Over the course of the past year, GAP has received a succession of complaints about unethical practices at the Office of Institutional Integrity (OII) of the Inter-American Development Bank (IDB). OII is the unit responsible for investigating allegations of corruption, waste and fraud at the IDB, and Brígida Benítez has served as OII Chief since January 2010. In each case, the complaints sent to us were first circulated internally at the IDB.
Soon after she took her position, Benítez’s lack of experience in fraud investigations became a source of concern. As a former partner at Wilmer Hale, her previous responsibilities had focused primarily on litigation and commercial trade disputes. Even as she serves as OII Chief, her extra-curricular work continues in this field: during the past academic semester, she taught a course in transnational litigation at American University (AU).
It should be emphasized that not only does investigation require a different skill set than litigation, but in many ways the two approaches to a set of facts are diametrically opposed. While an investigator examines facts impartially, a litigator uses facts to construct a narrative favorable to his/her client. The selection of a litigator, rather than an investigator, to head the IDB’s investigative unit, therefore, raises doubts about the Banks’ commitment to an impartial OII.
In August 2010, a second complaint concerning Benítez surfaced. An e-mail sent to four senior managers as well as many others at the Bank (including the Board of Directors) alleged that she had altered the search criteria for the position of Principal Integrity Officer in order to select a personal friend, Marlon Paz, who co-taught with her at AU and with whom she had worked closely in other capacities. The author of the e-mail cited a) Staff Rule 315, which establishes that a competitive search process is required to fill Bank positions, and b) the Bank’s Code of Ethics, which prohibits a staff member from participating in employment decisions that affect a candidate with whom the staff member enjoys a personal relationship.
The allegations in the e-mail show that before Benítez arrived at OII, the search criteria established to fill the Integrity post included prerequisites that would have eliminated her friend Paz from consideration. Among these requirements was the stipulation that successful candidates would need at least ten years experience in corruption and fraud investigations, and two years experience working in a variety of international sectors. Documents circulated with the e-mail showed that Benítez had discarded the parameters of the ongoing search and formulated altered requirements tailored to Paz’s background. The initial requirement that the candidate have a: “Comprehensive knowledge of relevant legal systems and investigative strategies and methodologies,” was changed to require instead a: “Comprehensive knowledge of investigative strategies, methodologies and techniques, which may include experience in complex litigation strategy.” Under Benítez, the position no longer required a familiarity with different legal systems, as one would expect of an investigator in an international institution. Instead, knowledge of litigation strategies was substituted. This switch is inexplicable except as a concession to the experience of Marlon Paz. Because of its legal immunities, the IDB does not litigate cases of firms or individuals suspected of corruption or fraud. Instead, suspected parties are referred to a Sanctions Committee, which may or may not debar them. In short, investigations conducted at OII virtually never find their way into a courtroom in any jurisdiction.
The changed requirements for what became Paz’s position at OII also announced that: “Knowledge of financial institutions and corporate finance issues is preferred,” a qualification that fit Paz but not OII or the IDB. Although the IDB is technically a “financial institution,” it is more specifically an intergovernmental financial institution, which adds a multilateral political layer to the organization. The IDB is not a commercial or investment bank, and only a relatively minor proportion of its operations deal directly with private corporations.
Like Benítez, Paz was more expert in U.S. commercial litigation than in investigations: investigations he had handled involved securities professionals, not political officials or public employees. He was an attorney whose biography at Georgetown Law School reads: “He previously served as the Senior Counsel to the Director of Trading and Markets at the U.S. Securities and Exchange Commission and practiced business and securities law in private practice.”
Irregularities also surrounded the timing of Paz’s completion of the requirements to become a Certified Fraud Examiner. Evidence circulated at the IDB alleged that Benítez informed Paz he would need this credential, and he then hastily prepared and applied for it. In fact, Paz arrived to assume his position at OII in July 2010, and he received the CFE credential during the previous 60 days, while the search was already underway.
On Friday, June 3, 2011, GAP received by regular mail additional allegations concerning the focus of OII, and the sanctions process. In brief, the whistleblowers assert that Benítez is referring few, if any, cases to Juan Ronderos, the new Sanctions Case Officer, for review. If true, this is certainly a continuation of past practice in the sanctions and debarment game at the IDB. Since 2010, of 33 parties sanctioned for corrupt or fraudulent practices, 22 are individual consultants and 11 are firms, a record that strongly suggests a long-term emphasis on small cases rather than larger, more significant ones. Only one firm from a donor country has been sanctioned – a record of selectivity that strains credulity. Of the six firms sanctioned thus far this year, GAP was unable to locate a website for a single one of them, suggesting that they are very small-scale operations.
These complaints taken together, and the issues raised, indicate ineffective – if not unethical – management at OII. Using a verifiably independent office or agent, IDB management must investigate these allegations of improper recruitment and cronyism in the very office established to protect the integrity of the bank. Moreover, the Bank should take steps to ensure that investigative resources are spent effectively rather than squandered on dubious investigations of microenterprises.
Beatrice Edwards is International Reform Director for the Government Accountability Project, the nation’s leading whistleblower advocacy organization.