The Front

Too Big to Debar?

Follow your own rules, and stop doing business with corrupt companies.

That is the message of the International Rivers Network, the Environmental Defense Fund and other environmental groups as they called on the World Bank in September to debar companies accused of bribing the former head of a major and controversial Bank-funded dam project in Southern Africa [see "Making the Earth Rumble: The Lesotho-South African Water Connection," Multinational Monitor, May 1996].

Between 1988 and 1998, a dozen major international dam-building companies allegedly bribed the former head of the Lesotho Highlands Water Project (LHWP), Africa's largest infrastructure project, allegedly depositing over $2 million in bribes into his Swiss bank accounts.

The bribes were revealed in July in a court case brought by the Lesotho government against the official, Masupha Sole, and were reported in the July 29 edition of Business Day, a South African newspaper.

The list of companies involved reads like a who's who of the dam-building industry. The reported bribes ranged from a low of $2,456 (Diwi Consulting, Germany) to as high as $733,404 (Highlands Water Venture, an international consortium which includes the French firm Bouygues). Other well-known companies include the Swedish/Swiss ABB ($40,681), France's Spie Batignolles ($119,393), Acres International of Canada ($185,002), Impregilo of Italy ($250,000) and ED Zueblin of Germany ($447,000).

The World Bank's procurement guidelines state it will "declare a firm ineligible, either indefinitely or for a stated period of time, to be awarded a bank-financed contract" if the firm is found to have "engaged in corrupt or fraudulent practices in competing for, or in executing, a bank-financed contract."

World Bank spokesperson Richard Uku told Multinational Monitor that the bank is currently conducting its own investigation. The "Bank will definitely take concerted action one way or another" after it has finished its investigation," he says.

"We also think it's important to emphasize that this [the LHWP] is a great project because it will bring water to millions of people," Uku adds.

The LHWP involves five dams, miles of tunnels dug through the Lesotho mountains and a small hydropower component. The project is intended to deliver water from Lesotho to South Africa's biggest urban area, including Johannesburg and Pretoria.

A World Bank-supported social fund intended to help affected communities in Lesotho "has been and continues to be a tool of opportunistic politicians," according to the Transformation Resource Centre and other Lesotho NGOs representing people impacted by the dam.

"Punishing the corrupt multinationals involved with the LHWP and closely monitoring the implementation of the project's social fund would reassure us of the World Bank's concern," the groups said in a statement.

Environmental groups have been harshly critical of the LHWP.

Diverting a huge amount of water "has had an extremely negative impact on the vulnerable rural highlands communities who have lost fields, grazing lands and access to fresh water sources due to the construction of the project," says Korinna Horta of the Environmental Defense Fund in Washington, D.C.

Environmentalists also point out that South Africa could meet its water needs through a modest application of conservation measures by rich white heavy users, making the Lesotho diversion completely unnecessary.

Although the Bank maintains a list of ineligible firms and has debarred seven firms since its new policy on corruption was approved in 1997, so far the Bank has indicated that its rules may not apply to this high-profile case because the alleged bribes are not directly tied to Bank project funds.

Bank officials have pointed out that its contribution (a $150 million loan) only makes up 5 percent of the financing towards the project.

"The Bank was supposed to be responsible for financial management of the project, not just their own funds," responds Patrick McCully of the International Rivers Network.

"At a time when there's a lot of rhetoric coming from the Bank about addressing corruption," McCully says, "they should at least be taking action on this case, which is the clearest-cut dam corruption case in the world, though by no means the worst."

Critics also point out that while the Bank claims it only provided a small portion of the actual project financing, Bank officials used the project loan agreement to threaten legal action and try to block the Lesotho government from dismissing Sole in late 1994. The Bank insisted that his dismissal would "seriously jeopardize the progress of the project." Sole was dismissed in 1995.

All of the companies implicated in the scandal are from countries that have signed the Organization for Economic Cooperation and Development's convention on corruption and bribery, which obliges signatories to adopt national legislation similar to the U.S. Foreign Corrupt Practices Act. The Foreign Corrupt Practices Act makes it a crime for U.S. citizens or corporations, or their subsidiaries or agents, to bribe foreign public officials. None of the OECD countries have ratified the convention, which in any case would not apply retroactively.

"The tragedy is that the only one who suffers may end up being the guy who takes the bribe while all these companies get off," McCully says.

If the Bank were to debar the companies involved, it would have major implications for the structure of the international dam industry. Impregilo, for example, is currently working on at least seven World Bank-supported dams.

Three years after Kathie Lee Gifford pledged to help end labor abuses in the apparel industry, two workers who were recently fired from Caribbean Apparel, the factory where Kathie Lee clothing is made, came to Washington, D.C. to meet with reporters.

