by Odious Debts Online

May 14, 2004

Washington: Corruption may have cost lending projects to help poor countries as much as $100 billion, the chairman of the Senate Foreign Relations Committee said Thursday. Senator Richard Lugar, chairing the first public hearing on corruption at the multilateral development banks, cited experts who calculated between $26 billion and $130 billion of World Bank funding for development projects had been misused since 1946, the year the World Bank first commenced operations. When developing countries lose development bank funds through corruption, poor countries are twice burdened. “Not only are the impoverished cheated out of development benefits,” said Sen. Lugar, “they are left to repay the resulting debts to the banks,” even though the poor are the least capable of paying the extra costs associated with bribery and fraud he added. Jeffrey Winters, an associate professor at Northwestern University testifying at the hearing, said his research estimated the World Bank had sapped development projects of about $100 billion and when other multilateral development banks were included, the total roughly doubled to $200 billion. Winters said citizens groups and NGOs in developing countries who demand the criminal portion of debts be written off ‚Äì defined as the portion of loan funds stolen by officials before they can be used for development ‚Äì are not acting irresponsibly or trying to repudiate their obligations. “They are simply pointing out that there is something very wrong about demanding repayment for funds the people never received,” he said. “The money was delivered from the World Bank and other MDBs, but it was intercepted along the way and ‚Äòprivatized’ illegally. It is easy to demonstrate that officials in the MDBs were aware of these practices for decades and, in violation of legal obligations under the Articles of Agreement, did nothing at all to stop the corruption.” On the contrary, said Winters, in almost every case, flows of funds from MDBs increased as pressures to lend mounted. “If you get only one dollar out of ten that goes to the poor, is that really worth it? And have you done anything to strengthen the economy for the long term? No. You’ve only nourished a corrupt government that has no intention of providing services,” Winters argued. In response, World Bank spokesman Damian Milverton said, “We completely reject the figure offered by one of the panelists. It has no basis in fact.” Milverton said the Bank had no estimate of its own on funds lost to corruption, but said officials had barred 180 companies and individuals from doing business with the Bank because of corruption or other wrongdoing. Specific bank projects under review by the committee include the Yacyreta dam on the Argentina-Paraguay border, the Lesotho Highlands Water Project and projects in Cambodia. For more information about the hearing on Combating Corruption in the Multilateral Development Banks before the US Senate Committee on Foreign Relations, see here.

Convicted multinational was awarded US federal contract
Nearly a year ago in a company press release dated June 14, 2003, Canadian-based engineering giant Acres International ‚Äì one of the companies convicted in the Lesotho dam-building scandal and part of the current Senate investigation ‚Äì announced it had been awarded a Multiple Award Schedule contract for Professional Engineering Services by the US General Services Administration (GSA) Federal Supply Service. GSA schedules are multiple award contracts that give federal agencies and state and local governments a buying vehicle of pre-approved products and services offered at commercial discounts. US government entities will no longer have to get competitive bids to purchase Acres International’s services. In a letter to World Bank President James Wolfensohn on April 16, Sen. Lugar made reference to the Bank-funded Lesotho project and the fact that three companies found guilty of bribery ‚Äì including Acres ‚Äì were not on the Bank‚Äôs list of reprimanded firms or on the list of disbarred firms that violated Bank fraud and corruption provisions. In the US, American companies are subject to the Foreign Corrupt Practices Act (FCPA), making it a felony for a company to make corrupt payments through its officials or agents to foreign government officials in connection with procurement decisions by that government. One penalty for violating the Act is debarment from US federal contracts. According to guidelines issued by the United States Office of Management and Budget, “a person or firm found in violation of the FCPA may be barred from doing business with the Federal government. Indictment alone can lead to suspension of the right to do business with the government.”