basis for a proposal to carry out a cross-country survey analysis of grand corruption in utilities outlined in the last section of this paper.

# **Box I: Examples of governance failures potentially related to grand corruption in utilities**

# **Biased decision in favor of incompetent electricity provider**

In Tanzania the president dissolved the cabinet in February after accepting the resignation of the prime minister and two cabinet ministers. It is alleged that the Prime Minister’s office improperly awarded a contract to a US-based electricity company. A parliamentary inquiry, launched in November, found that the generators failed to arrive on time, and that when they did, they did not work as required. Despite these alleged failings, the government was contracted to pay the company $140,000 a day. The inquiry alleges that the Prime Minister’s office later influenced the government’s decision to extend the company’s contract despite advice to the contrary from the state-run energy company Tanesco. _Source: Transparency International Reports._

# **Transfers made to influence the award of water contracts**

In Milan, Italy in 2002 a senior executive of Vivendi (now Veolia) was convicted of planning to bribe local politicians in both the majority and opposition parties of Milan city council in order to win the IT£200bn tender for a wastewater treatment plant in the south of Milan, Italy. The executive planned to pay total IT£ 4bn bribes to politicians. In July 1997, a junior French minister was jailed for two years, with a further two suspended, and fined one million francs (£94,800) for taking bribes from companies bidding in public tenders. The minister reportedly had received fees of 327,000 francs $48,000) for a fictitious job by Compagnie Generale des Eaux (renamed Vivendi and now Veolia) in exchange for giving the utility a water distribution contract in Angouleme. _Source: Friends of the Earth and UNICORN._

# **Allegations of political corruption in too expensive power project**

Enron’s Dabhol Power Corporation (DBC) signed a deal on power provision in 1993 in India, despite warnings from the World Bank that the project was too expensive. It was later alleged that local politicians had been paid off with bribes, while it was also claimed that local police and thugs had been hired to terrorize the opponents of the deal into silence. In 1999 DBC produced power at a price pegged to the world oil price, seven times higher than other electricity costs in India. _Sources: Various newspapers and Common Dreams NewsCenter._

# **Alleged corruption behind power plant deal**

In the Philippines, corruption was alleged behind a $470 million build-rehabilitate-operate-transfer contract for the Caliraya-Botocan-Kalayaan hydroelectric power plant, which was awarded in 2001. This award was made on the strength of a legal opinion by the then justice secretary, allegedly rendered in exchange for a $2million bribe. _Sources: Manila Mail and UNICORN._

# **Allegations of bribery for telecom and railway contracts**

Alcatel, the French multinational company, has been linked to bribery allegations in Costa Rica, Taiwan and Africa. Alcatel allegedly transferred $15 million to a consulting firm between 2000 and 2003 to obtain cellular networks contracts with Costa Rico's national carrier, ICE. Costa Rican prosecutors allege that some of this money was used to pay bribes. A former Costa Rican power and telecommunications director was quoted as saying that he and the Costa Rican president at the time had received a $2.4 million bribe from Alcatel in 2001. In the Taiwan case executives from Alcatel's Taiwanese subsidiary (along with Siemens AG's) are being investigated because of allegations that they bribed officials in $27.4 million worth of railway contracts awarded in 2003, according to an Alcatel filing with the SEC in November (2004). Alcatel's Taiwan Chief Executive was arrested in June as part of the probe. _Source: UNICORN._

# **2.1 Terminology**

As in other industries, corruption might influence the performance of utilities occurs in different ways. Bribes in the delivery of services are one category, often called _petty corruption_ ; they are a huge 4