annual report on investigations and sanctions of staff misconduct

c1

ANNUALREPORT

THE WORLD BANK GROUP

ON INVESTIGATIONS AND SANCTIONS

OF STAFF MISCONDUCT AND FRAUD AND

CORRUPTION IN BANK-FINANCED PROJECTS

FISCAL YEAR 2004

Department of Institutional IntegrityThe World Bank Group(202) 458-7677www.worldbank.org/integrity

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The World Bank Group

Annual Report on Investigationsand Sanctions of Staff Misconduct

and Fraud and Corruption inBank-Financed Projects

Fiscal 2004

(July 1, 2003 – June 30, 2004)

February 2005

FY04 Annual Report on Investigations and Sanctions ofStaff Misconduct and Fraud and Corruption in Bank-Financed Projects

ii

ACS Administrative and Client SupportADB Asian Development BankACFIU Anticorruption and Fraud Investi-

gations UnitAFD French Development Agency

(Agence Française deDéveloppement)

AFR Africa Regional Vice Presidency(World Bank)

CAS Country Assistance StrategyCRS Conflict Resolution SystemDFID U.K. Department for International

DevelopmentDIR Detailed Implementation ReviewDOJ U.S. Department of Justice

EBRD European Bank for Reconstructionand Development

ETC Extended Term Consultant

ETT Extended Term TemporaryEXT External AffairsFSA U.K. Financial Services Authority

FY Fiscal YearHR Human ResourcesIAD Internal Auditing Department

IADIU Internal Auditing DepartmentInvestigations Unit

IDB Inter-American Development Bank

IFC International Finance CorporationIFI International Financial InstitutionIPC Investigations Policy Committee

Abbreviations and Acronyms

INT Institutional Integrity Department(Department of InstitutionalIntegrity)

LEGAD Legal Department, CorporateAdministration

LEGPR Legal Department, Procurementand Consultant Services

MIGA Multilateral Investment GuaranteeAgency

NGO Non Governmental OrganizationOECD Organisation for Economic Coop-

eration and DevelopmentOIOS U.N. Office of Internal Oversight

Service

OLAF European Anti-Fraud Office (Officeeuropéen de lutte anti-fraude)

OPCS Operations Policy & CountryServices

PREM Poverty Reduction and EconomicManagement Network

SEC U.S. Securities and ExchangeCommission

SOE Statement of Expenses

SRI Salary Review IncreaseSTC Short Term ConsultantSTT Short Term Temporary

UN United NationsUSAID U.S. Agency for International

Development

WBI World Bank InstituteWBG World Bank Group

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This Annual Report summarizes the nature andvolume of institutional integrity activities andinvestigations of the World Bank Group forthe fiscal year ending June 30, 2004. TheWorld Bank has made significant progress inits capacity and execution of these activitiesover the past five years. Since its establish-ment in April 2001, the Department of Insti-tutional Integrity (INT) has handled over 1,300cases and currently has over 300 active cases.The Bank now has a budget of US$10 millionfor work in this area, making it by far theleader in resources committed among inter-national institutions in the fight against fraudand corruption. As a result of these activities,the Sanctions Committee heard 16 cases in-volving alleged fraud and/or corruption byparties involved in Bank projects, leading tothe debarment of 55 firms and 71 individualsin fiscal 2004.

Fiscal 2004 also saw the culmination ofseveral years’ effort to mainstream these newfunctions into the World Bank Group. Thiswork was undertaken against the backdrop ofconcerns raised by events in the United Statessuch as the corporate scandals of Enron andWorldCom as well as the Parmalat scandal inEurope. These events drew increased atten-tion to corporate governance issues, moneylaundering, and terrorist financing, resultingin legislation such as the Sarbanes-Oxley stat-ute in the U.S. Internationally, anticorruptioninstruments such as the OECD’s Anti-BriberyConvention and the U.N. Convention AgainstBribery have demonstrated the internationalcommunity’s determination to fight fraud andcorruption. Transparency International andother organizations have also played a signifi-cant role in raising awareness of the issue ofcorruption in the political arena. All of thesedevelopments have combined to focus atten-tion on the use of development funds and on

efforts by the World Bank and others to com-bat fraud and corruption. Some of the accom-plishments of the past year include:

• The strategy and the adequacy of theBank’s mechanisms and resources forimplementing its fraud and corruption pre-vention strategy were the subject of a re-view by outside experts, led by former U.N.Undersecretary and former U.S. AttorneyGeneral Dick Thornburgh. His report pro-vided a strong endorsement of the Bank’snew directions, as well as the quality of itsstaff, but noted that additional resourceswould be required.

• An earlier report by the Thornburgh groupincluded recommendations relating to re-form of the sanctions process, which wereapproved by the World Bank Board of Ex-ecutive Directors (the Board) in July 2004and are now in the process of being imple-mented.

• Development and approval of a StrategicDirections and Business Plan document forINT, approved by the Management Com-mittee and endorsed in July 2004 by theBoard, providing for a more proactive andpreventive approach to the fight againstfraud and corruption.

• On the basis of the agreed business plan,the Integrity Department received an ad-ditional US$2.2 million in budget for fiscal2004 and authorization to recruit eightmore staff, including an additional six in-vestigators.

• As part of the strategy, the Integrity De-partment introduced a new approach tocase management for allegations regard-ing fraud and corruption in Bank projects.All allegations undergo a preliminary as-sessment. Those rated high or mediumpriority are fully investigated. Information

Message from the President


iv

on low priority cases is filed for future ref-erence. In conjunction with this, the In-tegrity Department developed its own casemanagement database, which facilitatesmore effective capture and analysis of case-related data.

• Progress was also made in case manage-ment on the staff misconduct side, in termsof more efficient resolution of cases andthe referral of allegations received by theIntegrity Department to the Conflict Reso-lution System (CRS) whenever a less for-mal means of resolution may be more ap-propriate than a formal investigation, andto Human Resources whenever a case isdetermined to be essentially a perfor-mance-related issue.

• A communications audit related to inves-tigations and sanctions was carried outwith the goal of increasing deterrence andprevention through increased transparencyof results. A formal communications strat-egy, together with recommended changesto the Bank’s disclosure policy, was ap-proved by the Board in July 2004.

• In the interest of transparency, all of theaforementioned documents were disclosedand posted on the World Bank website.

While much has been accomplished, muchmore remains to be done. On the internal side,continued vigilance is needed to ensure thatthe Bank’s own house is in order. Bank staffmust be beyond reproach in their personal andprofessional conduct. In terms of the Bank’slending activities, the diversion of funds fromdevelopment projects through fraud and cor-ruption, when it occurs, directly injures theability of the Bank, its partners and its bor-rowers to achieve the goals that have been setfor poverty reduction. Resources lost to fraud

and corruption are an unacceptable drain ondevelopment effectiveness, not to mention thedamage to the credibility of lending institu-tions such as the World Bank.

But it is not just the financial damage fromfraud and corruption that should be of con-cern to us. It is the fact that corruption sets inmotion a chain of events that can wreak havocon a development project. The money to paya bribe must come from some part of theproject; as a result, prices may be raised, and/or quality and performance lowered. Lessqualified bidders win by bid rigging while quali-fied bidders become discouraged and stop bid-ding. In addition, citizen awareness of unchal-lenged corruption undermines trust in govern-ment and public institutions, which leads toacquiescence to poor quality and performancein public services and infrastructure – and toan unwillingness to report fraud and corrup-tion. All of these effects must be consideredwhen we assess the true impact of corruptionon publicly financed projects.

As we take stock of the Bank’s accom-plishments, I would like to recognize the sup-port that these new functions have had fromwithin and outside the World Bank Group,including the Audit Committee and the Boardof Executive Directors. I would also like toacknowledge the talents, hard work and dedi-cation of the staff of the Integrity Department,the Legal Department and the Sanctions Com-mittee.

Finally, I would like to thank those whohave demonstrated their integrity, and in manycases their courage, by reporting allegationsof fraud and corruption to the Bank.

James D. WolfensohnPresident

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I. Introduction and Background ......................................................................... 1A. Purpose and Scope of this Report .............................................................. 1B. The World Bank and the Anticorruption Agenda .......................................... 1C. The Mission of Institutional Integrity .......................................................... 3

II. Organization, Staffing and Resources .............................................................. 5A. Organization ........................................................................................... 5B. INT Staffing and Resources ....................................................................... 6C. Sanctions Committee Staffing and Resources ............................................... 7

III. Investigations and Case Load Management ...................................................... 9A. Investigations .......................................................................................... 9B. Case Load Management............................................................................ 9

IV. Internal Investigations and Sanctions .............................................................. 11A. Investigations and Case Load Management .................................................. 11B. Outcomes and Results .............................................................................. 14

V. External Investigations and Sanctions .............................................................. 17A. Investigations and Case Load Management .................................................. 17B. Outcomes and Results .............................................................................. 18

VI. Other Developments ...................................................................................... 21A. Policy Development .................................................................................. 21B. New and More Proactive Tools .................................................................. 21C. Communications ...................................................................................... 22D. Outreach and Knowledge Management ....................................................... 23E. External Scrutiny ..................................................................................... 24

VII. Challenges .................................................................................................... 25

Appendix 1: Significant Investigations Concluded in Fiscal 2003/2004 ........................... 27

Appendix 2: Sanctions Applied in Fiscal 2004 ........................................................... 33

Appendix 3: Sanctions Committee: Background and Historical Data ............................. 41

Appendix 4: The Investigative Process: Allegations of Staff Misconduct ......................... 45

Appendix 5: Trends in Case Load—Fiscal 1999–2004 ................................................. 49

Contents


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Text Tables(FY03–FY04 unless indicated otherwise)

Table 1: INT Staffing LevelsTable 2: INT BudgetTable 3: Total Number of CasesTable 4: Case Priority RatingsTable 5: Number of Internal CasesTable 6: Internal Cases by Type and Number of AllegationsTable 7: Internal Cases Involving Allegations of Fraud and CorruptionTable 8: Investigative Outcomes—Internal CasesTable 9: INT Investigative Results (Internal)Table 10: Number of External CasesTable 11: External Cases by RegionTable 12: Investigative Outcomes—External CasesTable 13: The Bank’s Sanctions Process (FY99–FY04)

Text Charts

Chart 1: Types of Allegations Received (FY04)Chart 2: Sources of Allegations (FY04)

Text Boxes

Box 1: Red Flags—Indicators of Possible Fraud or CorruptionBox 2: World Bank Group Protection of Whistleblower Rights

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Integrity Department www.worldbank.org/integrity

Anticorruption www.worldbank.org/anticorruptionConflict Resolution System www.worldbank.org/crsProcurement (including Sanctions) www.worldbank.org/procurement

Policy on Disclosure of Information www1.worldbank.org/operations/disclosure/

Related Websites of Interest

How to Report Allegations ofStaff Misconduct, Fraud or Corruption

To report allegations of staff misconduct or allegations of fraud or corruption within the BankGroup or in Bank Group-financed operations, you should contact the Integrity Department. Youcan contact INT in a number of different ways:

Contact INT directly:Telephone: 202-458-7677Fax: 202-522-7140Email: [email protected]: http://www.worldbank.org/integrity (Click on “Online Complaint Form”)

We encourage you to make use of a free email service (such as Hotmail or Yahoo) to createa temporary email account using a pseudonym, so that we may correspond with you as neces-sary. This can be helpful in pursuing your allegation.

Contact INT through an external Fraud and Corruption Hotline (24 hours/day):Toll-free: 1-800-831-0463 (translation facilities available)To reverse the charges (collect calls): 704-556-7046

Mail:PMB 376713950 Ballantyne Corporate PlaceCharlotte, NC 28277 USA

Anonymous calls are accepted.Please be as specific as possible and include at least the basic details of who, what, where,

when, and how. Let us know how you can be reached for further information or clarification ifyou can, or tell us the name of a temporary email account you have created for this purpose.


