World Bank Exempts Its Own Operations From Accountability Demanded of Borrowers

For Immediate Release

Contact: 

Bea Edwards, International Program Director
202.408.0034, ext 155 beae@whistleblower.org

Dylan Blaylock, GAP Communications Director
202.408.0034, ext. 137 dylanb@whistleblower.org

World Bank Exempts Its Own Operations From Accountability Demanded of Borrowers

GAP Letter to US Executive Director Questions Inconsistency

WASHINGTON - Governments that borrow
from the World Bank must account for their loan funds much more transparently
than the Bank itself accounts to taxpayers for its own financing. The
Government Accountability Project (GAP) pointed out this discrepancy in a paper
and a letter sent today to US Executive Director Eli Whitney Debevoise,
outlining the Bank's inconsistent disclosure practices regarding vendors.
While contracts financed through loan and project funds are publicly disclosed,
contracts between the Bank and its own vendors are shrouded in secrecy and kept
from public review. This double-standard has been highlighted and questioned
over the last six months, as the Bank's increasingly dubious relationship
with IT contractor Satyam Computer Services has slowly bled out through news
articles, culminating in the disclosure of a $1 billion fraud.

The
GAP paper details how the Bank holds borrowing country governments to much
higher standards than it applies to its internal operations and contracts.
Specifically, the paper focuses on the lack of transparency when the Bank's
direct contractors are debarred. In 2008, the Bank chose not to reveal -
even to its sister organizations in the UN system - indisputable
indications of corruption at the highest levels of Satyam's management
when it suspended the company from consideration for future work. As a result
the United Nations Development Program (UNDP) granted a six-million dollar
contract to Satyam in June 2008 - a contract that would probably not have
been awarded if the Bank's debarment policy had allowed for greater
transparency and action. 

Click here to read the letter to Debevoise: http://www.whistleblower.org/doc/2008/finalletter.pdf

Click here to read GAP's paper: http://www.whistleblower.org/doc/2008/finalpandd.pdf

Interestingly, an internal Bank review prepared six
years ago by former UN Undersecretary Dick Thornburgh examined this very
problem. At the time, the Bank's silence and secrecy about its overall debarment
procedures had provoked heavy criticism. Among other things, the
recommendations Thornburgh included in his 2002 report specify that:

  • Individuals, not
    just companies, should be debarred, in order to prevent corrupt
    contractors from simply switching companies and working for the Bank under
    different auspices;
  • The Bank should
    communicate findings of wrongdoing to other relevant parties;
  • The Bank should
    educate relevant Bank staff about such wrongdoing and misbehavior.

These are only a few of the recommendations in
Thornburgh's report that the Bank has ignored when debarring direct
contractors from its internal operations. The Bank certainly should have
considered the United Nations a relevant party with respect to the risk of
contracting Satyam, but debarment information and corruption concerns about the
company were not disclosed.

Regarding individual debarment, the World Bank does
apparently debar individuals from future work. Such debarments, however, are
not enforced; banned individuals can apparently re-surface in key managerial
positions at other firms that remain eligible for World Bank contracts (and
loans from the International Finance Corporation, the Bank's private
sector lending arm). An obvious example of this is Mohamed Muhsin, a key player
in the Satyam scandal who was permanently debarred from future work at the
Bank. Nevertheless, one firm in which he holds a senior management position has
a close and continuing contracting link to the Bank and another, from which he will
resign, received a $75 million IFC credit in February 2008.

"The World Bank's preferential treatment for "India's
Enron" and its accomplice, Mohamed Muhsin, is inexplicable, particularly
in an organization that portrays itself as a major anti-corruption
force," said Bea Edwards, International Program Director at GAP. 
"We have to wonder why the Bank exempts itself from the good governance
standards that its borrowers must respect."

 Click
here to read GAP's original letter to Bank Managing Director Juan Jose
Daboub: http://www.whistleblower.org/doc/2008/DaboubLetterFinal.pdf

Click
here to read Daboub's response: http://www.whistleblower.org/doc/2008/DaboubResponse.pdf

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The Government Accountability Project (GAP) is a 30-year-old nonprofit public interest group that promotes government and corporate accountability by advancing occupational free speech, defending whistleblowers, and empowering citizen activists. We pursue this mission through our Nuclear Safety, International Reform, Corporate Accountability, Food & Drug Safety, and Federal Employee/National Security programs. GAP is the nation's leading whistleblower protection organization.

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