Corruption In Iraq & World

DoD IG Resigns After One Year on the Job

Well, after only one year on the job, the DoD Inspector General (IG), Claude Kicklighter, has resigned. Most articles are based upon the AP article below, and no real reason is given why he left to take a teaching position.

Was he forced out because of the IG audit report disclosed at a recent House Oversight committee meeting? We talked about that report earlier, because it glossed over the issue of the Prompt Pay Act, and how in MY experience, the DoD financial office would pay vendor bills for Iraq Reconstruction projects without requiring a receiving or inspection report from the reconstruction office that ordered the materials.

Or, maybe it was because he stated in the article below that the IG office was not staffed adequately to audit all the defense projects in the works.

I can say that the ratio of only one auditor to $2-billion in spending programs is ludicrous. I set up three internal audit departments, and the average recommended ratio of auditors to company budgets was about 1 auditor per $100-million in spending in new departments, then it drops down to 1 auditor per $200-million after initial audited operations are improved. As a reference, a local school district with a $700-million budget has one auditor (who is new, and clearly understaffed - he can't even come up with enough time to work on the special audits demanded by the Board). Also, the Lake County government with a budget over $400-million has an audit department of five, and they are still trying to catch up with control and operational audits that are needed.

If I find out more about why Kicklighter left (which probably won't be disclosed), we will let you know. It could be just that he is 71, and was tired of the ratrace.
vj

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from THIS AP source

Pentagon's top investigator to resign

By RICHARD LARDNER – 1 day ago

WASHINGTON (AP) — The Pentagon's inspector general is resigning after just over a year in the job and at a time when defense spending has skyrocketed but personnel shortfalls in the oversight office have strained its ability to probe allegations of waste, fraud and abuse.

Claude Kicklighter, 74, took over as the military's top investigator in April 2007. He'll be replaced by Gordon Heddell, the Labor Department's inspector general since January 2001.

The Defense Department announced the changes Wednesday. It's not clear if Heddell, who will hold the post in an acting capacity, will be officially nominated for the position.

Kicklighter's departure marks yet another shift in leadership at this key Pentagon office. In September 2005, Joseph Schmitz resigned to be chief operating officer and general counsel for the Prince Group, which owns security contractor Blackwater Worldwide.

Schmitz's more than three-year tenure as Pentagon inspector general was marred by allegations he improperly interfered with two ongoing investigations to protect senior Bush administration officials. An independent inquiry later cleared Schmitz of any wrongdoing.

David Laufman, a federal prosecutor with GOP credentials, was selected to replace Schmitz. But Laufman's nomination was derailed after he testified that he would consult with the defense secretary before embarking on cases involving national security and other sensitive matters.

Members of Congress, including Senate Armed Services Committee Chairman Carl Levin, D-Mich., said the remarks raised questions about Laufman's credibility and his independence. In late 2006, after the panel declined to hold a vote to confirm him, Laufman withdrew himself from consideration.

A deputy inspector general, Thomas Gimble, ran the office after Schmitz left and until Kicklighter arrived.

Kicklighter, who had retired from the Army in 1991 after a 35-year career, was viewed as a solid choice when the defense budget was nearing $600 billion a year and procurement fraud cases in Iraq and Afghanistan were on the rise.

After retiring from the military, Kicklighter held senior positions at the Defense, State and Veterans Affairs departments before becoming inspector general.

"Inspector General Kicklighter took over an embattled office during a time of war," Sen. Charles Grassley, R-Iowa, said in a statement to The Associated Press. "He has been instrumental in beginning to turn the office in a new direction. I very much appreciate his willingness to try and create a transparent and open environment in a place that has a history of poor management and appears to know very little about its role within the Department of Defense."

Grassley, a senior member of the Senate Finance and Judiciary committees, was a vocal critic of Schmitz.

In a March 31 report to Congress, Kicklighter's office outlined major challenges in overseeing the military's perpetually growing budgets and bureaucracy.

The office estimated that nearly half of the military's $316 billion weapons budget went unchecked last year because the IG's office lacked the manpower. A decade ago a single auditor would have reviewed some $642 million in defense contracts, individual investigators are now charged with auditing more than $2 billion in spending.

The inspector general's office also has been stretching its staff to investigate corruption and fraud cases overseas, primarily in Iraq and Afghanistan where tens of thousands of contractors have been hired to help run operations.

"The continual degradation of audit resources that is occurring at a time when the (Defense Department) budget is growing larger leaves the department more vulnerable to fraud, waste and abuse and undermines the department's mission," the report states.

"Our coverage of high-risk areas and defense priorities is weakened and will continue to be weakened by insufficient personnel to accomplish our statutory duties," it adds.

Kicklighter has accepted a teaching position at George Mason University in Fairfax, Va. He will be executive director of the university's Critical Infrastructure Protection Project.

A spokeswoman for the inspector general's office said Kicklighter's resignation is not related to the personnel shortfalls.
On the Net:

* http://www.dodig.mil/

INTERPOL Becomes Growing Force in Anti-Corruption Efforts

INTERPOL is becoming a growing source of information on anti-corruption.

They hosted an International Conference on Corruption Related Crimes in 1998 in France.

They have a website section focused on Corruption HERE.

They also established a group of experts on corruption (IGEC) and are in the process of setting up the INTERPOL Anti-Corruption office (IACO) plus they are in the midst of raising $15-million to establish a 3-year budget for an Anti-Corruption Academy which will be in Austria.

It isn't clear to me whether they are just focusing on reduction of corruption in Police departments, which is a huge problem (i.e. an officer asking for a bribe to forgive a traffic ticket), or will they focus on the broader focus and incorporate anti-corruption into standard police work standards (and compete with established anti-corruption agencies in most countries).

