What is Fraud and Corruption?

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Fraud

A fraudulent practice is any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.

Example: In a few years since its establishment, a consulting company is awarded multiple World Bank Group-financed contracts totaling in millions of dollars.  The proposals submitted by the consulting company contain numerous past project experiences and references that contribute to its success and eligibility.  However, a review of the consulting company's past project experiences reveal that the company has claimed the experiences of individual consultants as its own, as well as grossly exaggerated the value of the projects that it has undertaken.  Not only is the consulting company misrepresenting its qualifications and capacity, it is also cutting its subconsultants' contracts by half, but claiming the full amount on its invoices to the client.  The quality of the deliverables from this consulting company is highly questionable, which affects the project's overall developmental goals.

Corruption

A corrupt practice is the offering, giving, receiving or soliciting, directly or indirectly, anything of value to influence improperly the actions of another party.

Example: A supplier agrees to pay "kickbacks" to a senior government official through an agent it hires as a subconsultant to perform "business development and marketing" services but without any deliverables.  This agent is connected to a senior government official who is demanding a "commission" from every bidder as the official has influence over the bid evaluation committee and can steer the award of the contract to any bidder willing to pay.  This supplier builds in the kickback amount as a percentage of the contract value, and pays for it from the funds it receives from the World Bank Group-financed project. Project financing costs are artificially inflated by these practices, and the supplier recovers costs by providing less expensive and lower quality goods.

Collusion

A collusive practice is an arrangement between two or more parties designed to achieve an improper purpose, including influencing improperly the actions of another party.

Example: A project official arranges to steer contracts on a World Bank Group-financed project to his own company and that of his relatives.  The project official not only tells his relatives' companies what prices to put in their bids, but also what particular technical specification to include.  The bids of companies that are not part of this "inner circle" are disqualified as being technically non-responsive, leaving the project official's and his relatives' companies as the lowest evaluated bidders on the different contracts.  Not only is the integrity of the procurement process compromised, but the winning bid prices are considerably higher than what would have been with genuine competitive bidding.

Coercion

A coercive practice is impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party.

Example: A contractor is stopped from submitting his bid at the bid opening.  Persons connected to a competitor block the contractor from entering the building where the bid opening is taking place, and tell him that "if he cares for his family, he should not submit a bid."  Another bidder who comes to submit a bid is also stopped by these same persons who tells the bidder that "it is not his turn to win this contract."  The two bidders leave the bid opening and do not submit a bid out of fear.

Obstruction

An obstructive practice is deliberately destroying, falsifying, altering or concealing of evidence material to the investigation or making false statements to investigators in order to materially impede a World Bank Group investigation.

Example: World Bank Group investigators contact a company alleged to have paid a bribe on a World Bank Group-financed contract and request to audit the company's financial records.  The company refuses to do so despite its agreement and obligation under the contract to allow the World Bank Group access to these records.  Furthermore, it withholds key documents and alters other documents that are given to the investigators.



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