STAFF MISCONDUCT

One of the most significant sanctions cases since INT’s inception was decided in FY07, leading to the debarment of Lahmeyer International GmbH (Lahmeyer), a German company, for a period of seven years because of corrupt activities in connection with the Lesotho Highlands Water Project (LHWP). The period of debarment may be reduced by four years if the Bank Group determines that Lahmeyer has met specific compliance conditions and fully cooperated with the Bank Group in disclosing past sanctionable misconduct.

The LHWP is a massive, multi-billion dollar water transfer and hydropower project implemented by the governments of Lesotho and South Africa. The project is designed principally to transfer water from the Maluti Mountains in eastern and central Lesotho to the Gauteng Province of South Africa.  The World Bank Group’s Sanctions Committee found that Lahmeyer engaged in corrupt activities by bribing the Lesotho Highlands Development Authority’s Chief Executive, Mr. Masupha Sole, the government official responsible for contract award and implementation under the LHWP, in violation of the Bank Group’s procurement guidelines. In July 2004, the World Bank Group debarred Acres International, another firm convicted of paying bribes under the LHWP, for a period of three years. Two other European firms were also convicted in Lesotho in relation to the LHWP, although they were not involved in the Bank-financed portions of the project.

The case was a re-opening of 2001 sanctions proceedings against Lahmeyer in relation to the LHWP. The Government of Lesotho announced criminal indictments of Lahmeyer and Mr. Sole in 1999. Following the announcement of the indictments, INT initiated an investigation into whether Lahmeyer had engaged in corrupt practices in relation to its contracts with the Bank Group. In October 2001, the Sanctions Committee found that the evidence was not sufficient to make a determination, and said that it would re-examine its findings in light of any additional relevant information. In 2002 and 2003, the High Court of Lesotho convicted Mr. Sole and Lahmeyer for bribery. The Court of Appeal of Lesotho affirmed Mr. Sole’s conviction in April 2003, and Lahmeyer’s conviction on six of seven counts in April 2004. In light of the information obtained from these decisions, the World Bank Group re-opened sanctions proceedings against Lahmeyer in August 2005.

Once the indictments were announced in mid-1999, the World Bank Group provided extensive evidentiary support to the Lesotho prosecutors and made Bank Group staff available for interviews. The World Bank later assisted the Government by bringing together the Lesotho prosecutors with the various project funding agencies and EU antifraud officials. The Bank Group benefited greatly from the investigative work done by the Lesotho Government in bringing the debarment case against Lahmeyer and Acres.

Three INT investigations concluded in this fiscal year involving three countries in two Regions, show that Bank-financed projects in the infrastructure sector continue to face fraud and corruption challenges. In two cases, consulting services contracts valued collectively at over US $7 million for the supervision of road works construction were found to have been tainted by fraud and corruption. In the third case, INT found evidence
of collusion in the bidding for contracts valued over US$30 million.

In the first case, the main consultant – an international firm – was advised by its local partners immediately prior to contract signature that bribes valued at a certain percentage of the contract price would need to be paid by the partnership to government officials from the Ministry implementing the project. The international firm rejected the demand for bribes and reported the matter to the Bank Group. INT’s investigation found sufficient evidence to establish that the local partners intended to make this corrupt arrangement. Sanctions proceedings will be brought against the local partners and the Bank Group intends to make a referral of the case to the borrowing government. Fortunately, because of the prompt reporting by the company, the Bank Group was able to prevent the arrangement from being carried forward.

In the second case, an international firm admitted it likely paid bribes over a number of years and at various stages of the contract implementation process through its local partners to government officials of the Ministry
implementing the project. The international firm will also face sanctions proceedings, though its cooperation with INT during the investigation may be proposed as a mitigating factor when the case is brought to the
Bank Group’s Evaluation and Suspension Officer and, possibly, the Sanctions Board if the firm continues to cooperate fully.

In both cases, firms cooperated with the INT investigation because of their own internal policies of business ethics; because they realized that their involvement in fraud and corruption in third countries would bring them
afoul of national legislation in their home countries; and because they see the Bank Group as a trustworthy interlocutor. Unfortunately, both firms indicated they would no longer compete for Bank-financed contracts in the
countries in which they were involved, because they considered the fiduciary environment to be too risky.

In the third case, three rounds of bidding for road rehabilitation contracts were cancelled by the Bank Group in light of persistent evidence that bidding contractors were colluding to fix prices and nominate pre-determined bid winners. INT conducted two investigations in relation to the bidding rounds and determined that the collusion was orchestrated by government officials within the Ministry implementing the project; that hefty bribes were intended to be paid; and that politicians within the government of the borrowing country were also likely to be involved. The findings of collusive practices led to cancellation of the contracts, resulting in significant delays in the development of critical infrastructure. INT plans to recommend sanctions against a number of companies in the borrowing country and will make a referral of the investigation to the relevant authorities.