See the website for more info: http://www.interpol.int/Public/Corruption/corruption.asp
vj

Lawrence Lessig on Corruption of US Politics Based on Money

Here are two "thinker" videos about a professor, Lawrence Lessig, on YouTube about the issue of how money affects US Politicians in a corrupt type of way - they don't get the funds directly, but as campaign funds. Lessig is thinking about running for Congress, and asking for supporters.

This also talks about how to change the system using the internet, and is a good view of one reason why I write this blog - we gotta do something...

This is a video of a Danish news show interviewing Lessig.

This is a video by Lessig on two major changes needed.

If you have the time, watch them... makes you think. His mantra is we need a grass roots movement to fix Washington now, before fixing global warming, etc.
vj

Journalists Group Lists Iraq as Least Responsive in Investigating Journalist Murders

Journalists are killed for many reasons in many countries. This article below lists the "Impunity Index" of 13 countries with the worst track record of prosecuting those who murder journalists. The index was created by the Committee to Protect Journalists (CPJ).

Iraq is the worst in the list, and has an Impunity rating almost twice as bad as the next country on the list, Sierra Leone.

A major reason for journalist murders in Iraq and other countries is the murders are intentional based on professional reasons, like the journalist was a muckraker or wrote an investigation on possible corruption.

So, another cost to the world is that journalists get murdered more often when writing about corruption.
A major reason is that the US, UN, the UK and other "civilized countries" are not forcing those countries receiving foreign aid to investigate, prevent and prosecute corruption cases.

Again, our mantra - STOP all foreign aid to all countries until they are in the top half of the Transparency International (TI) Corruption Perception Index (not the bottom half), AND not on the CPJ Impunity Index list. Currently, Iraq ranks third from the bottom on the 2007 TI Corruption Perception Index out of 179 country rankings.

You can find the CPJ at http://www.cpj.org/ .
Here is the Impunity Index list: http://www.cpj.org/impunityindex/index.html#countries
You can find the Transparency International Corruption Index at: http://www.transparency.org/
vj

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from
http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003796700

Iraq a Safe Place -- For Getting Away With Murder Of A Journalist, Report Says

By E&P Staff (Editor & Publisher Magazine)

Published: April 30, 2008 2:30 PM ET

CHICAGO A report on the nation's with the worst record of prosecuting those who murder journalists places Iraq at the top of the list -- but also includes such democracies as India, the Philippines, Russia and Columbia.

The "Impunity Index" released Wednesday by the Committee to Protect Journalists (CPJ) ranks 13 nations which each have at least five unsolved murders of journalists on the books.

Not surprisingly the top five nations on the list -- Iraq, Sierra Leone, Somalia, Colombia, Sri Lanka -- are literal or virtual war zones. CPJ noted, however, that most of the journalists killed in these conflict areas are singled out for death, and not accidental victims of war.

But the list also includes Mexico, with seven unpunished murders of journalists, and Bangladesh, with eight.

CPJ compiled the index by calculating the number of unsolved journalists murders as a percentage of the population. The New York City-based press freedom group included all killings between 1998 and 2007.

"Every time a journalist is murdered and the killer is allowed to walk free it sends a terrible signal to the press and to others who would harm journalists," CPJ Executive Director Joel Simon said in a statement. "The governments on this list simply must do more to demonstrate a real commitment to a free press. Lip service won't help save journalists' lives. We are calling for action: thorough investigations and vigorous prosecutions in all journalist homicides."

Here are the 13 countries on the Impunity Index, with CPJ's explanation of the situation:

1. IRAQ
Iraq became the world's most dangerous country for the press after the 2003 U.S. invasion led to armed conflict and sectarian strife. Journalists have generally not died in combat, however. Most are targeted for professional reasons and murdered. Most of the victims, such as Al-Arabiya correspondent Atwar Bahjat, are Iraqis. Seventy-nine cases are unsolved.

Impunity Index Rating: 2.821 unsolved journalist murders per 1 million inhabitants.

2. SIERRA LEONE
The 11-year civil war, which ended in 2002, took a great human toll across Sierra Leonean society. Nine journalist murders remain unsolved. Many of these cases stem from a particularly brutal period in January 1999, when rebels took the capital, Freetown. More recently, however, newspaper editor Harry Yansaneh was beaten to death in 2005, allegedly by a member of parliament and her relatives.

Impunity Index Rating: 1.636 unsolved journalist murders per 1 million inhabitants.

3. SOMALIA
Run largely by competing warlords since 1991, Somalia remains fragmented since Ethiopian troops helped install a central government in late 2006. No convictions have been obtained in five journalist murders. They include the slayings of radio journalists Mahad Ahmed Elmi and Ali Sharmarke, who were killed within hours of each other on August 11, 2007.

Impunity Index Rating: 0.610 unsolved journalist murders per 1 million inhabitants.

4. COLOMBIA
The conflict among right-wing paramilitaries, leftist guerillas, and government forces has led to dozens of journalist deaths. In the vast majority of cases, journalists were targeted for their coverage and murdered. At least 20 cases are unsolved, including the 2003 slaying of the nationally known investigative reporter Guillermo Bravo Vega.

Impunity Index Rating: 0.439 unsolved journalist murders per 1 million inhabitants.

5. SRI LANKA
Fighting between government and separatist forces has long bled the nation. But journalists are more likely to be assassinated than to die in crossfire, with many of the victims ethnic Tamils. The victims include senior Tamil journalist Mylvaganam Nimalrajan, shot in his home in 2000. Nimalrajan's murder is among eight unsolved cases here.

