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NEWS June 10, 2019

New Decisions from the WBG Sanctions Board Address Fraud, Corruption, Collusion, and Obstruction in Bank-Financed Projects

The World Bank Group Sanctions Board is an independent decision-making body that considers allegations of misconduct in various Bank, IFC, and MIGA projects and publishes final decisions internally and externally, rendering them available to WBG staff, companies and individuals accused of misconduct, and other stakeholders.

In March-May 2019, the Sanctions Board published six decisions (Nos. 116-121) arising from cases heard during its Spring 2019 session, which included allegations of fraud, corruption, collusion, and obstruction. The cases were diverse in scope and related to IBRD and IDA-financed Projects in Kenya, Bangladesh, Nicaragua, Ghana, and Ukraine that sought development for the transportation, trade, technology, oil & gas, and health sectors of those countries.

Fraudulent misrepresentations by bidders: In Decisions No. 116 and No. 117, the Sanctions Board imposed debarments with conditional release on firms whose various employees fabricated and submitted false documents when bidding on Bank-financed contracts. The separate contracts related to the Second Road and Safety Improvement Project in Ukraine and the Eastern Africa Transport, Trade and Development Project in Kenya. In each case, the Sanctions Board noted the respondent firm’s cooperation with INT’s investigation, and considered this favorably in determining the appropriate sanction. In cases where an accused firm admitted to the misconduct or did not contest INT’s allegations, the Sanctions Board applied additional mitigating credit, taking into account the scope and timing of such admissions.

Complex collusive and corrupt scheme with attempts to obstruct investigation: In Decision No. 118, the Sanctions Board imposed debarments with conditional release on a firm and its CEO for several types of misconduct during that firm’s attempt to benefit from a supplier contract under the Identification System for Enhancing Access to Services Project in Bangladesh. The firm was found liable for collusion, corruption, and obstruction; the CEO was sanctioned for collusion and corruption under the same general set of facts. The collusion scheme involved three associated businesses that were “vertically connected” – the bidding company for which the accused firm was a declared subcontractor, the accused firm itself, and a supplier to the accused firm. The Sanctions Board concluded that the businesses had arranged to influence technical specifications for the contract and “orchestrate” the implementing agency’s responses to other prospective bidders, all to their competitive advantage. The Sanctions Board also found that the accused firm and its CEO had solicited bribes for a government official to ensure support for both the collusive scheme and execution of the expected contract. Finally, the Sanctions Board sanctioned the accused firm for obstruction because the firm refused to meaningfully comply with INT’s investigation and document requests. Such requests are supported by the Bank’s established rights to audit and inspect corporate records relating to submission of bids and execution of contracts financed by the Bank. In selecting the final overall sanctions for the firm and its CEO, the Sanctions Board found several additional aggravating factors: the firm’s and the CEO’s central role in the misconduct, involvement of management in the schemes, and the sophisticated tactics employed by multiple players to perpetrate and conceal the misconduct.

Insufficient evidence of fraud: In Decision No. 119, the Sanctions Board declined to impose a sanction and terminated the accused firm’s temporary suspension after concluding that INT’s allegations of fraud were neither adequately articulated nor supported by sufficient evidence.

Multiple misrepresentations by firm seeking package of contracts: In Decision No. 120, the Sanctions Board imposed debarment with conditional release on a firm and debarment for a fixed period on its director for fraudulent acts committed when the firm bid on eight lots in two tenders under the Oil and Gas Capacity Project in Ghana. In its bids, the firm had submitted several false letters from manufacturers supposedly authorizing that firm to supply certain goods under the contracts. The firm’s director had on his part omitted to disclose to the implementing agency the fact that the firm was using a paid agent in bidding for one of the contracts. The Sanctions Board observed that such disclosures were “explicitly required” under the applicable rules of bidding. In determining the final sanction, the Sanctions Board increased the minimum period of debarment for the firm given that its staff committed two distinct fraudulent acts under two separate tenders.

Collusive conduct received formal reprimand: In Decision No. 121, the Sanctions Board issued a letter of reprimand to a firm that served as the agent of a bidder and participated in bid-pricing discussions with the government authority implementing the Health Sector Development Program in Bangladesh. The Sanctions Board found sufficient evidence that the bidder’s final bid price was contingent on the firm’s discussions with the government agency. The Sanctions Board, however, did not find support for the full scope of INT’s allegations, which also included collusion via receipt of non-public information and manipulation of technical specifications for the contract. In selecting the final sanction, the Sanctions Board took into account the scope of the firm’s cooperation with INT’s investigation and the lapse of more than six years between the Bank’s awareness of the misconduct and its formal Notice of Sanctions Proceedings to the accused firm.

The Spring 2019 session was the last chaired by Mr. J. James Spinner, whose term concludes this year. Announcement of the new Chairperson and additional new members for the Sanctions Board is expected this summer.

All other decisions of the Sanctions Board published as of May 2012 are publicly available on the Sanctions Board’s website.