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Documents Cited in this Report

Many of the key World Bank documents in this report have been made public during 2004.

Thornburgh, Dick, Ronald L. Gainer, and Cuyler H. Walker (January 21, 2000) Report Con-cerning Mechanisms to Address Problems of Fraud and Corruption

http://www-wds.worldbank.org/servlet/WDS_IBank_Servlet?pcont=details&eid=000160016_20040805171318

Thornburgh, Dick, Ronald L. Gainer, and Cuyler H. Walker (August 14, 2002) Report Concern-ing the Debarment Processes of the World Bank


Thornburgh, Dick, Ronald L. Gainer, and Cuyler H. Walker (July 9, 2003) Report Concerningthe Proposed Strategic Plan of the World Bank’s Department of Institutional Integrity, andthe Adequacy of the Bank’s Mechanisms and Resources for Implementing that Strategy


Department of Institutional Integrity (July 10, 2003) Department of Institutional Integrity:Strategic Directions and Business Plan—a Summary


World Bank (June 3, 2004) External communications strategy related to investigations andsanctioning of fraud and corruption in World Bank-financed projects


Operational Core Services PREM Network (June 30, 2000) Helping countries combat corrup-tion: progress at the World Bank since 1997


CRS Report for Congress (order code RL32374) (April 30, 2004) Anti-Corruption Standards ofthe International Financial Institutions

Hearing before the Committee on Foreign Relations, United States Senate, One Hundred EighthCongress, Second Session (May 13, 2004) Combating Corruption in the Multilateral Devel-opment Banks http://foreign.senate.gov/hearings/2004/hrg040513a.html

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IA. Purpose and Scopeof this Report

1. This Report covers the period July 1, 2003to June 30, 2004 (fiscal 2004). In July 2004,the Board of Executive Directors mandatedthe preparation of an Annual Report, as apublic document, describing the World BankGroup’s overall efforts in investigations andsanctions1. As set out in an amendment to theBank’s disclosure policy,2 the report will de-scribe the “nature and volume of institutionalintegrity activities and investigations. It willcontain, among other things, aggregate dataregarding categories of institutional integrityactivities, volume of cases, and outcomes, aswell as generic descriptions of the most sig-nificant investigations and cases resolvedwithin the prior fiscal year. It will not containany confidential information, including infor-mation specific to undisclosed investigationsor sanctions.”

B. The World Bank andthe Anticorruption Agenda

2. The fight against corruption by the WorldBank was launched by President Wolfensohnin his Annual Meetings speech of October 6,1996. Since then, much has been accomplishedwithin the Bank and by its Borrowers in tack-ling the underlying issues. Support for theBank’s anticorruption efforts has grown, as thefight against corruption has become recognizedas central to the fight against poverty—to en-sure that development expenditures actuallygo to help the poor and that an efficient pri-vate sector is able to contribute to povertyreduction through rapid and sustainablegrowth. Attacking corruption, therefore, isessential to the Bank’s overarching mission ofpoverty reduction.

3. In September 1997, the Board endorsedthe paper Helping Countries Combat Corrup-tion: The Role of the World Bank3 that setout the basic framework of the Bank’s anti-corruption strategy. This strategy has fourcomponents:

• Helping countries that request the Bank’ssupport in their efforts to reduce corrup-tion;

• Mainstreaming anticorruption in all aspectsof the Bank’s relations with its borrowingmember countries;

• Adding voice and support to internationalefforts to reduce corruption; and

• Preventing fraud and corruption in WorldBank-financed projects.

4. Within the Bank, the Public SectorManagement Group, along with the WorldBank Institute and the Procurement and Fi-nancial Management Groups, have led thecharge—working with borrowers to improvegovernance and accountability and tostrengthen the capacity for sound fiduciarymanagement. At the same time, the Bank in-troduced a new function (initially in IAD) toinvestigate allegations of fraud and corruptionin Bank projects. In 2001, it was establishedas a new department—the Department of In-stitutional Integrity. In 1998, the Bank estab-

Introductionand Background

1 The World Bank Group consists of the IBRD,IDA, IFC and MIGA.

2 World Bank (June 3, 2004) External communi-cations strategy related to investigations andsanctioning of fraud and corruption in WorldBank-financed projects, p. 9.

3 http://www.worldbank.org/publicsector/anticorrupt/corruptn/coridx.htm

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FY04 Annual Report on Investigations and Sanctionsof Staff Misconduct and Fraud and Corruption in Bank-Financed Projects

lished a Sanctions Committee to conduct ad-ministrative reviews of allegations of fraud orcorruption and to recommend to the Presi-dent the sanctions to be imposed on thosefound to have engaged in such activities.

5. In furthering its mission of promotingdevelopment and reducing poverty, the Bankstrives to ensure that its funds, and those en-trusted to it, are used for the intended pur-

poses. The Bank’s procurement policies andsupervision responsibilities are key to fulfill-ing this mission. (For a description of indica-tors of fraud and corruption, see Box 1.) Inaddition, the Bank must ensure that it hasmechanisms in place to minimize fraud andcorruption within the institution, and to re-spond swiftly and effectively when it occurs,in line with the Bank’s stated policy of zero

Box 1: Red Flags

Indicators of Possible Fraud or Corruption

A common case of fraud and corruption in a development project involves: (a) bribes andkickbacks; (b) bid collusion; and (c) fraud. Bribes or kickbacks are paid in order to securecontracts, and may also be required to secure the payment of subsequent invoices, inwhich case they may be in the nature of facilitation payments. When bid collusion takesplace, either among all bidders or more often, among project officials on the one hand andthe bidders on the other hand, it relies on designated losers being paid for their willing-ness to support collusion: hence, it surfaces in the form of rotating awards in any givenseries of consecutive or concurrent biddings. Bids show unusual similarities (same typo-graphical errors, same breakdown of unit prices, etc.). Since the designated winning bid-der may have to pay off the losers—in addition to project officials—to secure the contract,in order to recoup the costs of bribes and kickbacks, the winning contractor/supplier willinflate prices, over-bill for materials and labor, and/or under-deliver on quantity and qual-ity in comparison with what the bid and the contract specify.

Indicators of fraud, and possibly underlying corruption, include: the appearance oflocal agents or consultants that provide ill-defined, generic, or unneeded services—espe-cially in a country with a reputation for corruption; unjustified or repeat sole sourceawards; repeated selection of unqualified or high-priced contractors; a project officialinsisting on the use of certain local sub-contractors or suppliers; long and/or unexplaineddelays in contract execution after bid award, and a project official living beyond his means.It may also include the surfacing of new and unknown bidders or sub-contractors, or asudden and significant change in an implementing agency’s approach to procurement—either rigid adherence to procurement rules when they are normally quite flexible, or thereverse situation.

More broadly, indicators of bid manipulation by project officials may include: bid speci-fications too narrow or too vague; unreasonable pre-qualification requirements; an unrea-sonably short time to submit bids; selection of other than the lowest evaluated bidder;selection of a bidder followed by change orders increasing price or scope; questionabledisqualification of winning bidder and re-bidding; persistent high bid prices; the same(few) bidders bidding; apparent connections between bidders, etc.

Indicators of fraud during contact implementation include: poor quality work; repeatedfailed tests or inspections; delays or refusals to allow tests or inspections; and complaintsfrom users.

Introduction and Background

3

tolerance of fraud and corruption. This is therole of the Integrity Department’s Internal Unitwhich investigates allegations of staff miscon-duct.

6. Our core values as an institution, how-ever, go well beyond personal honesty and in-tegrity. As a multinational and multiculturalorganization, we are also committed to pro-moting a positive work environment whererespect and understanding are vital to valuingour differences. Ensuring a workplace free ofharassment, discrimination and other formsof inappropriate behavior helps to build thisrespect and understanding. Misconduct byBank staff, therefore, is not limited to casesof fraud and corruption but extends to otheraspects of behavior that are essential to main-taining a culture of integrity.

C. The Mission ofInstitutional Integrity

7. Reflecting these concerns, INT’s originalinstructions were to investigate allegations offraud and corruption in Bank projects andallegations of staff misconduct including, butnot limited to, fraud and corruption. Overtime, however, that original mandate hasevolved. From a mostly reactive and reme-dial effort to investigate problems after theyhave occurred, with sanctions applied as adeterrent, the Bank is working to achieve amore effective balance of reactive and proac-tive/preventive approaches. INT’s currentmission, therefore, includes working closely

with other agents of change across the WorldBank Group to:

• Reduce the risk of fraud and corruptionin Bank-supported projects through acombination of investigations and sanctionsin response to allegations and proactivemeasures for earlier detection and preven-tion; and

• Encourage the highest standards of per-sonal honesty, integrity and ethical be-havior within the Bank through a combi-nation of investigations of allegations ofstaff misconduct (with referral to HumanResources for appropriate disposition) andoutreach programs (led by the Ethics Of-fice) incorporating the lessons learned.

8. This statement of the mission was in-corporated in the Integrity Department’s Stra-tegic Directions and Business Plan paper ap-proved by Senior Management and subse-quently endorsed by the Board in July 2004.In addition to seeking a better balance betweenreactive and proactive approaches, the strat-egy calls for adoption of a new, more efficientapproach to case management, and better in-tegration of the Integrity Department’s workinto the anticorruption strategies of the Re-gions and Country teams. It also includes ex-panding and regularizing the Department’s staffwhile improving gender and nationality diver-sity, and strengthening communications andoutreach efforts regarding the Bank’s resultsand lessons learned.

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IIA. Organization

9. In 1997, the Internal Auditing Departmentestablished a small investigations unit (IADIU)to pursue allegations of fraud and corruption.As the case work grew, the unit contractedwith outside accounting firms to assist in thegrowing number of cases. In 1998, the Over-sight Committee on Fraud and Corruption wascreated, chaired by the Managing Director forOperations, along with a small secretariat toprovide coordination and oversight of the in-vestigations. In 1999, IADIU and the secre-tariat to the Oversight Committee were mergedinto a single unit, the Anticorruption and FraudInvestigations Unit (ACFIU). With furthergrowth, and the merger of ACFIU with theinvestigations function of the Office of Profes-sional Ethics in 2001, the new Department of

Institutional Integrity was created, reportingdirectly to the President. IAD and the Integ-rity Department now work closely together toensure a coordinated effort on fraud and cor-ruption. This collaborative approach includesregular quarterly review meetings between thesenior managers as well as briefings by Integ-rity Department staff in advance of travel byIAD staff, and occasional referrals betweenthe two departments.

10. Since then, the Integrity Departmenthas continued to evolve. At the end of fiscal2004, the Department consisted of: theDirector’s Office responsible for policy, qual-ity assurance, and resource management; aForensic Services Unit responsible for the casemanagement system and knowledge manage-ment; a Special Projects Unit responsible forthe development of a proactive approach to

Organization, Staffingand Resources

PresidentWorld Bank

Group

DirectorIntegrity Dept.

Policy & Quality Assurance

Budget &Resource Mgt.

Special ProjectsUnit

OperationsManagement

ForensicServices Unit

Internal Investigations

Unit

East Asia &Pacific

Regional Team

South AsiaRegional Team

Europe &Central Asia

Regional Team

Latin America &Caribbean

Regional Team

Africa & MiddleEast/North AfricaRegional Team

6


the prevention of fraud and corruption; andthe Operations Group, consisting of six teamsof investigators (one dealing with allegationsof staff misconduct, and five regional teamsdealing with allegations of fraud and corrup-tion in Bank projects) led by an OperationsManager.

B. INT Staffing and Resources

11. As of June 30, 2004, the Integrity Depart-ment had a total complement of 47 employ-ees, 37 open-ended and fixed-term staff, and10 consultants and temporary staff (see Table1). Of these, 13 were administrative and cli-ent support (ACS) staff (levels GB to GD) and34 were comprised of investigators (many ofthem attorneys, some former prosecutors), fo-rensic accountants, procurement and databasemanagement specialists, resource managementstaff, experienced operations staff and man-agers (levels GE to GI).