Impunity Index Rating: 0.408 unsolved journalist murders per 1 million inhabitants.

6. PHILIPPINES
While the country has a free and vibrant press, journalists covering corruption, crime, and politics have repeatedly been targeted with violence. Broadcast commentators and reporters in provincial regions are especially vulnerable. Politicians and police have been implicated in a number of slayings, but corruption in the local court system has stymied efforts to prosecute. No convictions have been obtained in 24 cases.

Impunity Index Rating: 0.289 unsolved journalist murders per 1 million inhabitants.

7. AFGHANISTAN
Despite the prolonged armed conflict in Afghanistan, journalists are more likely to be targeted for murder than to be killed in a combat situation. Seven cases are unsolved, including the 2007 slaying of local reporter Ajmal Naqshbandi. Running counter to the international trend, most victims have been foreign rather than local reporters.

Impunity Index Rating: 0.279 unsolved journalist murders per 1 million inhabitants.

8. NEPAL
Political instability and conflict between the government and Maoist insurgents have challenged Nepal, where five journalist murders remain unsolved. Four of the victims were abducted and executed while in captivity. All were local journalists. They include Birendra Shah, a radio and print journalist who was kidnapped and slain in 2007.

Impunity Index Rating: 0.185 unsolved journalist murders per 1 million inhabitants.

9. RUSSIA
Business, official corruption, and human rights abuses are among Russia's most dangerous beats. Fourteen journalists have been murdered with impunity since 1998. They include the well-known investigative reporter Anna Politkovskaya, shot in her apartment building in 2006, and the American editor Paul Klebnikov, gunned down on a Moscow street in 2004.

Impunity Index Rating: 0.098 unsolved journalist murders per 1 million inhabitants.

10. MEXICO
Drug trafficking, organized crime, and official corruption are Mexico's deadliest beats. No convictions have been obtained in seven journalist murders. Most of the victims were local reporters, such as Francisco Ortiz Franco, a top editor for the muckraking Tijuana weekly Zeta who was shot in the middle of the day on a downtown street in 2004.

Impunity Index Rating: 0.068 unsolved journalist murders per 1 million inhabitants.

11. BANGLADESH
Political instability and entrenched corruption are the toughest stories to cover in Bangladesh. Eight journalist murders are unsolved. The victims were all local reporters, and include the veteran correspondent Manik Saha, killed when leftists threw a bomb into his rickshaw in 2004.

Impunity Index Rating: 0.056 unsolved journalist murders per 1 million inhabitants.

12. PAKISTAN
Political unrest, sectarian strife, and tribal warfare confront Pakistan. Eight Pakistani journalists have been murdered with impunity since 1998. The victims include reporter Hayatullah Khan, who was kidnapped in the tribal region of North Waziristan in 2005 and found dead several months later.

Impunity Index Rating: 0.051 unsolved journalist murders per 1 million inhabitants.

13. INDIA
The world's largest democracy also has one of the world's freest presses, but in India, as elsewhere, politics and organized crime are dangerous stories to cover. Fivemurder cases are unsolved. All of the victims were local reporters. Among them is newspaper reporter Prahlad Goala, who was run down by a truck and then stabbed in 2006 after writing about timber smuggling.

Impunity Index Rating: 0.005 unsolved journalist murders per 1 million inhabitants.

Two Bribery Prevention Organizations: Trace International & Bribeline.org

If you are working at an international corporation, one issue you have to worry about is that someone in your firm, or an intermediary agent working for you may pay a bribe to a foreign government official or other person. Such situations are prohibited by the US Foreign Corruption Practices Act (FCPA).

So, here is an organization, Trace International ( http://www.traceinternational.org/ ), that acts as a reference clearing house for international corporations by providing references for business intermediaries (i.e. a business agent in the foreign country) in target countries who have been "vetted" by background checks, required to attend annual anti-bribery seminars, etc. to reduce the risk of using an intermediary who might pay bribes.

Additionally, Trace has established a separate website, Bribeline.org for anyone to report situations in any country where someone in government requested a bribe. The website then would provide a record of the request and provide a spotlight on the bribe requester. It is at: https://www.bribeline.org/ . Notice that the home page provides buttons to select from one of 20+ languages, so it really is for multi-nationals, PLUS the website is a secure website.

Check them out....

http://www.traceinternational.org/
https://www.bribeline.org/

And, below is a 2007 Reuters story on the above organizations
vj

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New Web site encourages firms to report corruption

By Reuters
http://news.com.com/New+Web+site+encourages+firms+to+report+corruption/2100-7348_3-6196139.html

Story last modified Wed Jul 11 16:50:53 PDT 2007

Multinational firms like Wal-Mart, Target and Tyco International on Wednesday endorsed a new Web site where companies and individuals can report bribery and corruption in countries where they do business.

Bribeline.org, launched by Trace, a Maryland-based nonprofit group that represents multinational companies, lets anyone volunteer information about incidents of corruption or bribery in the United States or abroad.

The information compiled from Bribeline will help companies determine where corruption is most prevalent and will help governments strengthen their ability to tackle corruption.

"Bribeline will further Wal-Mart's efforts to ensure we are allocating the necessary resources to combat corruption in those countries where we do business," said Alberto Mora, vice president and general counsel for the international department at Wal-Mart.

Businesses looking into ventures in certain countries will be forewarned about what kinds of bribery they can expect.

"If you know the terrain, it's easier to map out a business solution for survival," said Michelle Gavin, a board member of Trace.

The Web site does not require participants to identify themselves, which some critics say would encourage malicious or false reporting.

