THREE EUROPEAN COMPANIES GUILTY IN AFRICAN AID FRAUD CASE

OLAF /06/13 Brussels, 3 October 2006

Investigations of the European Anti-Fraud Office (OLAF) have contributed to court decisions against three European companies in a fraud case affecting a major development project in southern Africa. The companies – one incorporated in France, one in Italy and one in Germany – were found guilty in proceedings before the judiciary in Lesotho and were fined a total of 4.4 million Euros. The court decisions mark the closure of the follow-up to the OLAF investigations into the Lesotho Highlands Water Project that had been co-funded by the EU and other international donors.

The Lesotho Highlands Water Project was set up for the construction of dams, water transfer tunnels and an underground hydroelectric power plant. It is one of the biggest dam projects in the world and the largest bi-national (Lesotho – Republic of South Africa) construction project ever in Africa. The EU has been involved in this project since the early eighties. The total European Development Fund (EDF) financing for the project amounted to 61.2 million Euros and the European Investment Bank (EIB) funding was of 122.5 million Euros. Other donors such as the World Bank and the Government of Lesotho itself also contributed to the financing.

The Lesotho investigation into suspicions of fraud and bribery in the context of the Highlands Water Project started in November 1999. The different donors such as the European Commission, the European Investment Bank, the World Bank and individual member states were informed of the findings of the criminal investigation. OLAF provided assistance to the Prosecuting Authorities of Lesotho and opened an investigative file of its own that was later split into separate investigations for each international company that was suspected of having participated in the bribe payments in order to obtain contracts in the framework of the Lesotho Highlands Water Project. The Chief Executive Officer of the project was found guilty of bribery by the High Court of Appeal of Lesotho and is serving a 15 year sentence in prison.

• A company incorporated in France was brought before court in Lesotho and, once confronted with the findings, decided to plead guilty. It was convicted for 16 counts of bribery and fined 1.19 million Euros.

• A company incorporated in Italy pleaded guilty in the High Court of Lesotho to the alternative charge of Attempting to Defeat the Course of Justice and was fined 1,62 million Euros.

• The Court of Appeal of Lesotho rejected the appeal of a company incorporated in Germany and the company was found guilty on 8 counts of bribery and was fined 1.6 million Euros. This company is now assisting the prosecution of the second official charged with receiving bribes from this company

While the fines imposed on the companies amount to 4.41 million Euros, the exact amount of the financial damage inflicted on EU financial interests through the criminal acts could not be established.

Alessandro Butticé
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