12. While INT’s budget increase and re-cruitment authority for fiscal 2004 providedfor a higher number of staff, the Departmentexperienced high turnover ratio during theyear—a total of twelve staff departures. Ofthese, five were recruited by the U.N. Oil forFood Programme investigation in New Yorkand two others left to take up senior positionsat the Inter-American Development Bank (IDB)

and the U.S. Federal Reserve Board. An in-ternational recruitment effort was launched,but most of those selected did not arrive be-fore the end of the fiscal year. These new staffwill add significantly to the Department’s gen-der and nationality diversity, which is vital forthe effective conduct of investigations in ourmember countries. They also add importantnew dimensions in terms of language capabili-ties, including Russian, Chinese, Bahasa Indo-nesia, Hindi and Urdu.

13. Progress was also made in another areaof concern noted in INT’s strategy paper—thehigh proportion of staff on fixed-term ratherthan open-ended appointments. Of the 24 staffat grade GF or higher in fiscal 2003, only nine(38%) had open-ended appointments while 15(62%) were fixed-term. Fortunately, with theapproval of the strategy and business plan, anda significant budget increase, the IntegrityDepartment was able to convert a number offixed-term staff to open-ended appointments.As of June 30, 2004, of the 27 staff at level GFand above, 18 (67%) were open-ended whileonly nine (33%) were fixed-term, essentiallya reversal of the situation the previous year.

14. INT’s total budget allocation for fis-cal 2004 was nearly US$10 million (see Table2). This included a base budget of US$9.3million, an increase of US$2.2 million overthe base budget in fiscal 2003. As a result ofwork program developments during the year,the Integrity Department requested and re-ceived additional funding of US$600,000(mostly for travel and for outside experts tosupplement the Integrity Department staff inthe conduct of high priority investigations),for a total budget of US$9.9 million. Theadditional US$2.2 million in base-budget fund-

Table 1: INT Staffing Levels(FY03–FY04)

Staff Types FY03 FY04

Bank Staff

Investigators/Other Specialists 27 28

ACS/Other Support Staff 9 9

Subtotal 36 37

Consultants/Temporary Staff

Investigators/Other Specialists 7 6

ACS/Other Support Staff 2 4

Subtotal 9 10

Total Staff and Consultants 45 47

Table 2: INT Budget(FY03-FY04 – US$ million)

Budget Allocation FY03 FY04

Base Budget Allocation 6.1 9.3

Additional Allocation (Mid-Year) 1.0 0.6

Total Budget Authorization 7.1 9.9

Organization, Staffing and Resources

7

ing for fiscal 2004 allowed for the recruit-ment of another eight staff, as well as in-creased travel, space, computers and othersupport services.

C. Sanctions Committee Staffingand Resources

15. Within the Legal Department, the procure-ment unit (LEGPR) serves as the SanctionsCommittee secretariat and reviews and pro-vides legal advice on cases (see Appendix 3).In fiscal 2004, this unit comprised the ChiefCounsel, two level GG professional staff andone paralegal. In addition to Sanctions Com-mittee support, LEGPR also provides legal

advice on operational procurement issues aswell as on policy development and country in-stitutional work, to the Regions, the Procure-ment Unit in OPCS, and the Bank’s Procure-ment Board. LEGPR also provides training toBank staff and borrowers in the legal, institu-tional, and commercial aspects of procure-ment, and actively cooperates with interna-tional institutes and business groups. Alongwith the LEGAD, the Legal Corporate Admin-istration Unit, LEGPR played a lead role inreviewing the Bank’s sanctions process whichled to the reform proposals adopted by theBoard in July 2004. The unit devotes aboutone fourth of its staff resources to this func-tion, or roughly US$175,000.

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A. Investigations

16. INT started fiscal 2004 with a carryover of321 open cases, comprising 76% external cases(fraud and corruption in Bank projects) and24% internal cases (staff misconduct). Dur-ing the year, 354 cases were opened and 341cases were closed, with a carryover to fiscal2005 of 334 cases—an increase of 13 cases(see Table 3). The number of new cases infiscal 2004 was up slightly over fiscal 2003,while the number of cases closed was muchlower. The higher figure in fiscal 2003 was aresult of a special effort to close a large num-ber of relatively old fraud and corruption cases.The increase in the carryover to fiscal 2005was due to a decline of external cases (downby 20) offset by an increase of internal cases(up by 33) and an end of fiscal year ratio of67% external to 33% internal.

B. Case Load Management

17. As part of INT’s new approach to casemanagement, allegations received are rated asto their relative priority using a standard setof criteria. All allegations of staff misconductreceived by the Integrity Department are con-

sidered extremely important and are given ahigh priority rating and are investigated to thefull extent necessary in order to achieve clo-sure. (As noted in para. 23, some of the alle-gations of staff misconduct that come initiallyto the Integrity Department may be referredto other parts of the Bank for appropriate reso-lution.) On the external side, however, thenumber of cases clearly exceeds the resourcesthat would be needed to conduct a full investi-gation into every case.

18. All external cases go through a pre-liminary inquiry, with the information gath-ered used in the rating process. Cases ratedlow priority are usually closed without furtherinvestigation, but all relevant information isentered into INT’s database for future refer-ence and analysis. Such cases may be reopenedif the Integrity Department receives additionalinformation. Medium and high priority casesare included in the work program, with highpriority cases scheduled for investigation basedon the Integrity Department’s discussions withthe relevant regional counterparts. Overall,based on feedback from both the IntegrityDepartment’s investigators and the Regions,the new approach to case management is work-ing well.

19. As shown in Table 4, the IntegrityDepartment completed 176 high priority casesin fiscal 2004, including both internal and ex-ternal cases. Despite this accomplishment,there were 182 high priority cases carried overto fiscal 2005, 48 cases more than the fiscal2003 carryover (33 internal and 15 external).Medium priority cases were up by 26, whilelow priority cases declined by 41, reflectingthe new approach to case management. (Note:while low priority cases should normally beclosed immediately after being rated, there issometimes a delay in completing the neces-sary paperwork—hence the 24 cases shown

IIIInvestigations andCase Load Management

Table 3: Total Number of Cases(FY03–FY04)

Total Cases FY03 FY04

Cases Carried Over 430 321

New Cases Opened 339 354

Subtotal 769 675

Cases Closed 448 341

Ending Case Load 321 334

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in the table as low priority cases are still open.Note also that the “adjustment” column reflectschanges in the status of cases that emerge fromthe “no rating” category: the 51 “no rating”

Table 4: INT Case Priority Ratings(FY03–FY04)

FY03 New Cases FY04Carryover Cases Adjustments Closed Carryover

High Priority 134 175 49 176 182

(of which External) (57) (72)

Medium Priority 51 11 56 41 77

Low Priority 65 7 49 97 24

No Rating (Preliminary Inquiry) 71 161 –154 27 51

Total Cases 321 354 341 334

cases carried over to FY04, for example, rep-resent the original stock of 71, plus 161 newcases, less 154 that emerged with ratings, less27 others that were closed.)

11

IVA. Investigations andCase Load Management

20. With the closing out of a large number ofspecial cases in fiscal 2003, the business planassumed a reduction in the carryover of inter-nal (staff misconduct) cases. Instead, fiscal2004 saw a reversal of the previous year’s de-cline, with 110 cases carried over, an increaseof 33 (see Table 5). New cases were up by 26,from 125 in fiscal 2003 to 151 in fiscal 2004.(Again, this compares with a total populationof about 10,000 Bank staff and consultants.)The increase in new cases can be seen as afavorable indicator, at least to the extent thatit reflects an improvement in the reporting en-vironment, where staff feel comfortable andprotected in making good faith allegations, andconfident that the institution will take theircomplaints seriously (see Box 2 on Protectionof Whistleblower Rights).

21. Many of the cases that INT’s internalunit investigated during fiscal 2004 were ex-ceptionally complex and sensitive, requiring ahigh concentration of resources and generallycarried out against a tight time schedule. Time-liness is a perpetual concern in staff miscon-

duct cases, especially if a staff member hasbeen placed on administrative leave pendingthe completion of the investigation/decisionmaking process. However, the timeliness is-sue applies in essentially every case, given theimpact on staff morale and the workplace cli-mate of an ongoing investigation. The investi-gative process has also become more sophis-ticated over time, in part to accommodaterulings by the Administrative Tribunal and theAppeals Committee, but also reflecting lessonsof experience about how best to ensure thatinvestigations are carried out in a fair, bal-anced, and professionally competent manner(see Appendix 4). Complicating matters is thefact that INT’s operating environment is in-herently unpredictable with respect to the fre-quency, volume and sensitivity of complaintsthat it may receive.

22. These factors, combined with the fis-cal 2004 increase in new cases, have requirednew approaches to case load management onthe internal side as well. In the area of work-place conflict cases, for example, INT’s ini-tial response is to determine whether the caserequires the full and formal processes of anIntegrity Department investigation, or mightbe resolved more efficiently and effectivelythrough a less formal process. During boththe initial intake and the preliminary inquirystages, therefore, each case is examined againstthe various alternatives available under theWorld Bank’s CRS and a judgment is madeabout the most appropriate approach to re-solving the issues in dispute.

23. Whenever the best alternative is notobvious, INT may consult with various partsof the CRS (Ombudsman, Mediation, or Eth-ics) as well as with the Legal Department,Human Resources, and the relevant Bankmanagers, depending on the nature of the is-sue, to arrive at the most appropriate answer.

Internal Investigationsand Sanctions

Table 5: Number of Internal Cases(FY03–FY04)




Subtotal 237 228



12


Box 2

World Bank Group Protection of Whistleblower Rights

The World Bank Group (WBG) has procedures which are intended to protect whistleblowersfrom retaliation for raising good faith concerns in the workplace.

• A “whistleblower” is an individual who provides information or raises concerns in goodfaith to management or any entity within the WBG conflict resolution system (CRS) onsuspected misconduct (e.g., fraud and corruption), mismanagement, waste of resourcesand/or abuse of authority within the WBG, and where, as a result, that staff membermay be subjected to selective, arbitrary and/or exaggerated administrative and/or dis-ciplinary action for making the report (retaliation, reprisal) by his/her chain of com-mand, senior management official(s), or his/her fellow staff members.

• Staff Rule 8.01 (“Disciplinary Proceedings”) prohibits retaliation against any personwho in good faith provides information about suspected misconduct, or who uses theCRS.

• The WBG recognizes an obligation to protect whistleblowers from being subjected topressure or retaliation, or the fear of such consequences, as a result of raising work-place concerns in good faith. There are four ways in which the WBG affords thisprotection:

1. Staff members may choose to remain anonymous when reporting suspected mis-conduct to the Integrity Department or raising concerns with any entity in theCRS.

2. Staff members may request to have their identity kept confidential during theinvestigative process. This means that their identity would not be disclosed outsidethe investigative team unless the staff member consents to the disclosure, or theBank Group is so ordered by a competent judicial authority within a membergovernment, or it is determined that the staff member knowingly made a falseallegation of misconduct.

3. In consultation with HRS, the staff member may be transferred elsewhere in theWBG, if possible. For example, in recent cases of whistleblowing, management hasused the WBG’s Institutional Staff Resources Program to move staff into otherareas of the WBG at the staff member’s request.

4. As a deterrent, the WBG expressly prohibits retaliation by a WBG staff memberagainst any person who in good faith provides information about suspected mis-conduct or who uses the CRS, and the WBG will take appropriate disciplinaryaction under Staff Rule 8.01.

• In fiscal 2005, the WBG is undertaking a review of its policies and procedures relatingto protecting whistleblowers from retaliation to evaluate any areas for improvement inlight of evolving U.S. and international best practices in the public and private sectorsand the Bank’s status as an international organization.

