A corruption probe in US creates ripples in Goa

An internal clean-up by Louis Berger leads Goa police to interrogate politicians and government officials involved in water supply and sewerage projects in the state

On July 31, 2006, Harold Salomon, a former senior financial analyst at Louis Berger, submitted a computer disk full of incriminating evidence to federal investigators. Filed as a part of a whistleblower law suit under the US False Claims Act, the contents of the disk showed how the New Jersey-based construction management firm was overbilling USAID, the federal government's aid agency, which was leading reconstruction efforts in war-torn Iraq and Afghanistan.

Nine years later, the events Salomon triggered have brought discomfort to several politicians and government officers in distant Indian shores. Former Goa chief minister Digambar Kamat and the then public works department (PWD) minister Churchill Alemao, both of the Congress, are being interrogated by the police in connection with bribes allegedly received from a Louis Berger executive named James Mcclung. AM Wachasundar, a former government officer who was overseeing the project in which Louis Berger was the lead consultant, has been arrested. Former Louis Berger vice-president Satyakam Mohanty was arrested on Monday.

PROJECT DETAILS

Target area

1. Water supply: Mormugao, Salcete, Quepem and part of Sanguem
2. Sewerage: Margao and Mapusa, and North Coastal Belt

Project cost: Rs  1,383 crore

• SCHEDULE: August 2007 – January 2014
• CURRENT STATUS: 80-90% complete

Consultants: Consortium of Louis Berger, NJS consultants, Nihon Suido, Shah Technical Consultants

CONSULTANCY PAID: Rs 78 crore (approximately)

Mcclung was senior vice-president of Louis Berger in India. His name came up earlier this month after Louis Berger agreed to a $17.1-million settlement of charges under the Foreign Corrupt Practices Act. The charges included conspiracy to bribe Indian government officers to secure projects. One of the items under the head "corrupt conduct in India" referred to a payment to a minister. It further refers to bribes totalling $976,630 (approximately Rs 6 crore) paid for the Goa project as of August 26, 2010.

Mcclung has pleaded guilty of these offences. In an email, Louis Berger says the revelations were the result of an internal cleanup initiated around 2010. "Louis Berger self-discovered and self-reported the improper business activities of former managers identified in 2010 and prior. The company separated McClung from the company in 2012 following the results of the company's early internal investigations. This was part of a half-decade $25-million reform effort where the company rooted out corporate corruption and revamped its leadership, systems, processes and compliance and ethics programme."

Fixing Goa's problems
When it rains in Goa, it pours. Yet, less than half of its 1.4 million population had access to safe drinking water and even fewer had access to it round the clock. Only 13 per cent of its urban populace had sewerage facilities, much below the national average of 28 per cent. To address these twin problems was born the Goa Water Supply and Sewerage Project.

Since water & sanitation was one of the key focus areas of the Japan International Cooperation Agency (JICA), it decided to fund the Goa project and an agreement was signed with the Indian government in September 2007. Accordingly, JICA sanctioned a loan of 22.86 billion yen (around Rs 1,100 crore) out of the total project cost of 27.76 billion yen (Rs 1,383 crore).

Wachasundar, a former government officer who retired as chief engineer of PWD, was hired on contract as project director. Between 2007 and 2009, tenders for consultancy were floated thrice. Eventually, a consortium comprising Louis Berger, two Japanese consultancies that specialised in water and sanitation, NJS Consultants and Nihon Suido, and an Indian consultancy named Shah Technical Consultants won the bid. The contract was signed on May 29, 2009.

Neither Salomon's complaint nor the subsequent investigations were in the public domain at this stage. While Louis Berger did not want to comment on the role of its partners and the project director, it said that "procurement was a part of the consortium agreement" meaning that the consultants had a significant say in the allocation of work to local contractors for execution. It added that the consultancy fee was "7 per cent of the project amount", which worked out to approximately Rs 78 crore.

Shah Technical and NJS did not answer queries sent by Business Standard on their role in the project. A Delhi-based PR agency executive for JICA says the corruption charges were an issue for the Indian government to investigate and the Japanese agency would not interfere in this.

Not in the know
Kazuhisa Takahashi, general manager (administration), Nihon Suido, says: "We became the lead manager of the consortium because this project is funded by Japan, but as this is the first project to our company in India, we had to be largely dependent on Louis Berger, which means Louis Berger was the substantive lead manager." Takahashi says Nihon Suido was not aware of the bribes at all and that it got to know of the matter for the first time after it was reported in the Indian media.

Both Kamath and Alemao have denied any role, though the timelines very clearly point to their being in charge. While Kamath says he hasn't seen any file related to the project, Alemao says the appointment of the consultants was the job of the "technical people" managing the project.

A week before his arrest last week, when Business Standard met Wachasundar at his office in the morning, he shifted the meeting to "evening 5 PM." In the evening, he said he had got a call from Chief minister Laxmikant Parsekar and was hurrying to meet him. When Alemao's charge that technical people were responsible for the allocation of consultancy was put to him, Wachasundar said: "The decision was approved by the government, which means even ministers were included."

Michael Lobo, the BJP MLA from Calangute, has overseen parts of the sewerage project in his constituency. While some locals have complaints about the quality of the work and overshooting of deadlines, Lobo rubbishes such claims. "The quality of pipes was good. People are complaining about bad roads. If a road is dug, it will take time to settle. Repairing of roads can't happen during monsoon." He expects the work on sewerage network to be complete by December 2015.

Meanwhile, calls for investigations into other Louis Berger projects in the country have begun. The consultancy, which has over 700 people working for it in India, insists that the "two water projects reported in the deferred prosecution agreement are the only projects with improprieties."