Bruce Rich, The Environmental Forum/The Environmental Law Institute

September 1, 2005

Corrupt businesses, politicians, and cronies are stealing hundreds of billions of dollars from the globe’s poorest people but the World Bank and other multilateral development banks (MDBs) routinely ignore this corruption and capital flight, despite numerous reform efforts, declares Bruce Rich, the director of the International Program for the U.S. non-profit organization, Environmental Defense. In a recent issue of the Environmental Forum, Rich looks at how corruption and theft in international lending is also “embedded at the heart of the international economy”. Witnesses testifying at a series of U.S. Senate Foreign Relations Committee hearings investigating allegations of corruption in MDBs, said borrowing-nation bureaucracies and crooked contractors had stolen more than $100 billion from the World Bank over the past five decades. As a case in point, Rich draws on the experience of southern Africa’s Lesotho and its landmark corruption prosecutions against international companies involved in a massive water development project there. Quoting leading Lesotho prosecutor Guido Penzhorn, Rich reiterates a series of recommendations Penzhorn outlined to the U.S. Senate committee to help curb corruption: the bank and other international lending agencies, said Penzhorn, should debar contracting companies, and not just the agents hired by those companies to camouflage the bribery of principals. Penzhorn also urged a much more rigorous auditing to address practices that conceal widespread bribes and payoffs, and said international agencies and donors must show greater willingness to use debarment from future business, the only really effective sanction, since million-dollar fines become costs of doing business when contracts are worth hundreds of millions. Three days after Penzhorn’s testimony the World Bank announced the debarment of the Canadian engineering firm Acres International, more than two years after the Lesotho courts had found Acres guilty of bribery.

Read the full pdf here.