Internal Investigations and Sanctions

13

This process is working well, with a total of110 cases referred to others over the last twofiscal years (see Table 8). This has allowed theIntegrity Department to focus its resources onthose cases where referral is not appropriate(e.g. due to the egregious nature of the allega-tions) or where the CRS system has alreadybeen exhausted.

24. Allegations against Bank staff varywidely and range from fraud and corruptionin Bank-financed projects or in relation tothe Bank’s own administrative budget, toother forms of workplace misconduct suchas sexual harassment, violations of WorldBank Group polices and procedures, and non-compliance with personal financial obligations(see Table 6).

25. The Bank takes all of these allegationsseriously. Cases of sexual harassment are ac-corded the highest priority, along with thoseinvolving fraud and corruption by Bank staff.While the number of such allegations is smallin comparison with the total number of Bankstaff and consultants (less than 1%), the Bank’sethical obligations as an institution, and itsobligations as a lender, as well as the credibil-ity of its anticorruption efforts, require thatits staff be above reproach.

26. As noted in Table 7, there were eightcases involving fraud and/or corruption byBank staff in relation to Bank projects car-ried, and 32 new allegations in fiscal 2004,

for a total of 40 open cases. Of these, 17 wereclosed and 23 carried over into fiscal 2005.Of the 17 closed, two were referred to man-agers as they involved procedural irregulari-ties, not fraud or corruption, and three werenot investigated beyond the preliminary in-quiry due to a lack of evidence. Of the re-maining twelve that were closed following fullinvestigation, only one was substantiated; sixwere unsubstantiated and five were un-founded.4 While the number of such allega-tions was up significantly in fiscal 2004, andthe substantiation rate down, the numbers aresimply too small to be meaningful in terms ofpatterns or trends.

27. The number of cases involving allega-tions of fraud and corruption in relation tothe Bank’s administrative budget (e.g., ben-efits fraud and embezzlement) are also upsomewhat in fiscal 2004, with 48 new casescompared with 33 in fiscal 2003. The substan-tiation rate, however, remained above 50%.Of the 31 cases closed, 11 were referred or

Table 6: Internal Cases by Type and Number of Allegations(FY03–FY04)

Types of Cases FY03 FY04

Fraud and Corruption—Project Related 11 (9%) 32 (21%)

Fraud and Corruption—Budget Related 33 (26%) 48 (32%)

Workplace Misconduct 11 (9%) 10 (7%)

Sexual Harassment 4 (3%) 7 (5%)

Violation of WBG Policies/Procedures 32 (26%) 17 (11%)

Non-Compliance w/Personal Obligations 34 (27%) 37 (24%)

Total Cases 125 (100%) 151 (100%)

4 A case is: “substantiated” when the evidence issufficient to show that the alleged misconductwas committed; “unfounded” when the evidenceis sufficient to show that the alleged misconductwas not committed; and “unsubstantiated” whenthe evidence is inconclusive.

14


not investigated, while 20 were closed after afull investigation. Of these, 11 were substanti-ated, six were unsubstantiated, and three wereunfounded.

B. Outcomes and Results

28. During fiscal 2004, INT closed a total of118 cases of alleged staff misconduct. Of these,49 cases (42%) were referred to others and69 cases (58%) were investigated. Of the casesinvestigated, 30 (43%) were substantiated, 14(20%) were unsubstantiated, and 25 (36%)

were unfounded. It is important to note thedistinction between those cases in which suf-ficient evidence was found to enable the Bankto impose disciplinary measures (substantiatedcases), and thereby hold the staff membersaccountable for their actions, and those wherethe Bank’s investigation exonerated staff mem-bers who had been accused of misconduct(unfounded cases)—an equally important out-come for all concerned.

29. Out of the 30 cases that were substan-tiated:

• 12 staff members were found to have en-gaged in fraudulent or corrupt practices,11 relating to the Bank’s administrativebudget and one involving Bank-financedprojects. Of those, nine were terminatedand barred from rehire (or if they had al-ready left the Bank, simply barred fromrehire) and three received other forms ofdisciplinary action consistent with Bankrules and procedures;

• Two staff members were found to haveengaged in sexual harassment, and wereterminated and permanently barred fromrehire;

• 12 staff members were disciplined for fail-ure to comply with personal obligations

Table 7: Internal Cases Involving Allegations ofFraud and Corruption(FY03–FY04)

FY03 FY04

Fraud and Corruption—Project Related



Subtotal 14 40

Cases Closed 6 17

Cases Referred/Not Investigated — 5

Cases Investigated 6 12of which Substantiated (%) 3 1

(50%) (8%)

Ending Balance 8 23

Fraud and Corruption—Budget Related



Subtotal 51 67

Cases Closed 32 31

Cases Referred/Not Investigated 9 11

Cases Investigated 23 20of which Substantiated (%) 12 11

(52%) (55%)

Ending Balance 19 36

Table 8: Investigative Outcomes—Internal Cases(FY03–FY04)

FY03 FY04



Cases Investigated 99 69

of which:

Substantiated 64 30(65%) (43%)

Unsubstantiated 10 14(10%) (20%)

Unfounded 25 25(25%) (36%)

Internal Investigations and Sanctions

15

under the Principles of Staff Employment,while eight others brought themselves intofull compliance with their obligations as aresult of INT’s intervention; and

• Four staff members were disciplined forother violations of Bank Group policies.

30. In terms of outputs, referrals to CRS/HR/Management were down somewhat in fis-cal 2004, non-compliance with personal obli-gations cases remained steady and formal in-vestigations and reports to Human Resourcesfor decision were down significantly (see Table9). The fiscal 2003 results, however, reflectedthe large number of trust fund and visa-re-lated cases, part of two special reviews, bothof which were launched and mostly completedduring fiscal 2003.

Table 9: INT Investigative Results (Internal)(FY03–FY04)

Internal Products FY03 FY04

Referrals to CRS/HR/Management 61 49

Non-Compliance w/PersonalObligations Notes 46 45

Formal Investigations 54 14

Final Reports to Human Resourcesfor Decision 52 11

Referrals to National Authorities 2 1

17

A. Investigations and Case LoadManagement

31. On the external side, 203 new cases wereopened, down 11 from fiscal 2003, and closed223 cases, down 65 from fiscal 2003—for thereason noted in para. 16. While this resultedin 20 fewer external cases carried over to fis-cal 2005, the aggregate figures do not reflectthe challenge of a growing number of high andmedium priority cases. As shown in Table 4,the number of cases not yet rated declined by20 in fiscal 2004, while the number of lowpriority cases declined by 41, closed, in mostinstances, without a full investigation. Highpriority external cases, however, increased by15, and medium priority by 26, an increase of41. When compared with the 108 high andmedium priority external cases in fiscal 2003,this represents a 40% increase in the workload,since low priority cases, even before the newapproach to case management, were rarelyfully investigated. By way of context, the Bankapproves approximately 240 new projects ayear, and has an outstanding portfolio of ap-proximately 1,400. Each project has multiplecontracts and in some cases, especially those

involving small scale expenditures at the locallevel, contracts can number in the thousands.INT’s investigations may involve a single con-tract or multiple contracts on the same project.

32. Several high priority cases in fiscal 2004were exceptionally complex and sensitive, re-quiring a high concentration of resources forboth investigations and documentation andreport writing. These cases were critical forachieving greater impact from INT’s resourcesbut resulted in other high priority cases beingdelayed or not pursued during the period, asreflected in the increase of high priority cases.There were insufficient resources to pursuemedium priority cases, with a correspondingaging of that portfolio.

33. The nature of the allegations receivedby the Bank range from procurement fraudand collusion to kickbacks and bribes, fromaccounting fraud and overcharging to the mis-use of project assets, and other activities suchas misrepresentation of qualifications in bidsubmissions (see Box 1). As noted in Chart 1,collusion in the procurement process was mostfrequent, representing 45% of all allegationsfor cases closed in fiscal 2004. The next mostcommon was kickbacks and bribes (30%),often a complement to collusion during thebidding process, with additional payments re-quired subsequently to get invoices paid. To-gether, these two categories accounted for 75%of all allegations received in fiscal 2004.

34. In terms of the sources of complaints,the share of cases reported by Bank staff(mostly Task Team Leaders, Procurement andFinancial Management Specialists) has contin-ued to rise—reflecting, in part, the growingawareness of the institutional integrity func-tion within Operations—up from 26% in fis-cal 1999 to 56% in fiscal 2004.

35. In terms of the distribution of cases byRegion (see Table 11), it is important to note

VExternal Investigationsand Sanctions

Table 10: Number of External Cases(FY03–FY04)




Subtotal 532 447



18


that the number of allegations received by theBank from any given region does not neces-sarily reflect the extent of corruption in thecountries of that region. Rather, the currentstatistics are simply an indication of wherecases have been reported to the Bank, whichin turn reflects where the Integrity Depart-ment has been most active over the recentfew years. It may also reflect a relatively smallproject portfolio, as in the case of the MiddleEast and North Africa Region. Over time, asinvestigators visit more countries and under-take investigations over a wider geographicrange, the current phenomenon of under-reported countries/regions is expected to de-cline.

36. In fiscal 2004, the East Asia and Pa-cific and the Europe and Central Asia Regionsreported the largest number of new cases, withthe Middle East and North Africa region re-porting the fewest. The largest number of casesclosed was also in East Asia, reflecting the fi-nalization of a large number of cases arisingfrom the Detailed Implementation Review(DIR) of a project in Indonesia (see para. 43,and Appendix 1, p. 31).

B. Outcomes and Results

37. For cases closed during fiscal 2004, wherea full investigation was completed, the rateof substantiated findings was 44%, up some-

Chart 1: Types of Allegations Received(FY04)

Chart 2: Sources of Allegations(FY04)

Kickbacks or Bribes30%

Procurement Fraud& Collusion

45%

Accounting,Charging, Financial

Practices6%

Other14%

Security,Misuse of

Assets5%

Government & Public4%

Contractors10%

Bank Staff& Consultants

56%Other30%

Table 11: External Cases by Region(FY03–FY04)

FY03 EndingRegion Carryover New Cases Subtotal Closed Cases Case Load

Africa 25 34 59 26 33

East Asia/Pacific 90 69 159 97 62

Europe/Central Asia 49 50 99 38 61

Latin America/Caribbean 49 20 69 38 31

Middle East/North Africa 2 5 7 3 4

South Asia 29 25 54 21 33

Total 244 203 447 223 224

External Investigations and Sanctions

19

what from fiscal 2003 (see Table 12). Thelower figure for fiscal 2003, however, waslikely depressed by the effort to close oldercases, in some instances after an investiga-tion had been launched, but evidence to sub-stantiate the allegations was never obtained.Unsubstantiated cases were at 48%, and un-founded cases (where the evidence clearlyindicated that the allegations were not true)were at 8%.

38. Table 13 provides a summary of Sanc-tions Committee activities and outcomes dur-ing fiscal 2004 based on cases substantiatedas a result of the Integrity Department’s in-vestigations. In almost every area, the num-bers were higher than in any previous year—largely as a result of cases generated by a DIRcarried out in Indonesia in fiscal 2002 whichled to a number of follow up investigations(see para. 43). In addition to administrative

Table 12: Investigative Outcomes—External Cases(FY03–FY04)

FY03 FY04



Cases Investigated 213 103of which:

Substantiated 72 45(34%) (44%)

Unsubstantiated 128 49(60%) (48%)

Unfounded 13 9(6%) (8%)

Table 13: The Bank’s Sanctions Process(FY03–FY04)

FY03 FY04

Sanctions-Related Actions

Number of Cases Received 15 23

Number of Committee Sessions 5 8

Number of Cases Heard 8 16

Number of Sanctions Applied

Number of Debarments

Firms 14 55

Individuals 8 71

Total Debarments 22 126

Number of Letters of Reprimand

Firms 1 4

Individuals — 3

Total Letters of Reprimand 1 7

Total Sanctions Applied 23 133

sanctions, there were also 10 referrals to na-tional authorities made as a result of the casessubstantiated by INT. During fiscal 2004, theSanctions Committee:

• received 23 new cases from the IntegrityDepartment—the highest number since theCommittee was established in 1999 (seeAppendix 4);

• met eight times, and heard 16 cases—twiceas many as in fiscal 2003;

• debarred 55 firms and 71 individuals; and• issued seven Letters of Reprimand, four

to firms and three to individuals.

