Multilateral Development Banks

Lugar supports EBRD decision

The Office of Senator Richard Lugar

March 2, 2007

U.S. Sen. Dick Lugar welcomed the decision earlier this week by the European Bank for Reconstruction and Development (EBRD) to make a company ineligible for EBRD-financed contracts. The decision followed similar action by the World Bank debarring the company for bribery in connection with the World Bank-financed Lesotho Highlands Water Project.

“This is an important move towards consistency among the multilateral development banks’ (MDBs) anti-corruption efforts. It is the first instance in which any of the development banks has debarred a company for fraud or corruption committed in a project financed by another MDB,” said Lugar, Republican leader of the Senate Foreign Relations Committee.

“This is an important action showing bribe payers that their ability to do business with any of the MDBs is at risk. The risk of debarment provides a persuasive incentive for companies with weak anti-bribery controls to institute vigorous measures.”

The EBRD’s cross debarment in a coordinated effort to fight corruption is consistent with legislation Lugar proposed and that became law in 2005. His legislation established U.S. policy to promote coordinated “policies across multilateral development banks on issues including debarment, cross-debarment, procurement guidelines, consultant guidelines, and fiduciary standards so that a person that is debarred by one such bank is subject to a rebuttable presumption of ineligibility to conduct business with any other such bank during the specific ineligibility period.”

Lugar’s legislation also included measures to seek financial disclosure by development bank employees similar to that required for U.S. government officials and members of Congress; to improve the quality and oversight of development bank loans; to support the integrity of the development banks and strengthen whistleblower policies; and to support the independence and efficacy of the audit functions.

“These measures are an important step toward leveling the playing field so that honest companies and innocent individuals are not disadvantaged by the corrupt. When projects intended to boost economic development are derailed by corruption, the poorest suffer and are cheated of projected benefits in quality health care, clean water and education, said Lugar. “We all gain when developing countries rise out of poverty, and we are all hurt when MDB funds are lost, or projects fail, because of corruption.”

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