GAP Letter to US Executive Director Questions Inconsistency

(Washington, D.C) – 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

Click here to read GAP’s paper

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

Click here to read Daboub’s response

Government Accountability Project

The Government Accountability Project is the nation’s leading whistleblower protection organization. Through litigating whistleblower cases, publicizing concerns and developing legal reforms, GAP’s mission is to protect the public interest by promoting government and corporate accountability. Founded in 1977, GAP is a non-profit, non-partisan advocacy organization based in Washington , D.C.