesotho had announced criminal indictments against the German company and Mr Sole in 1999. This led to an investigation by the Bank's department of institutional integrity.
In October 2001, the Bank's Sanctions Committee found that the evidence was not sufficient to make a determination, and said that it would re-examine its findings in light of any additional relevant information. In 2002 and 2003, the High Court of Lesotho convicted Mr Sole and Lahmeyer of bribery.
The Court of Appeal of Lesotho affirmed Mr Sole's conviction in April 2003, and Lahmeyer's conviction on six of seven counts in April 2004. In light of the information obtained from these decisions, the World Bank re-opened debarment proceedings against Lahmeyer in August 2005.
While Lesotho had done a good job prosecuting those responsible of corruption, the World Bank is nevertheless criticised for its very slow actions. The decision to debar Lahmeyer for a crime for which it was indicted in 1999 "sends the wrong signal to other corporate bribers" Patricia Adams of the non-governmental organisation Probe International maintained.
"The Bank should have taken swift action and suspended the company's right to do business when they were originally indicted - as is allowed for under the US foreign corrupt practices act," Ms Adams added.
Meanwhile, investigations of the European Anti-Fraud Office into the Lesotho case concluded in October, with three European companies from France, Italy and Germany fined a total of 4.4 million euros.
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