Paul Volcker has another investigation panel and it just issued a report about the anti-corruption programs at the World Bank - the report is at:
http://siteresources.worldbank.org/NEWS/Resources/Volcker_Report_Sept._12,_for_website_FINAL.pdf
You may remember that Paul Wolfowitz was appointed head of World Bank in 2005 - one of his main objectives was to reduce chances of corruption similar to those in the UN. He established a separate investigative group called INT. Then, in early 2007, he established a review panel chaired by Paul Volcker (who had earlier reviewed the UN's Oil for Food Corruption problems). Wolfowitz was later forced out of the World Bank for other reasons, and now the Volcker panel has issued their 67 page report.
One of the interesting uses of the report is an appendix that includes a review of internal corruption investigation practices at five other large institutions.
It seems there was lots of conflict between the INT group and the World Bank staff, and the Washington Post article below says: "While the unit has achieved "some notable success," resistance to its mission has been "particularly strong" at the World Bank because of a feeling among the staff and even members of the executive board that a "strong anticorruption effort would somehow be antidevelopment and 'penalize the poor twice,' by curtailing lending in corruption-prone countries," the report said."
Basically, this is what I ran into with the US State Dept., the wimp factor. The WB staff are saying if there are too many rules to reduce corruption, they won't be able to lend funds into "corruption prone Countries". Ok, we have rules to prevent the beating of children and baby seals, but the WB wants to skip rules when lending into corrupt countries. That means the WB (using mostly US funds) lends money to corrupt governments, a big chuck is skimmed due to corruption, but that is ok, because some funds do get to the poor in that country. Talk about liberal attitudes.
I don't favor giving any funds to the World Bank if they have that attitude.
The detailed report also discusses that the WB has an aggressive emphasis, with incentives, on seeking out "development" (aka lending) opportunities. So, it sounds like it was a high powered sales operation where the sales (i.e. development) staff would push lending projects to earn bonuses without regard to anti-corruption or other controls. This is what sank Enron, Arthur Andersen and other firms like sub-prime mortgage lenders or stock brokerages that started dis-regarding business controls. Now I REALLY don't want US funds to go the World Bank.
vj
========================================
from the WashingtonPost.com
World Bank Unit Close to Wolfowitz Cited for Reform
By Glenn Kessler
Washington Post Staff Writer
Friday, September 14, 2007; D01
An anti-corruption unit at the World Bank heavily promoted by ousted president Paul D. Wolfowitz needs to be overhauled to mend tense relations with the rest of the bank's staff, according to a report released yesterday by a high-level outside review panel.
The panel, headed by former Federal Reserve chairman Paul A. Volcker, lauded the overall goal of the bank's Department of Institutional Integrity but said changes were required to end unnecessary conflicts with the bank's staff and reduce a "siege mentality" that undermined its effectiveness.
While the unit has achieved "some notable success," resistance to its mission has been "particularly strong" at the World Bank because of a feeling among the staff and even members of the executive board that a "strong anticorruption effort would somehow be antidevelopment and 'penalize the poor twice,' by curtailing lending in corruption-prone countries," the report said.
The report also said the World Bank had a culture that "favors seeking out lending opportunities" and a pay and performance evaluation system that favors making "loans for promising projects." Probes that might expose corruption were resented because they created "an awkward problem in relations with borrowing clients." As a result, the report said, "a lack of common purpose, distrust, and uncertainty has enveloped the anticorruption work of the Bank."
The panel recommended a series of institutional and managerial shifts to end the unit's isolation, including making the unit's director a vice president. "What is necessary is a fully coordinated approach across the entire World Bank group, ending past ambivalence about the importance of combating corruption," the report said.
Robert B. Zoellick, who replaced Wolfowitz as president this summer, embraced the report, telling reporters that it "makes clear the serious challenges ahead in overcoming the cancer of corruption in operations supported by the bank, and it offers constructive recommendations."
The department's director, Suzanne Rich Folsom, a lawyer with strong Republican ties, has been a lightning rod for criticism of the unit. Zoellick said, however, that he planned to name her vice president.
Folsom was counselor to Wolfowitz's predecessor, James D. Wolfensohn. Wolfowitz retained her as counselor and then named her director of the unit last year, ignoring the recommendations of an internal search committee, according to a report issued last week by the Government Accountability Project, a watchdog group.
"She has done very good work, operating in extremely difficult circumstances," Zoellick said. "The Volcker report recognized that work."
The GAP report criticized her for holding dual roles as counselor to the president and heading the anti-corruption campaign, saying it posed a conflict of interest. It said Folsom was biased toward hiring Americans and accused her of "a pattern of abuse of authority."
The Volcker report agreed that the head of the unit should not also be counselor to the president "in the interest of clarifying the purpose and independence" of the unit. It also called for "more diversity in [the department's] staff, consistent with the need to recruit investigators of the highest technical competence."