At a September press conference on Capitol Hill called by Charles Kernaghan and the National Labor Committee, Kathie Lee's husband, Frank Gifford, took public offense at the accusations launched by Kernaghan against Kathie Lee.

Gifford said that his wife was working hard to improve conditions at the factories, that he was unhappy the group released its findings before discussing them with her, and that his children are sometimes driven to tears by people who criticize their mother for permitting workers to toil in sweatshop conditions.

But Charles Kernaghan, head of the National Labor Committee, says that Gifford and Kathie Lee's discomfort cannot be compared to the plight of the sweatshop workers who earn as little as 50 cents an hour.

"It is nothing in comparison to the lives of the hundreds of thousands of young women locked in factories throughout the world, behind barbed wire and armed guards, who are stripped of their rights and paid starvation wages and who go home to one-room hovels without running water and raise their children on coffee because they can't afford milk," Kernaghan said after the news conference. "That is a real problem."

The two workers who appeared with Kernaghan at the press conference, Loren Del Carmen Hernandez and Blanca Ruth Palacios, were both fired from Kathie Lee's factories after attempting to defend their rights.

Del Carmen Hernandez was fired immediately after a meeting with a National Labor Committee delegation last August. Factory management detained her against her will for two hours, interrogated her about union activities, offered her bribes, questioned her about her children, and forced her to sign a blank piece of paper.

Palacios was illegally fired from her factory job at Caribbean Apparel after being elected general secretary of the union, one week before the delegation arrived in El Salvador.

"I have a signed agreement by Kathie Lee stating that she would never again tolerate sweatshop conditions and that she would open them up for inspection by local religious and human rights leaders," Kernaghan says. "None of these promises have been kept."

Workers at Caribbean Apparel make 60 cents an hour and work six days a week, eleven hours a day.

Production lines in the factory produce 2,000 pieces of Kathie Lee garments every day. Workers get no sick pay and their bathroom visits are restricted and monitored.

Every new employee must pay for a mandatory pregnancy test, and if the results are positive, they are fired immediately, Kernaghan says.

"As a celebrity, Kathie Lee has reaped millions from the sweat and toil of women in Third World countries around the globe," Kernaghan says.

"They can afford these workers the dignity of at least hearing their complaints. We know from past experience that Kathie Lee will do little about abusive factory conditions, but at least hearing these workers out is within her control."

A group of university students also attended the Capitol Hill press conference and predicted that the findings from El Salvador will fuel a new round of activism on campuses around the U.S.

"The question on campuses this fall is whether our universities will really commit to empowering these workers to have a voice and make sustainable changes in the industry, or whether they will run for cover," says Jessica Champagne, a student at Yale University and a member of United Students Against Sweatshops.

"We have listened to these workers and we will take action in line with their interests and the changes they say need to be made."

The day after the press conference, Kathie Lee went on her television show, "Live with Regis and Kathie Lee," to defend herself from the sweatshop allegations.

She said that she has been subject to "vicious personal attacks, which I think don't further the cause a bit - all it does is sell newspapers."

She said it is extremely difficult to monitor all the subcontractors who manufacture her apparel line, which is sold exclusively at Wal-Mart.

The Lawrence Summers Memorial Award

The September 1999 Lawrence Summers Memorial Award* goes to Steve Young, a former Republican U.S. Senate candidate linked with the Center for the American Experiment, a right-leaning Minneapolis-based think tank.

"We're not arguing that the Forest Service has become a believer in this religion," says Minnesota attorney Steve Young.

"But we're arguing that their failure to raise these religious questions has forced them to become an agent of religious purpose. If these [environmental] groups are saying that trees are fundamentally inviolate and sacred, that there should be some bioreserve that humans should be kept away from, my response is that, no, that's just your particular religious view and you can't force the government to impose that idea."

This is the rationale Young offers for a lawsuit on behalf of the Associated Contract Loggers in northern Minnesota against the U.S. Forest Service and two environmental groups.

The suit alleges that the Forest Service has become a "tool" of environmental groups that are motivated by a deep ecology "religion." Thus, the suit contends, the Forest Service's actions are in violation of the U.S. Constitution's separation of church and state.

Young adds that the deep ecology religion has penetrated the top of the government hierarchy. "I read Al Gore's book and I said, no shit, there's a coherence here, and that coherence is deep ecology. So we're [filing the suit] to establish new law-new ways of thinking about the environment."

Source: "Holy War: Minnesota loggers take the U.S. Forest Service and the tree-huggers to court on the unlikeliest of gripes," Minneapolis/St. Paul City Pages, September 22, 1999. Thanks to Ned Daly for forwarding this story.

*In a 1991 internal memorandum, then-World Bank economist and current Deputy Secretary of Treasury Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. "Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?" Summers wrote. "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City." Summers later said the memo was meant to be ironic.