21

A. Policy Development

39. The development of the Bank’s work onfraud and corruption has benefited from theadvice of various outside experts, includingformer U.N. Undersecretary and former U.S.Attorney General Dick Thornburgh.5 Duringfiscal 2003, Mr. Thornburgh led a team whichreviewed the proposed strategy and the ad-equacy of the Bank’s mechanisms and re-sources for implementing that strategy. Amongother conclusions, his report provided a strongendorsement of the Bank’s new directions, andof the caliber of its staff, but noted that addi-tional resources would be required. His re-port also highlighted the need to resolve anumber of policy issues that were central toINT’s investigative work. At about the sametime, the Bank established a new Investiga-tions Policy Committee (IPC), chaired by theManaging Director, Operations and includingthe Senior Vice President and General Coun-sel, the Vice President for Operations Policyand Country Services, the Vice President forHuman Resources, and the Vice President andController.

40. The IPC was supported by a secre-tariat in the Legal Department’s CorporateAdministration Division (LEGAD) and by ajoint Integrity Department/Legal Departmentworking group. As a result, significant progresswas made in dealing with a number of press-ing policy issues, including those arising fromthe Integrity Department’s review of the fea-sibility of new and more proactive approachesto fighting fraud and corruption in Bankprojects. These included progress on issues ofconfidentiality and witness security, reform ofthe Bank’s sanctions policy and processes, anddevelopment of related communications policy.The remaining unresolved issues are the sub-ject of ongoing work.

41. During the period covered by this re-port, only the IBRD and IDA were subject tothe Sanctions Committee. However, the au-thority of the Integrity Department to conductinvestigations extends to all World Bank Groupinstitutions. As part of the sanctions reformprocess, the sanctions procedures are currentlybeing updated and extended to include thespecific business needs of both IFC and MIGA.

B. New and More Proactive Tools

42. The Integrity Department began work ona proactive approach involving a possible for-mal program for the voluntary disclosure ofinformation by firms. A variety of voluntarydisclosure programs are currently in use inthe U.S., the E.U., several European countriesand Australia for different compliance pur-poses. The Bank’s objective would be to en-courage firms who have engaged in fraudulentor corrupt practices in relation to Bank-fi-nanced projects to disclose to the Bank thedetails of those practices in exchange for areduction in the application of sanctions thatwould otherwise apply, such as debarment. Asmall pilot exercise has been carried out. Suchan approach has the potential to generate sig-nificant additional information, not otherwiseavailable to the Bank, at a relatively low cost.Such information could then be used by theBank, inter alia, to strengthen the Bank’s in-ternal controls and to inform the identifica-tion, preparation, appraisal and supervisionof future Bank-financed projects. It would alsoincrease the risk of detection and sanction ofother, non-compliant companies.

VIOtherDevelopments

5 The Thornburgh reports are available on theBank’s external website (see page viii.)

22


43. The Integrity Department participatedin a second proactive Detailed Implementa-tion Review (DIR), similar to the one carriedout in Indonesia in fiscal 20026. While the firstreview focused on a single project in a rela-tively high risk sector, the second review fo-cused on several projects in different sectorsin a relatively high risk country. (Results arenot yet complete and thus details cannot bereleased.) DIRs involve an intensive review ofproject documentation, as well as physical in-spection of the project components as built.Going beyond the normal requirements ofproject supervision by Bank Task Teams, thesereviews are able to reveal indicators of fraudand/or corruption that occur “under the ex-isting radar” but can have a significant impacton the success and sustainability of a develop-ment project. The results of the review canthen be followed up in a variety of ways, in-cluding referral for possible further investiga-tion. A third DIR was in the planning stage atthe close of fiscal 2004, this one also involvinga number of projects in the portfolio of an-other relatively high risk country.

C. Communications

44. With the assistance of a Bank Communi-cations Advisor and an outside consultant, acommunications audit was carried out thathighlighted some key challenges the Bankfaced in getting its messages out—includingthe disclosure of information regarding theresults of its investigations. As part of thisexercise, the Bank conducted a benchmarkingexercise on best practices in communicationsrelated to investigations and sanctions. Thisincluded dialogue and visits with a number ofother agencies including: The European Anti-Fraud Office (OLAF); the U.N. Office of In-ternal Oversight Service (OIOS); the FrenchBanking Commission; U.S. Securities and Ex-change Commission (SEC); U.K. FinancialServices Authority (FSA); U.S. Federal Re-serve Board; U.S. Department of Justice(DOJ), Office of Professional Responsibility;U.K. Department for International Develop-ment (DFID); French Development Agency(AFD); U.S. Agency for International Devel-

opment (USAID); Asian Development Bank(ADB); Inter-American Development Bank(IDB); and European Bank for Reconstruc-tion and Development (EBRD). This exerciserevealed a clear trend towards increased trans-parency about results and actions in most, ifnot all, of these agencies as a strategic toolfor deterrence and prevention.

45. On the basis of this work, a communi-cations strategy specifically related to investi-gations and sanctions was developed and rec-ommendations were made regarding neededchanges in the Bank’s disclosure policy to al-low greater transparency. In addition to in-creasing public awareness of the Bank’s anti-corruption efforts, the intention is to increasethe deterrent effects of the Bank’s work bypublicizing the results of its investigations,consistent with the broader goal of contribut-ing to a change in behavior by persons involvedin fraud and corruption. In July 2004, theBoard endorsed that strategy and approvedthe changes in the Bank’s disclosure policy.This document was disclosed in July, and maybe viewed on INT’s website (http://www.worldbank.org/integrity) as well as onthe Bank’s Documents & Reports website(http://www-wds.worldbank.org).

46. Within the Bank, communication ofresults in staff misconduct investigations isessential to leveraging deterrence of would-beoffenders. One of the most effective methodsto deter staff from engaging in misconduct isto announce the results of specific cases (with-out names) via the Bank’s intranet home page(known as the Bank “Kiosk”) and throughwebsite posting. Names or units are not pub-licly released in accordance with Bank staffrules on confidentiality. An added benefit ofcommunicating results is to encourage futurereporting by staff, by demonstrating that theirclaims will be taken seriously and acted upon.

6 Progress Report: Fiduciary Review of the Sec-ond Sulawesi Urban Development Project Over-view Report, http://wbln0018.worldbank.org/acfiu/acfiuweb.nsf/(intlinks)/CTON-5PL77Z andAppendix 1, p.5.

Other Developments

23

The Integrity Department is also cooperatingwith IAD, Human Resources, and the EthicsOffice in sharing the findings from relevantinvestigations in order to assist them in en-hancing the Bank’s internal control environ-ment, and in support of the Ethics outreachprogram, drawing upon lessons learned fromstaff misconduct investigations.

D. Outreach andKnowledge Management

47. Fiscal 2004 saw a continuation of earlierefforts to broaden the awareness of what in-stitutional integrity is and what it does throughworkshops and seminars, as well as more in-depth training and education for operationalstaff both in Washington and in country of-fices. In addition, the Integrity Department hasregularized an arrangement with IAD to pro-vide briefings to audit teams in preparation ofengagements to identify potential fraud andcorruption concerns and facilitate appropri-ate audit plan focus.

48. The Integrity Department developed acomprehensive presentation on the typologyand mechanisms of international fraud andcorruption, and the Bank’s efforts to investi-gate and sanction any wrongdoing. This pre-sentation is called “The Anatomy ofTransnational Corruption” and it was givenover 20 times in fiscal 2004 before a wide va-riety of audiences, both within the Bank (e.g.Senior Management, the Board’s Audit Com-mittee, PREM Network training seminars,Legal Department, regional hub training eventsand others) and externally (e.g. Harvard LawSchool, Kennedy School of Government, U.S.Department of Justice, and the Socially Re-sponsible Investor Forum), and in each in-stance was well received.

49. Department staff participated in morethan a dozen major internal and external multi-day conferences and training events, includ-ing the World Bank Fiduciary Forum, IDB con-ferences, and other external for a ranging fromthe Conference of International Investigatorsin Lyon, France to the Rotary Club of Dili,East Timor. Integrity Department investiga-tors are continually encouraged to seek ap-

propriate opportunities for outreach duringtheir travels.

50. Briefings by the Integrity Departmenthave become an integral component of the ori-entation program for new Bank staff and newextended-term consultants and contract staff,as has the practice of specifically briefing newlyappointed country directors on Bank proce-dures and case histories in their country. Infiscal 2004, the incoming participants in theBank’s Young Professionals Program also re-ceived a briefing by Integrity Department staffon potential fraud and corruption in Bank op-erations. The Integrity Department is respon-sible for a full day of the PRMSP Core Courseon Governance and Anticorruption, targetedspecifically to Bank country economists andothers interested in governance issues. TheDepartment’s regional teams typically providemonthly updates of activities to their counter-parts in the regional vice presidencies as wellas presenting outreach and awareness mod-ules in regional hub training sessions for field-based staff. Integrity Department staff alsoprovide country office staff briefings and aware-ness presentations while working in clientcountries. More than 50 such orientation andbriefing sessions were conducted by Depart-ment staff during fiscal 2004.

51. INT has continued to support theVienna Institute partnership with the U.N.Office on Drugs and Crime to conduct theirannual multi-day anticorruption program fordelegates from developing countries, and theInternational Group for Anticorruption Coor-dination. During fiscal 2004, senior staff ofthe Integrity Department participated in sevenmajor international gatherings dealing withfraud and corruption issues, including plan-ning sessions to assess implementation ofInterpol’s Global Standards for investigations,and prosecution.

52. As most of INT’s level GE or higherstaff were external recruits without previousBank experience, an important training prior-ity for fiscal 2004 was addressed by offeringtwo three-day “Introduction to Bank Opera-tions for INT Staff” courses in partnership withOPCS. The customized version of the five-dayOPCS course focused on the operational pro-

24


cesses, decision inputs and standard documen-tation produced in preparing and implement-ing Bank lending. An additional offering of thiscourse is planned for fiscal 2005 based onpositive staff response and additional staff re-cruitment.

53. INT’s Learning Committee organizeda series of Brown Bag Lunch seminars andlectures dealing with current Bank/INT topicsranging from procurement reform, revision ofthe standard audit access rights in Bank-fi-nanced contracts, operational issues for a vol-untary disclosure program, the record and les-sons of experience from the U.N. Tribunal forYugoslavia, and many other topics of interestto INT staff. This is a continuing activity.

54. In addition, the secretariat of the Sanc-tions Committee, which includes the ChiefCounsel of LEGPR, has conducted numeroustraining and information sessions, both for-mal and informal, inside and outside the Bank.Topics covered include fraud and corruptionin Bank projects, the sanctions process in theBank, and the ongoing reform of that pro-cess.

E. External Scrutiny

55. The Congressional Research Service statedin an April 30, 2004 report7 to the U.S. Con-gress that the World Bank appears to be the

international financial institution (IFI) with themost extensive and detailed process for ad-dressing corruption issues. Assessing the an-ticorruption standards of IFIs, the report statedthat the Bank was the only IFI that had adoptedfour main procedures—an independent cor-ruption unit, an oversight committee, manda-tory staff financial disclosure procedures, anda corruption reporting hotline.

