Corrupt Lahmeyer Debarment Welcomed But Late

FOR IMMEDIATE RELEASE

Contacts:
Terri Hathaway, International Rivers Network, (In Cameroon) +237 530 25 95, terri@irn.org
Korinna Horta, Environmental Defense, (In Portugal) +351 96 392 0759, khorta@environmentaldefense.org

(November 7, 2006) Environmental campaigners welcomed yesterday’s decision by the World Bank to debar German-based Lahmeyer International for bribing officials to win contracts for Africa’s largest inter-basin water transfer scheme, the Lesotho Highlands Water Project (LHWP).

Korinna Horta of Environmental Defense said, “We welcome the World Bank’s decision to suspend Lahmeyer International from doing business with the Bank for a period of seven years. This decision represents an important departure from just talking about corruption to taking serious action. It sends an important signal to international companies that bribery of foreign officials carries considerable risk.”

However, the Bank’s decision comes three years after the Lesotho court found Lahmeyer guilty of corruption, during which time Lahmeyer received at least 18 Bank contracts totaling nearly US $15 million. Four contracts worth a combined US $1.4 million were granted since the Bank reopened its debarment investigation of Lahmeyer in August 2005.

Terri Hathaway of International Rivers Network said, “Although we welcome this decision, the World Bank’s sluggish response has only been to Lahmeyer’s advantage. Future action must come more swiftly. The Bank can not be serious about fighting corruption if it chases criminal companies, but gives them a generous lead time.”

Environmental Defense and International Rivers Network call on the World Bank to ensure that future court convictions for corruption occurring under World Bank contracts carry immediate debarment and for the Bank to work with other multilateral development banks and bilateral aid agencies to obtain cross-debarment of guilty contractors.

Besides serious allegations of corruption, the LHWP has caused the vulnerable Highlands population to lose fields, grazing lands and access to fresh water sources. Despite promises, their livelihoods have not been reestablished, and poor people have been pushed closer to the edge in their struggle for survival. Problems of erosion and the downstream effects of massive water diversion are disrupting ecosystems and people’s livelihoods.

“In addition to corruption, the Lesotho Highlands Water Project has been marred by environmental problems and impoverishment of the affected communities. The World Bank should not close its books on the project as long as these serious problems remain to be solved,” said Horta.

Background

Lahmeyer International was part of the consortium which carried out the 1986 feasibility study for the LHWP. The Project’s first phase is complete, including the Katse Dam, the Muela Dam, 82 km of water tunnels, and 200 km of access roads at an estimated total cost of US$2.5 billion. If completed, the entire scheme would divert about 40% of the water in the Senqu river basin to South Africa’s industrial Guatang region.

In 2002, the Lesotho courts handed down its first corruption conviction, to Acres International of Canada. The World Bank delayed its decision to debar Acres for more than two years after the conviction, allowing the company to receive at least four Bank contracts, including just one week prior to debarment. Acres was debarred from receiving Bank contracts for a period of three years.

The World Bank decision makes Lahmeyer ineligible to receive Bank contracts for a period of seven years, although this may be reduced to only three years should Lahmeyer meet the Bank’s criteria. For more information, see the World Bank’s Press Release.

For more background on project corruption and environmental and social issues, visit IRN’s Lesotho Highlands Water Project webpage.