"We had to make a decision early on between anonymity or verification," said Trace President Alexandra Wrage, "You can't have both."

The World Bank, which has a similar disclosure program that encourages firms to admit when they paid bribes while doing work for the bank, has estimated that bribery around the world amounts to about $1 trillion, and affects the poorest citizens the most.

"The World Bank knows from experience that nobody wants their names mentioned," said Suzanne Rich Folsom, director of the Department of Institutional Integrity at the World Bank. Fear is often a deterrent in reporting corruption, she added.

"Bribeline will be real-time information to all of us who are trying to fight corruption," said Folsom. "This may begin to level the playing field...and lower the cost of doing business."

She said that cracking down on bribery and corruption helped ensure that development aid benefited the poorest citizens who needed it the most.

Maura Abeln Smith, senior vice president at International Paper, a global paper and packaging company, said many companies already had internal mechanisms for reporting bribery and corruption, but said Bribeline would help.

"Without this, we will not really know what we're up against," she added

Introducing the European Commission's Anti-Fraud Office, OLAF

Introducing the European Commission's ( aka the European Parliament) Anti-Fraud Office, OLAF - similar to SFO in the UK.

http://ec.europa.eu/anti_fraud/jpo/en.html

Although they focus on non-government fraud, and not government corruption, they are a useful organization to know about.

In May, 2007, they organized a fair that included many organizations that educated the public about stopping fraud. (from the SFO news releases).

"OLAF, in cooperation with its national partners (investigation services, police, legal and administrative authorities, etc), does its best to counter criminals and fraudisters who organise their illicit activities at an international level. "

Below is from their overview page:

vj

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THE FIGHT AGAINST FRAUD

A PRIORITY OF THE COMMUNITY INSTITUTIONS

* 1. An independent European investigation service
* 2. Fight against fraud and cross-border crime
* 3. The independence of OLAF
* 4. Consultation and cooperation with Member States
* 5. Partnership with the national investigators
* 6. Internal investigations
* 7. Background on the OLAF investigators
* 8. OLAF and European Citizens

The Community budget is financed by taxpaying citizens' money. It is adopted, on a proposal from the Commission, by the budgetary authority (the European Parliament and the Council).

European policies, financed in this way, are intended for the realisation of projects of general interest. Evading the duties and levies which supply the Community budget, or using Community financing wrongfully, subsequently results in harm to the European taxpayer.

Therefore, The European Institutions have a duty to guarantee, with regard to the taxpayer, the best use of their money and in particular to fight as effectively as possible against fraud. For this reason, the protection of the financial interests of the Community has become one of the major priorities for the European Institutions. This covers activities concerning the detection and monitoring of fraud in the customs field, misappropriation of subsidies and tax evasion, insofar as the Community budget is affected by it, as well as the fight against corruption and any other illegal activity harmful to the financial interests of the Community.
In order to intensify this action, the Community Institutions established the European Anti-Fraud Office (known by its French acronym - OLAF) in 1999. They also provided for its investigative independence.

1. OLAF - AN INDEPENDENT INVESTIGATION SERVICE WITHIN THE EUROPEAN COMMISSION

The Community Institutions and Member States attach great importance to the protection of the financial and economic interests of the Community, as well as to the fight against transnational organised crime, fraud and other illegal activities prejudicial to the Community budget.

Attacks on the European policies, carried out by criminals and fraudsters, harm not only the budget of the Union, but also its credibility. The responsibility for the Commission in this respect is closely linked with its mission of implementing the budget ( Article 274 of the EC treaty). This was confirmed by Article 280 of the EC treaty.

In order to strengthen the means of fraud prevention, the Commission established within itself the European Anti-Fraud Office (OLAF) by EC, ECSC Decision 1999/352 of 28 April 1999. The Office was given responsibility for conducting administrative anti-fraud investigations and was granted special independent status.

The Office commenced its work on 1 June 1999, the day of entry into force of Regulation (EC) N° 1073/1999 of the European Parliament and of the Council, and Council Regulation (Euratom) N° 1074/1999, of 25 of May 1999, concerning the investigations carried out by OLAF. The Office succeeded the "Task Force for the Co-ordination of fraud prevention" (UCLAF) which was part of the Secretariat-General of the Commission, created in 1988.

While it has an individual independent status for the investigative function, OLAF is also part of the European Commission, under the responsibility of Siim KALLAS, Vice Président, in charge of Administrative Affairs, Audit and Anti-Fraud.

2. A EUROPEAN INSTRUMENT FOR THE FIGHT AGAINST CROSS BORDER CRIME AND FRAUD

OLAF carries out all the powers of investigation conferred on the Commission by Community legislation and the agreements in force with third countries, with a view of reinforcing the fight against fraud, corruption and any other illegal activity affecting the financial interests of the European Community.

Over and above the protection of financial interests, the responsibility of the Office concerns all the activities connected with safeguarding Community interests against irregular behaviour likely to lead to administrative or penal proceedings.

In order to coordinate the action of the Member States in their fight against fraud detrimental to the interests of the Community, OLAF provides them with the support of the Commission, aimed at organising close and regular cooperation between the competent national authorities.
Additionally, the Office, as a Commission service, contributes to the planning and the development of prevention and anti-fraud methods.

3. THE INDEPENDENCE OF OLAF AND ITS DIRECTOR-GENERAL GUARANTEED AND VERIFIED BY A SUPERVISORY COMMITTEE AND A SPECIAL STATUS

The implementation of OLAF's investigative functions (internal and external investigations) is conducted by its Director-General. He is designated by the Commission for a five-year period (renewable once), following a favourable opinion from the supervisory committee and in co-operation with the European Parliament and the Council.