============================================
Here is a link to the World Bank's Anti-Corruption webpage:
http://web.worldbank.org/WBSITE/EXTERNAL/WBI/EXTWBIGOVANTCOR/0,,menuPK:1740542~pagePK:64168427~piPK:64168435~theSitePK:1740530,00.html
And the Worldbank press release on the Volcker report, plus the link to the pdf report
World Bank President Robert B. Zoellick Welcomes Volcker Panel Review of the World Bank’s Institutional Integrity Department
Available in: Spanish, Arabic, Russian, French, Chinese
Press Release No:2007/064/EXC
Contacts:
In Washington: Amy L. Stilwell (202) 458-4906
astilwell@worldbankk.org;
Geetanjali Chopra (202) 473-0243
gchopra@worldbank.org
Related Links
* Comment on the Volcker Report & Bank Proposals
* Volcker Panel Executive Summary (pdf)
* Volcker Panel Full Report (pdf)
* Volcker Panel Website
* World Bank Institutional Integrity Website
* World Bank Governance Website
Washington, DC, September 13, 2007 - World Bank Group President, Robert B. Zoellick, has expressed his appreciation for the report of the panel led by Paul Volcker, which reviewed the work of the Institutional Integrity Department (INT) in the context of the World Bank Group’s governance and anticorruption strategy.
“This is an excellent and most useful report,” Zoellick said. “The Volcker report makes clear the serious challenges ahead in overcoming the cancer of corruption in operations supported by the Bank, and it offers constructive recommendations. Now it will be up to all of us to move forward, as part of our on-going commitment to address this vital issue.”
The Bank President said improving governance and overcoming corruption are critical factors to ensure development resources reach the poor who need them. “Stealing from the poor is not acceptable,” he said.
INT has the difficult job of investigating fraud and corruption in Bank-supported operations. It also investigates allegations of staff misconduct and administers the Bank’s Voluntary Disclosure Program, which encourages companies to adopt healthy business practices. INT performs important work that should be recognized and strengthened.
“The World Bank Group needs a strong, professional Institutional Integrity Department, backed by management and supported by a Bank-wide commitment,” Zoellick said. “As the report has explained, INT has achieved notable success, but we can do better and need to integrate its work into our operations more effectively and consistently.”
The Volcker panel’s detailed recommendations will be carefully and promptly considered by the World Bank Group.
As a first step, an internal working group from across the institution will be established to consider the panel’s recommendations, in light of its ongoing internal work on a governance and anticorruption strategy.
The World Bank Group will also encourage public comment on the report, which will be considered by the working group. A top priority will be defining a policy for disclosing information about INT’s work to Bank staff and management, the Board of Executive Directors, governments, development partners and the public.
The World Bank Group also proposes to improve INT’s effectiveness in the following areas:
*
Developing a capacity within INT to disseminate operational advice, lessons learned and best practices resulting from its work;
*
Ensuring that INT findings and recommendations are followed-up in a systematic and comprehensive manner, across all units of the Bank;
*
Working with the Audit Committee of the Board to strengthen accountability of INT and consider other steps to assure INT’s independence and support;
*
Reviewing and revising, as needed, staff rights in the conduct of investigations of alleged misconduct;
*
Considering the reassignment of investigations of staff misconduct, not involving fraud or corruption, from INT to another office;
*
Developing a policy to ensure that staff members are better informed of the outcomes of investigations of alleged staff misconduct; and
*
Evaluating the Voluntary Disclosure Program after the first year to assess its effectiveness.
The Bank will seek external comment on these initial proposals by posting them on the Bank’s website, along with the Volcker panel’s report and recommendations.
In considering the public comment, management and the working group will consult with the Bank's Board as an integral part of its deliberations prior to making final recommendations, which will be incorporated into the Bank’s new Governance and Anticorruption Strategy.
“The World Bank Group operates as a public trust,” Zoellick said. “It must be committed more than ever to improving its work on governance and anticorruption at all levels, as fighting corruption is critical to achieving its mission of overcoming poverty and encouraging sustained growth. As the Volcker report notes, there should be no illusions about the difficulty of the effort, yet the World Bank Group must continue to do better.”
Zoellick expressed his personal thanks to all the members of the independent review panel [http://www.independentpanelreview.com], led by former US Federal Reserve Chairman Paul Volcker and including Gustavo Gaviria, a Colombian entrepreneur; John Githongo, a Kenyan anti-corruption crusader; Ben Heineman, former General Counsel of General Electric; Walter Van Gerven, a distinguished Belgian legal scholar; and Sir John Vereker, Governor of Bermuda and a former Permanent Secretary for the UK’s Department for International Development.
============================================
And here is an old 2004 article where a US Senate Committee was criticizing the World Bank's losses due to corruption. It may be one of the reasons the above group was created. vj
http://www.commondreams.org/headlines04/0514-07.htm
Published on Friday, May 14, 2004 by Inter Press Service
Poorest Pay for World Bank Corruption - US Senator
by Emad Mekay
WASHINGTON - The World Bank has lost about 100 billion dollars slated for development in the world's poorest nations to corruption since 1946, nearly 20 percent of its total lending portfolio, according to a U.S.. Senate committee.