56. The U.S. Senate Committee on For-eign Relations held a hearing on “CombatingCorruption in the Multilateral DevelopmentBanks” on May 13, 2004 at which public testi-mony was given by U.S. Executive Director,Carol Brookins, and by Dick Thornburgh,among others, related to the work of the WorldBank and its Department of Institutional In-tegrity. The testimony is available on the Sen-ate Committee website.8

7 “Anti-Corruption Standards of the InternationalFinancial Institutions,” CRS Report for Congress(order code RL32374), April 30, 2004

8 Hearing before the Committee on Foreign Rela-tions, United States Senate, One Hundred EighthCongress, Second Session, “Combating Corrup-tion in the Multilateral Development Banks”http://foreign.sen-ate.gov/hearings/2004/hrg040513a.html

25

VII57. As the preceding sections demonstrate, theBank has made a good deal of progress in thedevelopment of its integrity functions. Thereare challenges still ahead. One of the mostimportant for fiscal 2005 will be implementa-tion of the sanctions reform changes approvedin July 2004, and the creation of a new Sanc-tions Board with a broader range of sanctions.This will require the appropriate staffing andresource commitments, as well as the capac-ity to communicate these changes widely to allaffected audiences once they are finalized. Onthe other side, the Integrity Department con-tinues to evolve in its functions and programs.It is still in the process of achieving an equilib-rium level of staffing and budget consistent withthe department’s responsibilities and workload. The significant growth of the department’sstaff and budget over the past three yearsclearly reflects the institutional priority beinggiven to this important new function withinthe World Bank. Other challenges include:

• Striking the right balance between thenewer, proactive/preventive approachesand the Bank’s ongoing role of respondingto allegations received—whatever thesource—in a timely and effective manner;

• Developing plans for the possible launchof a formal Voluntary Disclosure Program,including putting in place the required poli-cies, procedures and supportive infrastruc-ture;

• Adapting investigative activities and pro-posals for more proactive anti-fraud ap-proaches in the face of the potential chal-lenges presented by increased use of coun-try systems in the place of Bank procure-ment and financial management policiesand procedures;

• Extracting lessons learned from investiga-tions and more proactive approaches and

ensuring that those lessons are integratedback into the Bank’s internal policies andprocedures and in the Bank’s approach tothe identification, preparation, appraisaland supervision of the developmentprojects the Bank finances;

• Reinforcing whenever necessary the needfor the Integrity Department to remain anindependent investigative unit within theWorld Bank Group, reporting directly tothe President, and able to decide—withor without consultation—both the prior-ity of individual cases and the manner inwhich they should be pursued;

• Managing the transition to a new leader-ship team within the Integrity Departmentin fiscal 2005, taking into account the ar-rival of a new Operations Manager in Oc-tober 2004 and the planned departure ofthe current Director at the end of his five-year term (December 2005);

• Continuing to build up the Bank’s cadre ofexpert, experienced staff working on in-stitutional integrity activities, including re-cruitment, training, mentoring and devel-opment, as well as maintaining a high levelof morale and work/life balance;

• Building on progress made during fiscal2004, continue the process of extendingthe sanctions procedures in use by theIBRD and IDA to IFC and MIGA in a man-ner appropriate to their business modelsand taking into account their existing pro-cedures for due diligence and other anti-fraud and anticorruption measures;

• Continuing the process of awareness rais-ing and outreach in both IFC and MIGA,with investigative services provided by INT;

• Further strengthening the links betweenIntegrity Department and other relatedunits in the World Bank Group, includingLegal, HR, CRS, Management, IAD, etc.;

Challenges

26


• Developing evaluation tools that will helpensure that INT’s business processes andapproach are both efficient and effective;

• Enhancing the institution’s communicationsand outreach efforts. This will be criticalfor the Bank, indeed for all IFIs, in orderto increase deterrence and prevention; and

• Strengthening partnerships with the otherIFIs, our borrowers, the private sector,NGOs, and civil society, since collective

action is critical for changing how projectsactually work on the ground.

58. More broadly, the Bank will need tocontinue efforts to help mainstream concernsabout fraud and corruption into the basicwork of the institution—reducing povertythrough financing of development projects inour member countries. This is the long-termchallenge.

27

1A. Internal Investigations(Staff Misconduct)

EmbezzlementA staff member and a former short-term con-sultant embezzled around US$90,000 in WBGfunds. The evidence showed that on at leastseven occasions over a four month period, thestaff member falsified, and/or caused to befalsified, accounts payable records and thusdiverted the funds to the personal bank ac-count of a former WBG short-term consult-ant (STC). Of note, no documentation sup-porting the changes that led to the disburse-ments were produced and each transactionamount was below the threshold that wouldhave required approval from an Accounts Pay-able manager prior to disbursement. Follow-ing disbursements, the STC then “kicked-back”approximately US$33,000 to the staff mem-ber through wire transfers to the staffmember’s personal bank account.

Human Resources found that the staffmember’s actions constituted serious miscon-duct. The staff member’s appointment wasterminated and the staff member is not eli-gible for rehire. The former STC was perma-nently barred from rehire in any capacity.

Local ProcurementTwo country office staff members acting inconcert with a vendor, engaged in a schemeover a period of approximately two years togenerate bids and award more than 98% (ap-proximately US$22,000) of the maintenanceservices contracts for the residences of expa-

triate Bank staff members to this single ven-dor. While “competing” bid submissions werefalsified to prevent detection of the scheme,close inspection of the documentation yieldedindicators of fraud. In return for this procure-ment manipulation, one of the staff membersreceived several thousand dollars worth of freeor discounted labor and materials in connec-tion with work performed by the vendor onthe staff member’s private residence.

Human Resources found that the staffmembers’ actions constituted serious miscon-duct. Both staff members’ appointments wereterminated and they are not eligible for re-hire.

Acceptance of BribesAfter a detailed investigation originating froman IAD referral of project supervision irregu-larities, the Bank terminated a staff memberfor accepting bribes from a consulting firm inexchange for influencing the retention of aconsultant on a Bank-financed project. Theinvestigation established that the staff mem-ber, acting in the capacity of task manager,used a middleman to facilitate the transfer ofillicit payments between the consultant and thestaff member. At the time, the middleman wasacting as a consultant procurement advisor tothe project.

In conducting this investigation, IntegrityDepartment investigators searched publicrecords and determined that the staff mem-ber made large additions to the staff member’shouse using cash payments to builders andsuppliers. When interviewed about the source

Significant Investigations Concluded inFiscal 2003/2004

Appendix

28


of the wealth to make home improvements,the Integrity Department developed evidencethat the staff member fabricated elaboratestories regarding the source of outside fund-ing. In addition, investigators spent consider-able time in the field interviewing governmentofficials and consulting companies who workedon the projects supervised by this staff mem-ber. Many officials gave oral accounts of illicitactivity by the staff member. The IntegrityDepartment ultimately uncovered a contrac-tor willing to provide documentary evidenceof a specific bribe payment to the staff mem-ber. The contractor turned over authenticatedcommercial bank documents which conclu-sively established the misconduct by the staffmember.

The Bank also took debarment actionagainst the middleman and his associated com-panies, with the Sanctions Committee issuinglifetime debarments for their involvement incorruption.

Sexual HarassmentThe case involved a senior level country officestaff member (manager) who engaged in acontinuous pattern of behavior over a periodof six years that constituted both sexual ha-rassment and workplace harassment. Themanager targeted five ACS and temporary staffmembers. The staff member repeatedly solic-ited three female staff members to engage insexual relationships, and repeatedly invited twoof them to join him for lunch and dinner (per-ceived as a pretext to pursue his personal in-terests with these individuals) after it wasmade clear his invitations were unwelcome.The second form of harassment alleged washostile or offensive behavior on the part ofthe manager by his repeatedly insulting thecomplainants’ professional competence in thepresence of others. During this period, themanager was one of two Anti-HarassmentAdvisors in the country office.

Human Resources found that themanager’s actions represented conduct thatis unsuitable, unacceptable and incompatiblewith the ethical behavior the WBG expects,and further stated that as a manager, and in aposition of trust, the behavior was particularly

egregious. The manager’s appointment withthe WBG was terminated, and he is ineligiblefor future rehire.

B. External Investigations (Fraudand Corruption in Bank Projects)

Fraud and Corruption in the Implementa-tion of Rural Infrastructure ProjectsThe Bank was advised that during the courseof a regular supervision mission, the projectteam noticed a series of irregularities associ-ated with the implementation of the project.A subsequent investigation involved the col-lection and analysis of documents and inter-views with several witnesses, resulting in evi-dence of fraudulent and corrupt practices inthe award and implementation of more than20 subprojects. These fraudulent and corruptpractices had a negative impact on the project’sdevelopmental objective. While significant dis-bursements were made on a number of infra-structure contracts, contractors had made littleprogress on the actual works. In addition, theIntegrity Department found that in some in-stances, rural mayors used the Bank-financedfunds to finance their political campaigns.

As a result of the investigation, the Bankcancelled a portion of the loan and requestedthe reimbursement of the misused funds. Inaddition, the Bank suspended further disburse-ments until the Borrower took remedial ac-tions to prevent future misuse of funds in theimplementation of the project.

The Bank also referred its findings sub-stantiating the allegations of fraud and cor-ruption to local authorities. The Borrower es-tablished a group of anticorruption prosecu-tors to investigate and prosecute the cases thatarose from the Bank’s referral. To date, theseprosecutors have completed nine trials, whichhave resulted in the conviction of 15 projectofficials, members of bid evaluation commit-tees and contractors. Sentences have rangedbetween two and four years of imprisonment.In addition, the trials also resulted in the deci-sion to suspend prosecution against anothernine individuals under the condition that theyprovide restitution to the Borrower. Another

Appendix 1

29

15 indicted individuals are currently awaitingtrial.

BriberyINT has conducted a number of bribery inves-tigations. A sample of representative cases ispresented below:

I. Following a Government’s criminal indict-ments in connection with an alleged cor-ruption in 1999, the Bank initiated an in-vestigation into those allegations and, inparticular, into whether consultants whohad received contracts financed by theBank had engaged in corrupt practices. Atthe conclusion of this initial investigation,the Bank concluded that the evidence wasnot reasonably sufficient to show that thefirm had engaged in corrupt practices andas a result did not sanction the firm. TheBank at that time, however, reserved theright to reopen the investigation in light ofany additional information that might sur-face, including from the public proceed-ings.

Following the firm’s conviction of brib-ery in September 2002 by the High Courtof the Borrower, the Bank reopened itsinvestigation. In August 2003, the Courtof Appeal of the Borrower upheld the HighCourt’s decision on one of the two countsof bribery. The investigative work done bythe Borrower produced evidence not avail-able to the Bank during its initial investi-gation. With the new evidentiary informa-tion, the Bank proceeded with anotherdebarment proceeding.

Consequently, the firm was declaredineligible to receive any new Bank-financedcontracts for a period of three years as aresult of corrupt activities for the purposeof influencing the decision-making of apublic official, a violation of the Bank’s pro-curement rules. Consideration was givento the fact that the firm had already beenordered to pay a criminal fine by the crimi-nal courts of the Borrower and that therelevant persons involved in the firm’s workon the project were no longer in positionsof responsibility in the company.

II. Following an investigation, a Bank staffmember was terminated and a consultantand consulting firm were permanently de-barred for corrupt practices in the awardand execution of technical assistance con-tracts. Analysis of documentation revealedred flags of fraud and corruption and, withthe support of witness statements, the in-vestigation established that the procure-ment process had been manipulated andthe bribery had occurred.

III. Similarly, disbursements for an infrastruc-ture improvement project were suspendedby the Bank after an investigation foundevidence that the Project Director and aformer Bank staff member were involvedin bribery and bid-rigging with contrac-tors. The lifting of the suspension was con-ditioned upon the completion of a crimi-nal investigation and forensic audit of theproject. The subsequent forensic audit ini-tiated by the Borrower’s Government iden-tified significant indicators of possible cor-ruption and other control weaknesses inthe management of the Bank-financedproject.

The Project Director was also arrestedand criminal proceedings are ongoing. TwoBank staff who were earlier terminated formisconduct subsequently pled guilty in U.S.Federal District Court on charges relatedto the project.