With the aim of guaranteeing the independence of OLAF in its investigative function, the legislator gave the obligation to the Director-General of the Office neither to seek nor take instructions from any government or any institution (including the Commission). If the Director-General of OLAF ascertains that the Commission has taken a measure that challenges his independence, he has the possibility of bringing a case against the Commission before the Court of Justice.

To consolidate this independence, the Office is subject to regular control of its investigative functions by a Supervisory Committee, made up of five outside persons independent of the Community Institutions, who are highly qualified in the areas of competence of the Office. At the request of the Director-General or by its own initiative, the Supervisory Committee will deliver opinions to the Director-General concerning the activities of the Office, without, however, interfering with the conduct of investigations in progress.

4. CONSULTATION AND COOPERATION WITHE THE MEMBERS STATES : the Advisory Committee for the Coordination of Fraud Prevention (COCOLAF)

The Advisory Committee for the Coordination of Fraud Prevention (CoCoLAF) is the forum for the exchange of information on general issues regarding the protection of the Communities’ financial interests between the Commission and its main partners for the protection of financial interests. Debate and reflection on the Member States’ needs and OLAF’s particular added value are furthered in specific working groups.

In close cooperation with the Commission and the Member States, the Committee also issues guidelines for national authorities and reference documents on fraud and other irregularities. CoCoLAF is also in charge of furthering the close cooperation between the Member States and the Commission (OLAF), provided for in Article 280 of the EC Treaty.

CoCoLAF provides a forum in which the Commission can consult the Member States on the content of the annual report on the protection of the Communities’ financial interests and the fight against fraud, produced in cooperation with the Member States. The report gives an overview of Community and national action and initiatives, including case reporting and trends in fraud and other irregularities throughout the EU, conducted in the course of the year.

5. PARTNERSHIP WITH THE NATIONAL INVESTIGATORS AGAINST THE INTERNATIONAL NATURE OF THE CRIME : THE ADDED VALUE OF OLAF IN THE CONDUCT OF EXTERNAL INVESTIGATIONS

OLAF, in cooperation with its national partners (investigation services, police, legal and administrative authorities, etc), does its best to counter criminals and fraudisters who organise their illicit activities at an international level. OLAF is to some extent the engine of the "Europe of legality" against the "international nature of criminality" harmful to Community interests.

Working to strengthen the fight against fraud, OLAF carries out the external investigative responsibility conferred on it by the regulation providing for "on the spot" checks and inspections carried out in the Member States for the protection of the financial interests of the European Communities against frauds and other irregularities (Regulation N° 2185/96). If cooperation agreements exist, OLAF can also use this authority in third countries.

Within the framework of its investigative function, the Office also carries out checks and inspections provided for inthe regulation for the protection of the financial interests of the European Communities (Regulation N° 2988/95) and in any other sectoral regulation.

In practice, fraud and other irregularities are almost always detected in close cooperation between with the relevant national investigation services. It should not be forgotten that the principal obligation in this area falls to the Member States; they collect their own traditional resources (i.e. the budget revenues of the EU) on behalf of the Community and manage almost 80% of the expenditure of the Community budget.

In sectors where particularly lucrative sources of illicit profit exist, task-groups specialising in specific products such as cigarettes, alcohol or olive oil, have shown that close cooperation between the Member States and effective coordination at Community level can be extremely useful in uncovering large scale smuggling and fraud. The same is true with regard to the efforts made at the Community and national levels to introduce preventive measures in these fields.

6. INTERNAL INVESTIGATIONS: A GUARANTEE OF THE SMOOTH OPERATION OF THE EUROPEAN INSTITUTIONS

Experience shows that no country or institution in the world is safe from cases of corruption or breaches of their responsibilities by their officials. Despite the total honesty and loyalty of the great majority of its officials, the European Commission wanted to be equipped with an investigation instrument in order to fight and protect itself.

To this end, OLAF can carry out administrative investigations inside the institutions (see EC Decisions 1999/394 and 1999/396) and the bodies and organs of the Community, in the event of fraud harmful to the budget of the EU. It is also responsible for detecting serious facts, linked with the performance of professional activities.

These investigations are carried out in compliance with the rules of the treaties (in particular the protocol on privileges and immunities) and with the staff regulations of officials of the European Communities. Additionally, they are carried out in full compliance with human rights, fundamental freedoms and the rules of confidentiality and data protection.

Insofar as legal provisions are respected, the Office has a whole series of powers (examples: access to information and the buildings of the Community Institutions, with the possibility to check accounts and to obtain extracts of any document).

In addition, the Office can request, from any person concerned, information that it judges useful for its investigations. In accordance with the arrangements laid down in Regulation N° 2185/96, it can carry out on the spot controls of the economic operators concerned, in order to have access to information concerning possible irregularities held by these operators.

7. THE INVESTIGATORS OF OLAF: A MULTI-DISCIPLINARY TEAM OF SPECIALISTS IN THE FIELD OF THE FIGHT AGAINST FRAUD

Currently, OLAF is comprised of about 400 personnel. The investigators of OLAF, like all the other officials and Community employees, work in the exclusive interest of the Communities. They have to discharge their functions and do their work while keeping in mind the interests of the Communities, without taking instructions from any government, authority, organisation or person independent of the institution.

To achieve these specific tasks, the majority of the personnel of OLAF have a solid professional experience gained in the areas of national investigations, police and judicial services, investigations concerning complex fraud cases, analysis and evaluation of information, or in support or development of policies in the area of the fight against fraud.