”It is critical that every development bank dollar reaches its intended recipient,” said Sen Dick Lugar, chairman of the Senate Foreign Relations Committee, on Thursday. ”Unfortunately, that is not happening - corruption remains a serious problem.”
Lugar cited one of the panelists as the source for the massive figure. Jeffrey Winters of Northwestern University, who testified before the hearing, estimated the World Bank ”has participated mostly passively in the corruption of roughly 100 billion dollars of its loan funds intended for development.”
Other experts estimate that between five and 25 percent of the 525 billion dollars the Bank has lent since 1946 has been misused. This amounts to 26-130 billion dollars.
”Even if corruption is at the low end of estimates, millions of people living in poverty may have lost opportunities to improve their health, education and economic condition,” Lugar said.
A World Bank spokesman vehemently disputed the estimate. ”We completely reject the figure offered by one of the panelists,” said Damian Milverton. ”It has no basis in fact.”
Corruption has become a global issue as developing countries, watchdog groups and some economists complain that poor nations lose huge funds from multilateral development banks (MDBs) like the World Bank because of misuse of money. Yet taxpayers in those borrowing countries have to still to repay the banks.
”So, not only are the impoverished cheated out of development benefits, they are left to repay the resulting debts to the banks,” Lugar added.
The estimates emerged at the first in a series of oversight hearings into the anti-corruption efforts of the World Bank and other multilateral development banks (MDBs), which include the Inter-American Development Bank (IDB) the Asian Development Bank, the African Development Bank, and the European Bank for Reconstruction and Development.
Testifying at Thursday's hearing were the U.S. representatives to the World Bank and the IDB, as well as four outside experts.
Manish Bapna, executive director of the Washington-based watchdog group Bank Information Center (BIC), said corruption threatens the core mission of those banks: poverty alleviation.
”While MDBs profess 'zero tolerance' for corruption in their projects and programs, this rhetorical commitment has not always been meaningfully implemented,” Bapna said.
Corruption can also undermine the development impact of the banks' projects, for example, if contractors use diluted cement in civil works like road-building, officials permit illegal timber harvesting in restricted forest areas, or grant profitable public contracts to well-connected cronies of government officials.
Another example mentioned at the hearing is a project in Lesotho, Africa. Last year a court in that country convicted the director of the Lesotho Highland Water Authority, as well as two international contractors who had paid bribes, of corruption in the awarding of contracts. The World Bank financed part of the project.
Professor Jerome I Levinson of the Washington College of Law at the American University referred to that particular case, and suggested there is a remedy for such actions.
”The World Bank, potentially, has an effective, if draconian, remedy,” he said. ”It could place the international contractors on a proscribed list barring them from bidding on any future World Bank financed projects anywhere in the world.”
The bank says its list of barred companies and individuals now includes 90 names.
Levinson also noted that such projects are usually financed or administered through an auxiliary of a parent company, which is created just to carry out a particular project and then dissolved once the work is completed. That parent should be held responsible for any corrupt activities, he added.
”If we are serious about addressing the cancer of corruption in projects even partially financed with public international funding, I think that it is reasonable to insist upon the entire project being subject to procurement guidelines that assure transparency in the award of international contracts and thus minimize the risk of corrupt payments in connection with such contracts,” he added.
Some of the witnesses also urged multilateral banks to ensure that funds released for non-specific purposes are not subject to corruption, and suggested audits of how that money was eventually spent, admitting that last step could prove difficult.
”Realistically, however, this is the weakest link in the system,” Levinson said. ”Money is fungible. It is extremely difficult, if not impossible to trace the ... disbursed funds.”
Winters, on the other hand, suggested that the MDBs be supervised by an independent auditing body.
”The MDBs must do a much better job supervising and auditing projects and loans,” he said. ”But the only effective way to protect against corruption of development funds is to establish an international auditing body that is independent of the MDBs and of private sector auditing firms -- nearly all of which have deep conflicts of interest.”
Milverton said the World Bank already has multiple layers of oversight mechanisms, including audits, an inspection panel that reviews complaints against Bank projects, and the institution's governing board, among others.
Carole Brookins, the U.S. executive director to the World Bank, told the hearing that combating corruption and building good governance have been major priorities of the Washington-based institution since 1996.
”The World Bank continues to be the leader among international development institutions in a broad range of country-based initiatives to strengthen governance, build effective local institutions and increase transparency,” she said.
In the last fiscal year, the MDBs financed projects worth more than 35 billion dollars in the areas of public administration, transportation, health and education, among others.
The United States contributes more than one billion dollars a year to the banks, with a large majority of that money going to the World Bank's International Development Association, which lends to the very poorest countries at subsidized rates.
Copyright © 2004 IPS-Inter Press Service
=======================================