The new government of the Borrowerhas pledged to act on the recommenda-tions in the audit report in an aggressiveand transparent manner, and to take ap-propriate legal action against those in-volved. The Bank and the Government willbe working very closely to ensure that thelessons learned and the recommendationscontained in the audit are implemented,and the Bank’s country team will under-take a review of its current portfolio toensure that all possible anticorruption safe-guards are in place.

IV. A number of cases have revealed that somelarge multi-national companies entered intoagreements with local agents who had con-

30


tacts in the government, and subsequentlynegotiated the award of contracts with thegovernment officials in exchange for a bribeor kickbacks. During contract execution,it has been established that the involvedcompanies frequently were required to payfacilitation fees to government officials inorder to have their invoices processed orto obtain approval of substituted person-nel.

Collusive Bidding and thePayment of KickbacksAn extensive investigation was conducted inresponse to specific allegations of fraud andcorruption made in the media. This investiga-tion concluded that bidders on a Bank-financededucation project colluded with each other tomaximize the prices that could be obtainedduring the procurement of education supplies,and that many project officials received kick-backs from contract winners amounting, onaverage, to approximately 15% of the value ofthe contracts. As a result, the Bank declaredmisprocurement on a significant portion of therelevant loan, entered into negotiations withthe Government to promote changes to pro-curement methods in the sector to reduce thechances of corruption in the future. A referralof the findings was made to the Governmentso a determination could be made concerningcriminal charges against the relevant officials.

Further, the Bank instituted debarmenthearings against the bidders. A substantialnumber of contractors were subsequently sanc-tioned, being declared ineligible to participatein future Bank-financed contracts for a statedperiod.

Forged World Bank LettersTwo suspicious letters written on Bank letter-head were forwarded to the Bank. The letterswere addressed to an agency that providesexport guarantees, and related to an allegedcontract between a company selling medicalequipment and the Ministry of Health. A falserepresentation was made that the Bank pro-vided a “no objection” to borrowing and ex-penditure in the sector in recognition that thehealth sector was a priority.

INT’s review of this matter confirmed thatthe correspondence were forgeries, and likelyan attempt to undermine a procurement pro-cess and to defraud. As the Bank had no in-volvement in a project to supply medical equip-ment to this country, a referral to the relevantgovernment was made.

Misrepresentation of Credentials-Fraudu-lent DocumentsDuring the implementation of a health project,the performance of a key consulting companyexhibited a number of shortcomings that con-tributed to delays in the assessment phase ofthe pilot project. This issue raised suspicionamong the project officials and the Bank teamthat the real capacities and qualifications ofthe company might have been misrepresented.As a result of the poor performance of thefirm, project officials in coordination with theBank, decided not to extend the contract ofthe company although the assignment was notcompleted and only half of the funds were dis-bursed under the contract. The matter wasreferred to the Integrity Department for fur-ther investigation.

The investigation involved the collectionand analysis of documents, as well as inter-views with many witnesses in several coun-tries. The Integrity Department confirmed thatthe experience and credentials of the princi-pal as well as the qualifications and certifica-tions of the consulting firm were misrepre-sented in order to meet the selection criteriaof the tender. The Integrity Department alsofound that this fraudulent practice was recur-rent in the numerous misrepresentations thecontractor committed not only on this project,but also on a previous contract in a differentcountry.

The matter was referred to the SanctionsCommittee who recommended debarments ofboth the principal and the firm for fraudulentpractice. The poor performance of the com-pany underscores the fact that fraudulent mis-representations committed by any contractoron a Bank-financed project can have signifi-cant negative impacts during project implemen-tation. This case is a typical example of pro-curement manipulation where the falsification

Appendix 1

31

of documents, forgery of financial documentsand misrepresentation of credentials are usedin order to meet selection criteria for tenders.

Detailed Implementation ReviewA series of debarment hearings were con-cluded, resulting in the imposition of sanctionsagainst over 100 individuals and companieswhich had undertaken fraudulent and/or cor-rupt practices in relation to a number of Bank-financed contracts in the urban sector of aborrowing member country. These debarmentsarose from the Bank’s first Detailed Implemen-tation Review (DIR), a joint effort betweenthe Integrity Department and the country of-fice. The DIR was part of a program initiatedby the relevant country office to strengthenfiduciary controls and reduce corruption inBank-financed projects and was undertakenwith the cooperation of the Borrower. A riskanalysis was undertaken to select which projectwould be reviewed. The DIR involved a broadoverview of procurement, implementation andfinancial management practices accompaniedby an intensive review of a sample of contractsin a variety of project locations. Despite a se-vere problem with missing documentation, theDIR team found evidence of collusion amongstbidders and common ownership of shell com-panies. The DIR team also found inadequateproject oversight by implementing agencies andconsultants, resulting in departures from com-pliance with contractual terms, failure to com-plete work and changes to contracts withoutappropriate approvals. Similar problems werefound with financial management controls.

The DIR was followed by an intensive In-tegrity Department field investigation of over20 referrals from the DIR team, nearly all ofwhich resulted in substantiated findings thatbidders had manipulated the procurementprocesses to give the appearance of competi-tion, and that often such collusive bidding wasaccompanied by the payment of kickbacks toproject officials and to “losing” bidders whowent along with the collusive scheme.

The Bank shared the DIR results with theGovernment and declared misprocurement inrelation to some of the contracts. The Gov-ernment also agreed to suspend disbursements

of the relevant loan which, ultimately, wascancelled. Follow up measures are being takento introduce more rigorous anticorruptionmeasures in the design of future Bank projects,and to improve transparency, accountabilityand governance.

Abuse of a Trust FundThe Bank conducted an investigation into al-legations, sent via mail to a local Bank coun-try office by an anonymous complainant, whichstated that the Government agency implement-ing a project dealing with social safety net ar-rangements had engaged in fraudulent andcorrupt practices. The complainant alleged thatproject officials from the Government agencyhad manipulated the procurement process bywhich consultants were hired under theproject, that expenses were fraudulentlyclaimed by those officials and that paymentswere made by those officials for services whichwere not provided. The project at issue wasfunded by a Trust Fund for which the Bankacted as trustee. The Bank’s high fiduciary dutytowards Trust Funds under the Bank’s man-agement necessitated the investigation beingmade a high priority.

The Integrity Department investigation,which involved significant document collectionand analysis and the conduct of a three-weekfield visit, substantiated the allegations. Theinvestigation also uncovered three exampleswhereby project officials manipulated contractsto ensure that the vast majority of the con-tract revenues were returned to them and thattheir actions would not be detected by stan-dard Bank supervisory practices. In responseto the investigative findings, the Governmenthas been asked to repay a relevant part of themisused funding and the Bank is undertakingdebarment proceedings against the companiesand private individuals involved. In addition,the Bank has also referred the case to theGovernment for a determination on whethercriminal charges against the relevant officialsshould be pursued.

Misrepresentations in ProcurementIn response to concerns raised by the Bank’stask team, an investigation was conducted into

32


a Bank-financed contract which was part of aproject designed to assist the reintegration offormer military personnel into civilian societyin the aftermath of war. The Integrity Depart-ment investigation found that a major procure-ment of goods—valued at over US$6,000,000—was the subject of significant misrepresenta-tions from the winning bidder during the bid

process and that the misrepresentation wasabetted by the project’s supervising consult-ant and its local partners. As a result of INT’sfindings, the Bank declared misprocurementon the contract and sanctioned several com-panies and persons, including the supervisingconsultant.

33

2A. List of Firms and Individuals Debarred

NAME ADDRESS COUNTRY INELIGIBILITY PERIOD GROUNDS

AMRIN AMIR UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

ANDY KARAMAY MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV AGUNG SEJAHTERA MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

CV BERINGIN MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

CV BAHTERA AGUNG MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

CV CITRA AGUNG MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV INDO PRATAMA MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV KARMEL MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV LELEMUKU MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV MARCAPADA MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV NUSA INDA UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

CV PRATAMA KARYA MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV RANDY PRATAMA MAKASSAR Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

Appendix

Sanctions Applied in Fiscal 2004

34


CV REJEKI BERSAMA UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV RIFKI JAYA UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV TAUFAN DIAZPORA RAYA MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

CV WIRANDA ABADI MAKASSAR Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

CV ZORAYA CIPTA SORANA MAKASSAR Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

DENY SUMIOK MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

HERI ISMAWI MAKASSAR Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

IMRAN ANDI UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

JULIUS LALOAN MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

JUNALDI D. MONOARFA MAKASSAR Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

JURRY PELEALU MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

KARIM HADI MAKASSAR Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

MOHAMMED ILYAS MALLA MAKASSAR Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

MR. A. SYARIFUDDIN UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

MR. ALIM SURYADI MANADO Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

MR. BOY KARAMAY MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

MR. DICKY LANTU MANADO Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

MR. FRANS UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

MR. JULIANUS KESEK MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

MR. RADIUS LIEM MANADO Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

Appendix 2

35

MR. SJAHRIAL UJUNG PANDANG Indonesia 12 MAY 2004 12 MAY 2006 Procurement Guidelines1.15(a)(ii)

MRS. WIRDA MAJID MAKASSAR Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

MS. AUDREY VERRA MENTANG MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

PETRUS TITALEY MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

PIETER KEY MANADO Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

PT ADI KARYA ABADA MANADO Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

PT CIPTA BARU MAKASSAR Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

PT DIMENSI PRAKARSA UTAMA MAKASSAR Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

ROSMIATI NUR MAKASSAR Indonesia 12 MAY 2004 12 MAY 2007 Procurement Guidelines1.15(a)(ii)

SAAT IRANDA MAKASSAR Indonesia 12 MAY 2004 12 MAY 2005 Procurement Guidelines1.15(a)(ii)

ABDUL AZIZ MALLA MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

ANDARIAS P. PARABANG MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

CV ARIES BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

CV PANTANG MUNDUR BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

CV SULINDO MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

D. SAMPATH RAO KARIMNAGAR India 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

EDY SUNARKO BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

FANNY LENGKONG Bitung Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

FREDDY PRASETYO MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

HATAB MUCHTAR MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

36


HEDY TAMAKA BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

IDRIS SALEH BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

JAGAN RAO India 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

KRISPINA LENNY TENDRA MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

NY. SHIRLEY TAMAKA Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

PT BRAGAS CIPTA MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

PT MINARTA DUTAHUTAMA MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

PT REKABANGUN NUSA TIMUR MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

PT TIRTA SUL-SEL MURNI MAKASSAR Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

REFLI MAMBU BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

SREE SATYA ENTERPRISES Karimnagar India 29 DEC 2003 29 DEC 2005 Procurement Guidelines(KARIMNAGAR) 1.15(a)(ii)

YANTO RUPPU BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

YULI RUPPU BITUNG Indonesia 29 DEC 2003 29 DEC 2005 Procurement Guidelines1.15(a)(ii)

A. PERUMAL METTUR DAM India 06 NOV 2003 06 NOV 2005 Procurement Guidelines1.15(a)(ii)

K. SRINIVASAN METTUR DAM India 06 NOV 2003 06 NOV 2005 Procurement Guidelines1.15(a)(ii)

M/S. SRI SRINIVASA India 06 NOV 2003 06 NOV 2005 Procurement GuidelinesENG. WORKS 1.15(a)(ii)

ABD. MUIN AYYUB PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

AHMAD ALI RIFKI PARE PARE Indonesia 03 NOV 2003 03 NOV 2007 Procurement Guidelines1.15(a)(ii)

AMMADE MADONG PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

ANDI NATALUDDIN PARE PARE Indonesia 03 NOV 2003 03 NOV 2006 Procurement Guidelines1.15(a)(ii)

Appendix 2

37

ANDI NURMIATI HAMID PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV ARA RIFKI PARE PARE Indonesia 03 NOV 2003 03 NOV 2007 Procurement Guidelines1.15(a)(ii)