The OLAF team of investigators is multidisciplinary nature, which makes it possible to have an comprehensive and inter-sectoral approach (in the police, judicial, financial, customs, agricultural fields, etc). The fact that the majority of the investigators come from national investigation services is valuable in more than one way-at the level of expertiseand in maintaining close relations with the national investigators. This partnership is essential in the fight against fraudsters and criminals who harm Community interests.

8. OLAF AND THE EUROPEAN CITIZENS

OLAF is therefore neither a "secret service", nor a police force. It is rather the legal instrument for administrative investigation with which the European Union has been equipped by the Commission, to guarantee better protection of Community interests and compliance with the law against attacks from organised crime and fraudsters.

In the spirit of service to defend exclusively the interests of the European citizens and the supremacy of law, OLAF follows a policy of close cooperation with all the competent authorities and EU citizens.
The only limits to its policy of absolute transparency are established by the regulations in force, the laws on judicial secrecy, and the respect of individual rights.

Within this framework, OLAF also seeks the cooperation of the Institutions and all European officials, who have the obligation to transmit to the Office any information concerning possible cases of fraud or corruption or any other illegal activity of which they are aware. The Office appeals to any person with information on cases of fraud harmful to the Community budget to report this to OLAF.

To this end, a free phone provides the opportunity for contacting OLAF free of charge from all Member States, in order to give information of interest to the Office.

Postal address of OLAF:
The European Commission - European Anti-Fraud Office (OLAF)
Rue de la Loi, 200
B-1049 Brussels

Offices:
Rue Joseph II, 30
1000 Brussels

For any additional information, contact:
Mr. Alessandro Butticé
Tel.: + 32 2 296 54 25

UK's Serious Fraud Office - an introduction

Back in the 1980's, the UK (like the US) had lots of frauds and the public got upset. So, they established the SFO (Serious Fraud Office - not San Francisco Airport's code...) to investigate selected "Serious" or large frauds that exceed £1 million WITH an international dimension.

Here is small overview - visit their website at the link below to learn more:
However, unlike anti-corruption agencies in many countries, they don't seem to think part of their mission is to publicize past fraud cases and publish tips how to avoid fraud. Maybe next year...

PS: A difference between fraud and corruption is that fraud is committed in non-government operations, and corruption exists in government agencies. SFO appears to be mostly an investigative and prosecution arm for large business and individual frauds, not government corruption.
vj

http://www.sfo.gov.uk/about/about.asp

What kind of organisation is the SFO?

The Serious Fraud Office is an independent government department that investigates and prosecutes serious or complex fraud. It is part of the UK criminal justice system.

The Office is headed by the Director who is appointed by and accountable to the Attorney General. The Attorney General is appointed by the Prime Minister and is responsible to Parliament for:

* the Serious Fraud Office
* the Crown Prosecution Service
* the Treasury Solicitor's Department
* the Department of the Director of Public Prosecutions for Northern Ireland
* the CPS Inspectorate
* the Revenue and Customs Prosecution Office

Jurisdiction

England, Wales and Northern Ireland fall within the SFO's jurisdiction.

The SFO does not have jurisdiction over Scotland, the Isle of Man or the Channel Islands.

Case Acceptance Criterion

The key criterion we use when deciding whether to accept a case is that the suspected fraud appears to be so serious or complex that its investigation should be carried out by those responsible for its prosecution.

The SFO could not - and does not - take on every referred case of suspected fraud. SFO resources must be focussed on major and complicated fraud.
Factors considered:

* does the value of the alleged fraud exceed £1 million?
* is there a significant international dimension?
* is the case likely to be of widespread public concern?
* does the case require highly specialised knowledge, e.g. of financial markets?
* is there a need to use the SFO's special powers, such as Section 2 of the Criminal Justice Act?

Congress is Trying to Establish SIGIR for Afghanistan

SIGIR.mil is the independent audit group that has published most of the detailed audit reports on corruption and fraud in the Iraq Reconstruction Program.

Now, Congress is trying to establish a separate group like SIGIR for Afghanistan, and the article below indicates that the US Army has complained that it would duplicate the work of their own Inspector Generals. I doubt it.

Read my comment I tried to post on the publisher's website, but it was too long. And, read the comment from USAID to the article, which I also talk about in my comment.

First, the article, then USAID's comment, followed by my comments:
vj
==============================================
from GovernmentExecutive.com - it is also a monthly magazine for Federal executives
http://www.govexec.com/mailbagDetails.cfm?aid=38297#comments-form-area

Pentagon asks Congress to drop plan for Afghanistan IG
By Megan Scully CongressDaily October 16, 2007

The Pentagon is urging House-Senate conferees on the fiscal 2008 defense authorization bill to drop a provision in the House measure that would create a special inspector general for Afghanistan reconstruction.

The office would be modeled largely on the independent investigator examining rebuilding efforts in Iraq, where the temporary office has uncovered billions of dollars of contract waste and fraud. In May, House Armed Services Chairman Ike Skelton, D-Mo., called it among one of his bill's most significant provisions, and stressed that the inspector general in Afghanistan would "ensure even greater accountability" of efforts there.

But in a package of appeals on the authorization measure sent last week to the House and Senate Armed Services committees, Pentagon officials said they view the creation of the special investigator as a redundant office that would deplete the Pentagon's inspector general of needed personnel. The Senate version of the bill also created the Afghanistan inspector general, but the Pentagon did not address that provision.

The special inspector general for Iraq reconstruction "already competes with the departmental IGs for trained staff, who must also be willing to deploy to Iraq," according to the appeal. "Staffing this new special IG for Afghanistan reconstruction would further draw on the limited pool of trained personnel, with limited resources to mentor and train less senior staff."

