Bar Complaint Charges Former World Bank Official with Ethics Violations

WASHINGTON -  Today, April 6, the Government Accountablity Project (GAP) filed a
complaint with the Washington, D.C. Bar Association against Suzanne
Folsom, former Director of the Department of Institutional Integrity
(INT) at the World Bank from 2006 to 2008. The complaint reveals
unethical actions taken by Folsom as the manager of the Bank’s
investigations unit, including improper interference with an external
review, abuse of authority, harassment, and deception of INT staff.

According to the complaint, concerns about mismanagement at INT under
Folsom became so serious in 2007, that then-World Bank President Paul
Wolfowitz was obliged to convene an independent external panel chaired
by Paul Volcker to review the investigative practices in place. In the
two years since the Volcker Panel issued its report, Bank management has
repeatedly heralded the implementation of the Panel’s recommendations
as
evidence of effective action to combat corruption. Rulings
handed down in December 2009 by the Administrative Tribunal (AT), the
Bank’s internal court, in response to sixteen complaints filed by INT
staff members, however, illustrate Folsom’s deliberate and substantial
interference with this supposedly independent commission. The rulings
show that Folsom manipulated the inquiry in order to influence its
findings and weaken its recommendations.

When Folsom managed INT, GAP also released a report on management at
the unit that documented widespread irregularities, in contrast to less
critical conclusions of the Volcker Panel.

The bar complaint is available
on GAP’s website by clicking here.

Folsom’s Source
inside the Volcker Panel

Specifically, Folsom recruited a member of the Volcker panel to
inform her of the identities of the panel’s witnesses, as well as the
content of what they said. Ruling No. 419, for example, describes
Folsom’s interference in detail; the text identifies Folsom as “Ms. X:”

In October 2005 the President of the
Bank appointed Ms. X as Acting Director of INT. She became Director of
INT in January 2006.

The INT staff member who exposed Folsom’s manipulation is identified
as “the Applicant.” In the text of the ruling, the witness for World
Bank management is quoted admitting Folsom’s
illicit contact with the Volcker panelist:

[The Applicant] makes reference to
sub rosa conversations [Ms. X] regularly had with a member of the
Volcker Panel during which she would receive information on the INT
staff who registered concerns about INT management with the Panel. [Ms.
X] indeed told me that she engaged in these meetings and even informed
me of the name of the specific panel member. ... [Ms. X] indeed told me
and [the Applicant’s supervisor] that [the Applicant] was among the
staff who spoke ill of [Ms. X] and that she would punish him, that he
would never get promoted (AT
Decision 419, para. 45)

Acting on information from her informant, Ms. Folsom then retaliated
against those who criticized her.

“Folsom’s action inevitably had a
chilling effect on other INT witnesses before the Volcker Panel,” said
GAP International Director Bea Edwards. “The Panel informant violated
the witness’ confidentiality and exposed them to Folsom’s reprisals.
Other staff members saw that happen. The Tribunal rulings taint the
conclusions of the entire Volcker review.”

Misleading the
Panel Regarding INT Practice

The rulings also show that Folsom altered her management practices in
order to mislead the Volcker Panel about the administration of INT (AT
Decision 410, para. 52). The witness for management
explained to the Tribunal how Folsom invented department-wide evaluation
criteria solely for the benefit of the panel:

This change [to the Results
Agreement] was a consequence of [Ms. X’s] decision during the latter
part of the third quarter of the OPE [Overall Performance Evaluation]
cycle to have the management team develop and issue across the
department standardized Results Agreements for investigators, without
prior notice to INT staff, and was based on [Ms. X’s] stated desire to
showcase the standardized Results Agreements in her submissions to then
impending Independent Review Panel headed by Chairman Volcker.

Instead of presenting the Panel with documents that accurately
reflected INT performance standards, Folsom produced fictitious accounts
of her management practices. Her version of administrative procedures
stood uncorrected when the Panel issued its findings and made
recommendations for “reform.”

What the Rulings Do

The sixteen appellants to the Tribunal alleged that they suffered:
violations of due process, breaches of confidentiality, a hostile work
environment, unfair treatment, and abuse of discretion at the hands of
INT management (AT
Decisions 408 - 423, para. 3). Tribunal judges validated
these complaints and attributed the responsibility for the chaos at INT
to Folsom. INT staff members have said informally to GAP that under
Folsom, INT became little more than a “plumbers’ unit,” dedicated to
plugging the information leaks that embarrassed Wolfowitz as Bank
president. They added that the correctives recommended by the Volcker
Panel were insufficient.

A Separate Ruling
against Folsom

In a separate ruling cited in GAP’s Bar Complaint, the World Bank’s
Tribunal revealed that Folsom personally intervened in an improper
investigation of the General Counsel of the private sector lending arm
of the Bank, the International Finance Corporation, and conveyed the
impression to a senior manager that the investigation’s target was
guilty of misconduct allegations when, in fact, she was not.

The ruling found that Folsom’s actions in this case damaged the
former General Counsel’s professional and personal reputation, and
forced her into early retirement as a result of the stress of a
protracted, intrusive and investigation.

As a consequence of all seventeen decisions, the Bank will pay the
victims over $2 million in damages and compensation.

Folsom’s Departure
& the Lack of Bank Action

Ultimately, Bank President Robert Zoellick forced Folsom to resign in
January 2008.

“Ironically, Folsom was forced out for leaking confidential Bank
documents to the press,” said Edwards. “In a sense, the head plumber
herself was fired for leaking.”

As a condition of her departure, however, Folsom pocketed a severance
payment of about $400,000. Additionally, an INT staff member claims
that Zoellick allowed Folsom a weekend of unfettered access to INT
offices during which she was free to remove and shred documents.

Although the Lead Internal Investigator at INT, Wayne Nardolillo,
informed the AT that Folsom told him the identity of her informant on
the Volcker panel, World Bank management appears to have taken no action
to hold the panel member to account, to determine the influence this
member had on the panel’s final recommendations, or to revisit the
Volcker exercise for the purpose of instituting real reforms in
corruption investigations. On the contrary, Bank management continues to
tout the recommendations of the Volcker Panel as if they were credible
rather than distorted by Folsom’s unethical influence.

Folsom’s Recent AIG
Controversy

Three months after leaving the World Bank, Folsom was hired by AIG as
the chief compliance and regulatory officer. From AIG, she collected a
second golden parachute of $1 million after less than two years at the
company, even as other AIG executives fought the imposition of the
$500,000 annual pay caps by Kenneth Feinberg, the Paymaster for
bailed-out US corporations and banks. Folsom, who left “to pursue other
opportunities,” accompanied AIG’s General Counsel, Anastasia Kelly, out
the door, who openly left the company because of the pay caps after
counseling other AIG executives on how to avoid them. Senator Charles
Grassley is inquiring into the generous terms of Folsom’s simultaneous
separation.