Hearing on SAfrica WCup stadium bid rigging
Hearing on accusations of South Africa's 2010 World Cup bid rigging, price fixing in stadiums
FILE - In this Friday Feb. 20, 2009, file photo, work continues on Soccer City in Johannesburg, South Africa. The South African Local Government Association says Johannesburg, Cape Town, Durban, Port Elizabeth and Polokwane believe they were overcharged on World Cup projects and could collectively seek as much as 3.9 billion rand ($394 million) in damages. (AP Photo/Themba Hadebe, File)
PRETORIA, South Africa (AP) -- A hearing opened Wednesday into collusion by construction companies that led to bid rigging and price fixing on projects for the 2010 South Africa World Cup.
A tribunal will decide whether to confirm fines totaling $147 million for 15 companies that agreed to "rigged" projects in the general construction industry in South Africa from 2006-11.
World Cup-related work is included in the findings by the Competition Commission, which uncovered the wrongdoing by the country's biggest building firms in a two-year process. Companies came forward and acknowledged their roles and the extent of price fixing in exchange for guarantees that they wouldn't face criminal prosecution.
There was "a shameful pattern of collusion" by the companies, David Unterhalter, a lawyer representing the commission, said at the start of the two-day hearing.
The collusion by the companies led to inflated prices on projects such as the new $730 million Cape Town Stadium and a $200 million contract to redevelop Soccer City stadium and the surrounding precinct in Johannesburg, the World Cup's showpiece venue that hosted the opening game and the Spain-Netherlands final.
South Africa's central government spent about $3 billion on the first World Cup in Africa, including the building of six new stadiums, the rebuilding of Soccer City and the upgrading of the other three venues.
The country was widely praised for pulling off a successful event despite initial doubts.
An association representing some of the nine host cities for the World Cup estimated that at least five of the cities were overcharged by between 10 and 30 percent on stadiums and World Cup-related infrastructure. The South African Local Government Association says Cape Town, Johannesburg, Durban, Port Elizabeth and Polokwane could collectively be owed up to $390 million because of the price-fixing.
Lawyers representing SALGA and the Gauteng provincial government, which controls South Africa's commercial hub of Johannesburg, asked for permission at the hearing to intervene in the process for the disclosure of more rigged projects. Tribunal chairman Norman Manoim dismissed their application, but the cities can pursue damages from the companies in civil court once the tribunal has ruled on the fines.
SALGA, the local government association, argued that the fines handed down by the commission — one of which was only about 3 percent of one company's annual revenue — might not be appropriate to the scale of the price fixing.
If the tribunal agrees with the $147 million fines proposed by the commission, that money will go to South Africa's national treasury.
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