Pentagon officials also argued the office would take resources from other Afghanistan reconstruction efforts because the bill requires funding to be redirected from other reconstruction accounts.

The Defense Department criticized the House provision because officials believed it would be an internal organization rather than a more independent, cross-agency entity. The House provision requires the Afghanistan IG to report directly to the Defense secretary, but also gives the office oversight of other federal agencies.

A House aide familiar with the provision stressed the intent was not to make another internal Pentagon organization and said members are working to have the IG also report to the Secretary of State. Indeed, the Senate version requires the Afghanistan IG to report both to the secretaries of Defense and State.

The Iraq inspector general was created by Congress as an amendment to the fiscal 2004 emergency wartime supplemental spending measure. Last year, Congress approved language that would keep the office of the Iraq special inspector open until October 2008, overturning a House Republican-sponsored amendment to the fiscal 2007 defense authorization bill that would shutter the office a year earlier.

According to the House provision, the Afghanistan inspector general office would close 10 months after 80 percent of the funds appropriated for Afghanistan reconstruction have been spent. The Senate bill would close the office on Sept. 30, 2010.
VIEW ALL COMMENTS POST COMMENT
COMMENTS

* The USAID Office of Inspector General is opposed to the creation of a special inspector general office for Afghanistan reconstruction, as referenced in amendments SA 2150/SA 3081 to the National Defense Authorization Act for Fiscal Year 2008 (H.R. 1585). While a special inspector general may have been appropriate in Iraq based on the heavy emphasis on reconstruction, we believe that this model would not be effective in Afghanistan because the primary emphasis in Afghanistan is on development activities, and traditional inspector general oversight is most applicable. USAID OIG believes that the Inspector General Offices of Defense, State, and USAID are in the very best position to oversee the reconstruction and development programs in Afghanistan, and that the General Accountability Office is the agency to address cross-cutting oversight issues. · The individual agencies are those who best know their respective internal operations and programs and where to focus in order to most effectively coordinate activities. · We have a collective presence in Afghanistan--either through continuous TDY assignments or through a permanent presence--and are already providing comprehensive oversight, as reflected in our letter to Senator Lautenberg about the Afghanistan Working Group. · A special inspector general for Afghanistan would be duplicative of work already underway and planned for the fiscal year. · The influx of a large, new inspector general office into Afghanistan would hinder our ability to do our jobs because of the strain it would place on the very limited Embassy infrastructure in Kabul. In summary, we encourage Senator Lautenberg and others not to create a special inspector general for Afghanistan reconstruction. Instead, we encourage Congress to facilitate and augment the four oversight agencies already successfully working there. Dona M. Dinkler Posted October 17, 2007 11:05 AM

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Comment from Vance Jochim regarding the above article - posted Oct. 17, 2007

I was in the Green Zone working for IRMO for 23 months as Chief Auditor for the US advisors setting up CPI. The short story is that I saw so much waste and mis-management in ALL USG programs that SIGIR.mil was the only effective audit group there. I knew several of them and also interfaced periodically with DCAA, State IG etc. to see how they were contributing. They weren't. GAO wasn't there, but that was where SIGIR got most of their people, not from the IG's. In my opinion the IG's were ineffective and as a recent articles and Congressional oversight committee hearings have found, the State IG prevented audits, and USAID's audit that were published were lightweight and NEVER placed responsibility on USAID or their managers. I worked for 18 years as Audit Director in large organizations like ARCO, Nissan and County of Los Angeles, and SIGIR was the only effective group there looking at the big picture. One problem was that SIGIR would not review USAID work until late 2005 because they "relied" on the USAID auditors, but problems in program management became so bad, they finally started to look at USAID programs. Afghanistan could use a SIGIR type group, but they need to look at USAID also.
A big reason why corruption has festered is that the State Dept. controls all activities in foreign countries, so when I was there, they refused to let GAO auditors into the country. Additionally, in 2003 (before I was there) and 2004, it would have been tremendous if GAO, OMB or other management and audit focused agencies had specialists on the ground to TRAIN and MODIFY existing Iraqi internal accounting systems to detect and prevent fraud and corruption. But no US agencies except the military, state and Commerce (through State Dept.) have groups focused on providing information and advice outside of the US borders. And, when IRMO was formed (based upon a Presidential Directive), many US agencies wouldn't supply "detailees" to IRMO because no funds were provided to pay for replacing the people that went. Thus, the Sr. Advisor's office for Finance in IRMO was really all people from the US Treasury and they were concerned with the banking system and paying government salaries (with pallets of cash) and NOT fixing the broken, communist based accounting and work processes in government. Why send hordes of auditors if you haven't fixed the internal accounting systems first???
Additonally, during CPA days, the primary liasion to the Iraqi Board of Supreme Audit (BSA - their version of GAO) was a Brit who had no clue about accounting and just liked to pontificate - I went with him to visit the BSA.)

PS: One reason that IRMO was supposedly created to manage Iraq Reconstruction is that USAID screwed up so much in early Afghanistan construction projects that Donald Rumsfeld demanded the formation of a separate, independent agency (IRMO) to manage reconstruction in Iraq. My personal experience is that USAID is run by very liberal ex-PeaceCorps people who do NOT have the technical expertise to run construction projects. (See my earlier posts) and my professional opinion is that their audit reports are lightweight and never indicate that anyone in USAID had mis-managed anything. (I read a number of them). Search on GAO audit reports on Google related to USAID and Afghanistan, or Iraq, and see what the GAO has to say about them. USAID has a massive public relations dept. and influence to cover up technical weaknesses. When I was in Iraq, they periodically sent out publicity memos taking credit for programs run by IRMO.
vj

Vance Jochim
Certified Internal Auditor
IRMO in Baghdad - May,2004 to March, 2006

USAID's Laughable Webpage on Iraq Corruption "Success"

USAID is the "subsidiary" of the US State Dept. that implements "foreign aid" for the US in foreign countries. No other government agency has authority to do that without State Dept or USAID approval.

