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Wednesday, January 5, 2011

The hypocrisy of multimationals paying hefty bribes to crooked government officials

We all knew that European multinationals pay bribes to government officials to win large and lucrative infrastructure contracts. Indeed, the news that the Franco-American conglomerate, Alcatel-Lucent, had been found by US authorities to have paid bribes to government officials in several Third World countries to win contracts did not surprise anyone. The only reason the event was big news here was the mention in documents presented by US authorities in a Miami court of a transaction involving a Kenyan company, in which government officials pocketed huge bribes.

Interest in the subject also comes from the fact that Alcatel-Lucent has been winning huge contracts in this country, the largest being the $113 million deal where it was contracted by the government in 2008 to lay the 1,500-kilometre submarine cable between Mombasa and Fujaira in the United Arab Emirates, which is owned by Teams Ltd. When the news first broke out, everybody assumed that the transaction mentioned in the US court, a case in which government officials are suspected to have pocketed $20 million, had something to do with the submarine cable project.

But the transaction in question happened long before Teams was conceived.

The subject matter relates to shenanigans around the tender for the 2nd GSM licence won by KenCell — a consortium owned by French company, Vivendi, and a local firm, Sameer Investments. After winning the licence, Vivendi and its local partners granted Alcatel-Lucent a lucrative $87 million contract involving the construction of a switch-centre, and putting up base stations for the mobile network. KenCell was a private company in which the government had no interest. But if what the authorities in the US suspect is true, then Alcatel-Lucent used a very elaborate scheme to pay the bribes to top officials of the Moi regime. I will not go into the details of a story that has been in the public domain for a week. The broad trends are what I find intriguing.

Indeed, the court documents make compelling reading about the hypocrisy of these multinationals — how they will pay bribes and yet be the first to report incidences of bribery to Transparency International. Whether it was Costa Rica, Honduras, Nigeria or Taiwan, Alcatel-Lucent’s modus operandi was the same: reckless cowboys bribing government officials all over the place in order to clinch lucrative deals. In almost all cases, Alcatel-Lucent conducted the bribery business through local agents and consultants who were paid success fees or commissions. The bribery business had become formal. In the Central America cases described in the court documents, Alcatel-Lucent actually signed formal ‘‘consulting agreements’’ with these third party agents, complete with specific bank accounts for paying the bribes.

There are instances where bribes were disguised as ‘‘marketing and advisory services’’, and for ‘‘maintaining appropriate relations with government officials’’. In the Kenyan transaction, Alcatel-Lucent is suspected to have laundered hundreds of millions of shillings to one such consultant for providing ‘‘strategic intelligence reports’’. The invoices were generated from yet another Mauritius-based ‘‘consultant’’ which was later found to share ownership with companies owned by influential Kenyans. This company continued to produce monthly economic intelligence reports on the telecommunications market in Africa which were of no use to either KenCell or Alcatel-Lucent.

What are the lessons? In future, we must raise the red flag when a public-funded project is made to take on board too many consultants and third party agents. I hear of a multi-million dollar infrastructure project where government officials involved in the initial stages migrated to Dubai where they established a ‘‘consultancy’’ to provide services to the same company. Feasibility studies have also proved to be a convenient conduit for paying bribes.

I still don’t understand why we had to spend Sh3 billion on feasibility studies and designs on the Lamu project. At this rate, we may end up with piles of expensively produced designs for projects which may never see the light of day.

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