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Bank’s graft crusade exaggerated, critics say

Emad Mekay
Inter Press Service
February 7, 2007

Publicising a self-styled crusade against corruption, the World Bank says it is successfully stepping up its campaign against graft, probing more than 400 cases over the last two years alone and barring dozens of companies and individuals from future World Bank contracts. But critics doubt the scope of the claims.

Watchdog groups cite conflicts of interest in the Bank’s core mission, and the Washington-based lender’s keenness to brush up its image. They say the Bank has a contradictory agenda – the Washington-based lender needs to push more loans for projects in developing nations whose economies are open for investment, but its newfound role as a campaigner against corruption could deter companies from joining Bank projects and slow down lending.

“The sad truth is that, when you compare the Bank to others – such as Canada, which is doing nothing – it is taking a leadership role. But that isn’t much to rejoice over,” said Patricia Adams of Probe International, a Canadian watchdog group.

Adams, who has followed corruption cases for years, says the Bank’s efforts are still sorely lacking.

“If the Bank were to conduct forensic audits of all its outstanding projects – and the closed and completed projects too – to determine when the funds were ‘wrongly diverted from their intended purpose of benefiting the poor,’ recovered and repaid, then I will have greater confidence that the Bank is serious about stopping corruption on its projects and is determined to send a strong message to its contract winners that it won’t tolerate corruption,” she told IPS.

Another group says that the Bank has so far resisted calls to pass greater protections for a crucial player in the fight against corruption – its own internal whistleblowers.

“We continue to be concerned about the sincerity of management’s efforts,” said Beatrice Edwards of the Government Accountability Project, a Washington-based whistleblower support organisation.

“Because whistleblowers are a key element in fighting corruption, an institution that refuses to protect them, as the World Bank refuses, demonstrates clearly that it wishes to turn a blind eye to the theft and misuse of public funds,” she said in an interview.

In its latest report released Tuesday, the World Bank Group’s Institutional Integrity Department (INT) says it has cracked down on corrupt business practices like never before.

It says over the last two years alone, the INT investigated and closed 441 external investigations into fraud and corruption in Bank-financed projects — more than the total cases probed from 1999 to 2004, during which time the Bank sanctioned 338 firms and individuals.

The more recent investigation resulted in the debarment of 58 firms and 54 individuals due to fraud and corruption over the period covered in the report. The companies and individuals will no longer be eligible to work in Bank-financed projects.

With a budget of 10 million dollars a year, the INT says it examined problems like influence peddling, procurement fraud, collusion, kickbacks and bribes, the misuse of project assets, and misrepresentation of qualifications in bid submissions, among other misdeeds.

“The World Bank is the only multilateral development bank that has published the names of the firms it has sanctioned for corrupt practices – a major deterrent to wrongdoing,” the report says.

These achievements, however, failed to impress many independent groups monitoring the Bank.

GAP, for example, says the Bank exaggerates the effectiveness of the steps that it has taken to fight corruption.

“For example, the firms debarred for corruption are typically small-scale,” Edwards of GAP told IPS. “For the most part, they have been involved in petty fraud having to do with minor kickbacks.”

She said that GAP analysts are working with World Bank staff members who made credible, documented disclosures involving major corporations and corruption in Bank operations.
“When these Bank whistleblowers made their disclosures to INT, they were (alternatively) harassed, demoted and dismissed and blacklisted. In short, silence. One of our clients said that where corruption and the World Bank are concerned, INT is ‘part of the problem,'” she added.

The Bank insists it is doing the best it can, not only externally, but internally as well.

It reports that it completed 227 internal investigation involving staff misconduct over the past two fiscal years. Of these, INT substantiated allegations in 77 of the cases involving 78 staff members.

“The Bank will continue down the path of zero tolerance toward fraud and corruption and commit itself to a ‘gold standard,'” said Suzanne Rich Folsom, who directs the INT, which was established in 2001 as the independent investigative arm of the Bank.

The Bank says it terminated or barred from rehire 22 staff members and disciplined 11 others for fraud and corruption, while also barring five staff members for sexual harassment; disciplined five for failure to comply with personal obligations; terminated from rehire seven others for conflict of interest or other violations; and punished four others for conflicts of interest.

Ever since he came to office in 2005, World Bank President Paul Wolfowitz, widely criticised for his role as a key architect of the U.S. invasion of Iraq, has been trying to make the anti-corruption crusade a signature of his tenure.

Wolfowitz announced a “long-term strategy” for using the Bank’s funds and expertise to help developing countries rid their governments of bribe-taking and other dishonest practices.
A key component has been the deployment of anti-corruption teams in many World Bank country offices.

Wolfowitz says he is restructuring the Bank’s INT to make its authority clearer and its operations more effective. Last year, he led efforts to gather heads of other multilateral lenders like the Inter-American Bank and the African Development Bank to commit verbally to further fighting corruption.

Among other measures, the Bank has also kick-started the “Voluntary Disclosure Programme,” which encourages companies to admit wrongdoing in exchange for diluted or no penalties.

Critics say that the VDP programme allows “confessors” confidentiality, in turn allowing the Bank to cover up its own negligence or complicity, which undermines the administration of justice in countries where it is a criminal offence to bribe a foreign official.

“[The] Voluntary Disclosure Programme doesn’t accomplish this goal and indicates to me that the Bank is still suffering from the same conflict of interest with the companies it awards contracts to,” Adams said. “I don’t have confidence that the INT is catching the big fish.”

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