Patricia Adams, Odious Debts Online
September 25, 2007

Despite wide news coverage of the Volcker-led inquiry to assess the World Bank’s Department of Institutional Integrity (INT), coverage of one of INT’s more effective internal anti-corruption investigations almost passed unnoticed. If not for recent editorial interest from the Wall Street Journal, an insightful glimpse of World Bank conflict of interest might have been lost. In “World Bank Corruption” and “Mind the GAP,” editorial writers for the Wall Street Journal highlight an INT investigation they argue senior Bank officials are eager to discredit, even deep six.

They report a forthcoming internal report on a major Bank-supported health care project in India is expected to reveal corruption running into the hundreds of millions of dollars.
This new report, due for release any day, follows up on a 2005 “Strictly Confidential” report [PDF] by INT on phase one of the health-care project. As readers of the document will learn, the “Report of Investigation into Reproductive and Child Health I Project, Credit N0180, India” couldn’t be more damning, as this extract makes clear:

“Evidence summarized below indicates that RCH I was subject to systematic fraud and corruption through i) bribery of Procurement Support Agencies (PSAs) and government officials; ii) falsification of performance certificates; iii) collusion among bidders; and iv) coercion of companies by cartel members and PSA officials.”

The report goes on to disclose that “Multiple witnesses admitted to bribing government officials, including ministers [emphasis added], in an effort to secure the award of Bank-funded contracts.”

“All of this,” says the Wall Street Journal, “keep in mind, for a project that is supposed to help the poor.”

Journal editorial writers point out that when former World Bank president, Paul Wolfowitz, was presented with the plan to finance phase two of the same project, there was no mention of corruption problems. But when he learned of them in mid-2005, Mr. Wolfowitz did the unprecedented: he suspended further Bank lending to the project and, in so doing, committed several Bank taboos. His action was an affront to the Indian government, one of the Bank’s biggest borrowers, as well as a humiliation to Bank officials who “were supposed to be supervising the project, but clearly weren’t.” It also “threatened to embarrass Britain’s Labour government, which was providing money for the same India project.”

All three forces rallied and lobbied hard to get phase two of the project funded after the Indian government promised to clean things up. In retrospect, says the Wall Street Journal, this contributed to Mr. Wolfowitz’s own demise as president when he was thrown out of office on what, the Journal argues, were bogus corruption charges.

But before Mr. Wolfowitz was drummed out, he was able to ensure that the Bank’s anti-corruption unit continued its “detailed implementation review” of the India project. This review is what we are now waiting for. Stay tuned.