CV CIPTA INDAH PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV DELAPAN-DELAPAN MAKASSAR Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV HIJRAH MAKASSAR Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV MUTIARA PELITA PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV NASTRI Pare Pare Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV PAMMANA SEJAHTERA PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV SULO GROUP MAKASSAR Indonesia 03 NOV 2003 03 NOV 2006 Procurement Guidelines1.15(a)(ii)

CV WANDY’S PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV WIRA KARY A JAYA PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

DARWIS ALI MAKASSAR Indonesia 03 NOV 2003 03 NOV 2006 Procurement Guidelines1.15(a)(ii)

H.M. NASIR HADDADE PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

Edward HAMDANI PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

IMALIA HARAHAP MAKASSAR Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

PT HAYDAR PUTERA PERKASA MAKASSAR Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

PT INDERA PERDANA TRD MAKASSAR Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

RIDA ALI RIFKI PARE PARE Indonesia 03 NOV 2003 03 NOV 2007 Procurement Guidelines1.15(a)(ii)

SOEWANDY TJANGGO PARE PARE Indonesia 03 NOV 2003 03 NOV 2005 Procurement Guidelines1.15(a)(ii)

CV ADI KARYA UTAMA BITUNG Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

38


ATHOS PORTOS ARAMIS BITUNG Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

CV RAYA KONSTRUKSI BITUNG Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

ADI MULYONO BITUNG Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

BIENY PADJA CV PERISAI BITUNG Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

CV CAKRA MANGGALA PUTRA MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

TRI PALUPI MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

PAT HAERUMY HAMZA TUPPU MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

PT JAYA PERDNA MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

BUHRANUDDIN BADRUN MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

PT PANCA WAHANA SAKTI MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

JOHNNY LEONARDO MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

RAIS RAHMAN MAKASSAR Indonesia 29 DEC 2003 29 DEC 2004 Procurement Guidelines1.15(a)(ii)

PT DUTAGRAHA MAHAWISESA MAKASSAR Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

HAERUMY HAMZA TUPPU MAKASSAR Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

CV SURYA ENDAR JAYA MAKASSAR Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

AMIN BASO MAKASSAR Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

CV WIRA MAS MAKASSAR Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

Hj. MASGAWATI MAKASSAR Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

ADNAN SUBAIR MAKASSAR Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

CV BINA BERSAMA PARE PARE Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

Appendix 2

39

WAHID ARAFIN PARE PARE Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

CV AROMA PARE PARE Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

AHMAD MAPPAINGE PARE PARE Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

CV LUMPUE INDAH PARE PARE Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

LOEKITO SUDIRMAN PARE PARE Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

CV MALLUSETASI PARE PARE Indonesia 03 NOV 2003 03 NOV 2004 Procurement Guidelines1.15(a)(ii)

JAN SUNDQVIST STOCKHOLM Sweden 15 AUG 2003 Permanent Procurement Guidelines1.15(a)(ii)

SMAFORETAGARTJA NST SRB AB STOCKHOLM Sweden 15 AUG 2003 Permanent Procurement Guidelines1.15(a)(ii)

B. Letters of Reprimand Issued in FY04

Viñas Russi & Cía Ltda., of Barranquilla, Colombia Reprimanded June 29, 2004 Remains Eligible Procurement Guidelines1.15(a)(ii)

Mr. Pedro Elías Russi Diaz, of Barranquilla, Colombia Reprimanded June 29, 2004 Remains Eligible Procurement Guidelines1.15(a)(ii)

Mr. Jesús Viñas de la Hoz, of Barranquilla, Colombia Reprimanded June 29, 2004 Remains Eligible Procurement Guidelines1.15(a)(ii)

Schlumberger S.A. (formerly known as Reprimanded July 28, 2003 Remains Eligible Procurement GuidelinesSchlumberger Industries S.A.), France 1.15(a)(ii)

Ganz Meter Company Ltd., Hungary Reprimanded July 28, 2003 Remains Eligible Procurement Guidelines1.15(a)(ii)

Naresh Grover, India Reprimanded October 14, 2003 Remains Eligible Procurement Guidelines1.15(a)(ii)

Surgicoin, India Reprimanded October 14, 2003 Remains Eligible Procurement Guidelines1.15(a)(ii)

41

3Establishment and OutcomesThe Bank’s sanctions process was first formu-lated in a paper presented to the Board inJuly 19969 and was implemented in a January1998 Operational Memorandum.10 Consistentwith the Board paper and Operational Memo-randum, the President established a SanctionsCommittee in November 1998 to carry out in-dependent administrative reviews of allegationsof fraud or corruption in Bank-financedprojects (as these terms are defined in theBank’s Procurement Guidelines and Consult-ant Guidelines) and to recommend to the Presi-dent sanctions to be imposed on those firmsor individuals found to have engaged in suchactivities.11

The Committee’s membership during fis-cal 2004 consisted of the managing Directorfor Operations (Chair), the Senior Vice Presi-dent and General Counsel, and two other se-nior staff selected for their operational expe-rience (one Regional Vice President and theVice President, Human Resources).

The July 1996 Board paper and the Janu-ary 1998 Operational Memorandum estab-lished a framework for the operations of theSanctions Committee. The policies containedin these two documents provided the basis forprocedures subsequently finalized with theassistance of the Thornburgh team and issuedin August, 2001. Those procedures providedfor sanctions that included periods of ineligi-bility (limited or indefinite) to participate infuture Bank-financed procurement, letters ofreprimand, and requirements that the respon-dent institute training and integrity programs

for its employees. Sanctions imposed areposted on the Bank’s external website.

Under its procedures, the Committee re-views each case, notifies respondents of theallegations, holds hearings to which the respon-dent is invited and, based on its conclusionsin each case, makes recommendations to thePresident. The first case was decided in March1999. As of June 30, 2004, the Committee hadreceived 63 cases from INT, met 48 times, andheard 43 cases. On the basis of Committeerecommendations, the Bank had debarred 131firms and 94 individuals, and had issued 11letters of reprimand—eight to firms and threeto individuals (see Table below).

Review of Experience and CurrentReform Process

In 2002, the Bank undertook a review of thesanctions process to ensure that it was func-

Appendix

Sanctions CommitteeBackground and Historical Data

9 Fraud and Corruption—Proposed Amendmentsin the Bank’s Loan Documents for the Purposeof Making Them More Effective in the FightAgainst Fraud and Corruption, dated July 11,1996 Board Paper R96-112/1

10 January 5, 1998 Operational Memorandum onFraud and Corruption under Bank-FinancedContracts: Procedures for Dealing with Allega-tions Against Bidders, Suppliers, Contractors,or Consultants.

11 The Committee is not involved in sanctioningBank staff or borrowers accused of such activi-ties.

42


tioning in an effective and efficient mannerand affording a fair process to those involvedin the proceedings. As part of the review, theBank again engaged the Thornburgh team toprepare a report assessing the Bank’s debar-ment process and making recommendationswith respect to possible reforms to existingpractices. Following further internal review anddiscussion, the proposed reforms were sub-mitted to the Board of Directors for their con-sideration in June 2004.

The goal of the proposed reform is to in-crease the effectiveness of the Bank’s sanc-tions process by streamlining the process, ex-panding the types of sanctions available, andinstituting a temporary suspension mechanism

to protect the institution from further lossesdue to fraud and corruption while cases arepending. In terms of specific changes to theexisting process, the most significant ones in-clude:

a) modification of the membership of theSanctions Committee (to be renamed“Sanctions Board”) to include both Bankstaff and non-Bank staff, sitting in panelsof three to decide cases;

b) establishment of a new staff position of“Evaluation and Suspension Officer” withthe authority to issue temporary suspen-sions pending final resolution of the caseson appeal to the Sanctions Board (the

The Sanctions Process(FY99–FY04)

FY99 FY00 FY01 FY02 FY03 FY04 Total

Sanctions-related Actions a

Number of Cases Received b 8 6 4 7 15 23 63

Number of Committee Sessions c 7 11 9 8 5 8 48

Number of Cases Heard 5 8 2 4 8 16 43

Number of Sanctions Applied

Number of Debarments

Firms 7 37 15 3 14 55 131

Individuals 2 8 4 1 8 71 94

Total Debarments 9 45 19 4 22 126 225

Number of Letters of Reprimand

Firms — 1 2 — 1 4 8

Individuals — — — — — 3 3

Total Letters of Reprimand — 1 2 — 1 7 11

Total Sanctions Applied 9 46 21 4 23 133 236

a Although the Committee followed a sanctioning process and debarred 306 firms and individuals, the totals may not add up as some firms and individualswere debarred under more than one case.

b In some instances, more than one session was convened to deal with a single case; in other instances a single session was able to deal with more than onecase.

c One case was dealt with by the Sanctions Committee twice, in FY01 and FY04.

Appendix 3

43

Evaluation and Suspension Officer’s pre-liminary decisions would become final ab-sent an appeal by the respondent or INT);and

c) introduction of measures to address a per-ceived need for lighter and more flexiblesanctions, recognition of cooperation as amitigating factor in sanctions determina-

tions, and additional incentives to contrac-tors to disclose voluntarily informationabout fraud or corruption in Bank-financedprojects.

These reforms were approved by the Boardof Directors on July 9, 2004 and the Bank iscurrently in the process of implementing them.

45

4The Investigative Process:

Allegations of Staff Misconduct

Appendix

Investigative Process (First Stage)

Intake & Evaluation

Walk-inTelephone

LetterEmail

HelplineHotline

Receiptof Complaint

No YesIsMisconduct

Alleged?

Referto Mgmt, HR,

or CRS

InitiatePreliminary

Inquiry

46


Investigative Process (Second Stage)

Preliminary Inquiry

DevelopInvestigative Plan

ID Allegations/IssuesDetermine StandardsID DocumentsID WitnessesDetermine investigative steps

Conduct Preliminary Inquiry

Prepare Report on Results ofPreliminary Inquiry

SufficientEvidence to Merit

Investigation

InitiateInvestigation

AllegationsUnfounded

FurtherInvestigation is

Negated

Referral to Mgmt,HR or CRS deemedmore appropriate

Notify Manager(s),Complainant,and Subject of

Outcome

Appendix 4

47

Initiate Investigation and UpdateInvestigative Plan

Evaluate Evidence

All AllegationsUnfounded and/orUnsubstantiated

Prepare FinalReport of

Investigation

Draft FinalReport of

Investigation

At Least oneAllegation isSubstantiated

Provide Subjectwith Draft Report forReview & Comments

IncorporateSubject's Comments

into Report

Followup onSubject's Rebuttal

as Appropriate

Provide RevisedDraft to Subjectas Appropriate

FinalizeReport

Submit FinalReport to HR

for Decision onMisconduct and

Discipline, if any

Interview WitnessesObtain Documentary

EvidenceUse of SubjectMatter Experts

Notify Subject,Interview & ObtainWritten Response

Followup onRebuttal Witnesses and/orDocuments as Appropriate

Notify Manager(s),Complainant,and Subject of

Outcome

HR NotifiesSubject, Manager(s),

Complainant ofOutcome

Investigative Process (Third Stage)

Investigation

49

5Appendix

Trends in Case LoadFiscal 1999–2004

Total Investigations Case Load

TotalFY99 FY00 FY01 FY02 FY03 FY04 FY99–04

Carried Over — 66 227 470 430 321

New Cases 167 400 545 550 339 354 2,355

Cases Closed 101 239 297 590 448 341 2,016

Year-end Total 66 227 470 430 321 334

Internal Investigations Case Load


Carried Over — 19 52 109 112 77

New Cases 91 160 176 137 125 151 840

Cases Closed 72 127 119 134 160 118 730

Year-end Total 19 52 109 112 77 110

External Investigations Case Load


Carried Over — 47 175 361 318 244

New Cases 76 240 369 413 214 203 1,515

Cases Closed 29 112 178 456 288 223 1,286

Year-end Total 47 175 361 318 244 224