The Integrity Vice Presidency (INT) investigated allegations of manipulation in the enrollment and exclusion of beneficiaries in a social benefits program aimed to help alleviate the impact of unemployment throughout the borrowing country. 

Considering the decentralized nature of the program’s implementation arrangements and the large number of beneficiaries, the Bank’s review was necessarily limited to a small subset of the program, but involved the conduct of interviews and the examination of project data and relevant government information.  INT found evidence that in a four month period, the number of enrollments increased in one area by a third because of issues unconnected with eligibility criteria.  The investigation also found that in some instances civil society organizations were inserted into the enrollment process and in a limited number of cases the civil society organizations threatened to exclude beneficiaries from the program if they refused to participate in the organization’s activities, or if the beneficiaries refused to share a portion of the benefits with the administrative agency.  During the life of the project, the borrowing government’s own structures were also collecting information and acting on allegations of abuse in the program.

As a result of the Bank’s findings, the borrowing government has endeavored to create greater transparency of the social benefits program by reviewing the entire roster of eligible beneficiaries; adopting more transparent procedures and internal controls regarding beneficiary registration and status of registrants; and implementing stricter controls in determining the eligibility of beneficiaries.

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A Level GG staff member serving as a project manager willfully and intentionally deceived senior management through a continuous pattern of financial fraud from January 2002 to January 2005 by providing false and fraudulent hotel receipts and statement of expenses totaling $30,330 for which there was no legitimate entitlement.   Furthermore, the staff member manipulated and improperly used World Bank Group calling cards and the office telephone for personal long distance calls, then subsequently misrepresented the extent and purpose of the calls when explaining travel for personal leave.

Through a consistent pattern of claiming one to three extra days of travel reimbursements by altering, extending or forging hotel receipts or statements of expense, the project manager gradually accumulated tens of thousands of dollars in fraudulent travel claim reimbursements.

The investigation originally stemmed from an inquiry as to personal phone charges made from one location using the World Bank telephone system, when the staff member alleged to senior management to be attending training in another country.    The discrepancy in the physical location of the staff member led to a further investigation of all travel expenses during the project manager’s tenure.  INT found substantial evidence to indicate a clear and continuous pattern of misrepresentation with regard to, not only the use of the World Bank telephone system, but also mission travel in that the staff member submitted falsified hotel receipts and statements of expense. 

Based on INT’s findings, the Bank’s Vice President of Human Resources Services terminated the staff member’s employment, barred the staff member from future hire within the World Bank Group, and ordered the forfeiture of the staff member’s separation benefits totaling $30,300 as restitution for the staff member’s ill-gotten gains.

A Level GH Country manager was found to have defrauded the Bank Group of US$7,250 by using Country office cars and drivers for personal purposes, using a country office mobile phone for his family’s personal purposes and by submitting reimbursement claims for representation expenses with no supporting documentation.

The manager also requested that country office drivers falsely record personal trips as “official miscellaneous” and to replace the original log entries of drivers’ logs with false entries in advance of an internal audit. Finally, despite a warning from the Country Director not to communicate with the Country office staff concerning INT’s ongoing preliminary inquiry, the staff member telephoned his staff to discuss INT’s visit, thereby violating the duty to cooperate provision in Staff Rule 8.01.

The manager was given an Options Letter which led to his voluntary termination, a permanent bar to future employment in any capacity anywhere in the Bank Group, a permanent restriction on access to Bank Group facilities, restitution, and a waiver to all rights to appeal.

This case involved a Level GG senior staff member who engaged in a pattern of behavior towards multiple females, which constituted an abuse of authority and sexual harassment. In successive sequences, the staff member offered each female, who were either newly employed by the Bank in junior positions or seeking employment with the Bank, to engage in physical contact with him with the offer of a massage.

The accused staff member admitted to having engaged in the behavior alleged by the complainants, but disputed that it constituted either an abuse of authority or that it created a hostile work environment for the complainants, stating that the behavior stopped immediately after the solicitation had been rebuffed by the females.   The investigation revealed that, regardless of the staff member’s intention, the impact of the inappropriate behavior on the multiple victims ranged from embarrassment to fear, and resulted in the creation of an intimidating work environment, particularly for one victim, who worked under the direct supervision of the staff member.  In addition, the staff member’s position with the Bank was perceived by the junior staff members as inherently intimidating. Lastly, the fact that after each female successively rejected his solicitations, the staff member proceeded to engage in a similar pattern of behavior with the next female, which also posed a serious reputational risk for the institution.

Based on INT’s findings, the Bank’s Vice President of Human Resources Services terminated the senior staff member’s employment for abuse of authority and sexual harassment, and permanently barred the staff member from future employment within the World Bank Group in any capacity.