Below is the article USAID posted on their website about successful anti-corruption programs in Iraq. These efforts are entirely different from the Iraq Reconstruction Program Office (IRMO) establishment of the Iraqi Commission on Public Integrity that I helped set up. USAID did not date this page, but I think I originally saw it in 2005.

While I was there in 2004-2006, USAID used the term "anti-corruption" in several programs to ensure funding support, but I could never find details exactly what they did. In early 2004, they were caught by the CPI founder trying to use the CPI plan from IRMO as the basis for justifying their own programs. The reason is that USAID has no "subject matter experts" in technical areas like corruption, rule of law, agriculture, etc. Instead, they have generalist former Peacecorp and State Dept. workers who have no technical background, thus they circulate requests for spending program proposals with generic terms like "anti-corruption" and ask vendors to submit programs. Then they choose a program, typically from a favored vendor who probably doesn't have any better technical skills. Just like that, they get $50-million programs or more and then try to figure out how to spend it after the program starts of specific programs THEY want to accomplish, not necessarily what the approved program objectives said.

I also found out that USAID is very skilled at knowing how funding works, so immediately after they get a program authorized by Congress or authorizers, they "commit" the entire amount, such as $50-million in a signed contract so that the funds cannot be cut. Although the funds have not been spent, or even a plan written in detail how to spend it, they have locked in the entire amount legally with a master contract with a vendor. I found that out because we knew they had a $250-million program that included about $50-million for "capacity development" which means training programs. The IRMO Director said it had not been spent yet, so I should ask them for a chunk for a $10-million management training program for senior officials in the 28 Iraqi Ministries who had no training in basic management, supervision, budgeting, etc. However, USAID refused to "share" the funds, saying it was all contracted for. 6-months later I sat in a meeting where the new program manager for that $50-million was asking us for ideas on where to spend it. However, they had specified the funds could only be spent on local government entities like towns, etc. and not the central government. Thus they spent it using favored vendors to give courses on "transparency" and "democracy building" and "women's rights" to local groups far outside the ruling central government. Because of the decentralized approach, and the risks from terrorists, they "took the word" of training providers, and had NO DOCUMENTATION to show who got the training, testing results, etc. That is how USAID spends taxpayer funds.

Finally, I have to comment on their statements below:

1) USAID's statement they launched a "national anti-corruption campaign" - that is the one I discussed above - it was very basic training in local cities and was NOT National because they completely avoided providing any training, etc. to the central government, including all the Ministries. USAID shoud NOT be allowed to claim credit for "anti-corruption" programs because they were very generic, and they would/could not provide me any evidence when I asked on behalf of the IRMO End State Task Force for evidence of what the program accomplished for some $50-million.

2) USAID's sponsorship of a "National conference on transparency and accountability...". I remember reading this when I was in Iraq, so I asked the USAID group to furnish me with the details of the "15 recommendations..." and got a list of very generic topics to be included in the Constitution... it was something I could have written at the dinner table and was very sophmoric.

It is my opinion, verified with discussions with others in Iraq, that USAID's liberal mind bent was focused on their own liberal causes like women's rights, democracy building, etc. and would use any buzz word they could, like "anti-corruption" to obtain approval for programs they wanted, but had little relation to the buzz words used.

They reacted in the same way regarding other programs run by IRMO, including mini-loan programs, agriculture, etc. where they had a large public relations effort to claim credit for programs initiated and implemented by the IRMO people with separate Iraq Reconstruction programs.
vj
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from
http://www.usaid.gov/stories/iraq/ss_iraq_anti-corruption.html

Anti-corruption campaign promotes transparency in Iraq
Iraqi Communities Fight Corruption

Recognizing that transparency and accountability are critical to democratic governance, USAID launched a national anti-corruption campaign in collaboration with civil society organizations. The campaign included training for officials, survey polls, legislative advocacy, educational posters, and mobile theaters. So far, the results have been very positive.

First, USAID sponsored a national conference on transparency and accountability during the drafting of Iraq’s constitution. The conference yielded 15 recommendations that were incorporated into the constitution, including an article that holds ministers accountable for their actions and another that creates an independent auditing body.

Second, the program sponsored surveys to understand the needs and priorities of Iraqi citizens. One USAID-funded survey by the al Rafhaa Organization found that 33 percent of Iraqis consider transparency and accountability the most important attributes in a political candidate. Regarding national priorities, 25 percent of Iraqis considered stopping corruption a high priority, second only to the 38 percent who listed security as their top priority. Other surveys have helped monitor corruption within organizations and government bodies, revealing areas where accountability needs to be improved.

Finally, the program’s efforts in voter education, community dialogue, and constitutional development helped expand public awareness and participation in the January 2005 election and the October 2005 constitutional referendum.

USAID’s civil society programs focus on civic education, anti-corruption, and human rights. USAID has established resource centers to deliver training and technical assistance to Iraqi civil society organizations and provided small grants to support advocacy and public awareness campaigns. Through focused training and technical assistance, USAID is helping to build an informed, sustainable, and active civil society that will be key to routing out corruption, holding the government accountable, and building a prosperous and democratic Iraq.

New Volcker Panel Report Slams Effectiveness of World Bank Anti-Corruption Initiatives

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

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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.

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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
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