The World Bank has expanded its policy of disclosing the names of firms and individuals banned from doing business with the Bank.
In a Jan. 11 announcement, the Bank said it will reveal the names of firms and individuals barred from providing goods and services directly to the institution. Under existing policy, the Bank discloses the names of those prohibited from doing work on Bank-financed development projects.
“This change was made in the interest of fairness and transparency,” according to the Bank statement.
Three companies have been debarred along with their affiliates under the Bank Group’s corporate procurement program, the Bank stated.
Satyam Computer Services Ltd. of India will not be allowed to do business with the Bank for eight years, the Bank said, for “providing improper benefits to Bank staff and failing to maintain documentation to support fees charged for its subcontractors.” The Bank said the debarment was effective September 2008, but the Bank did not acknowledge the debarment until December when it confirmed press reports. Satyam’s chairman and founder Ramalinga Raju resigned recently after admitting to accounting problems.
Fox News has reported, beginning last October, that World Bank officials have known for more than three years about corruption involving the highest corporate levels of Satyam, “but they felt no obligation to the global corporate community to share that information publicly until late last month.”
Fox has also raised questions about communication among international organizations, noting that the United Nations gave Satyam a contract in July, after the World Bank had suspended Satyam in February. The unannounced suspension triggered a phase-out period prior to the September debarment, according to a Bank official.
While the Satyam situation apparently sparked the policy change, the Bank reached back to disclose two other debarments made more than a year earlier, including one-line explanations. An official said these were the only other firms debarred for direct work with the Bank.
Wipro Technologies will be ineligible for four years beginning June 2007, for “providing improper benefits to Bank staff.”
Megasoft Consultants Ltd. also is banned from bank contracts for four years, commencing in December 2007 for “participating in a joint venture with Bank staff while also conducting business with the Bank.” The firm is located in Herndon, Va., and is a subsidiary of the Indian firm the Megasoft Ltd.
According to Fox News the three firms “shared corporate and even personal ties, and in the case of one firm may even have shared a collusive strategy for retaining World Bank business.” Fox’s report goes into considerable detail about this.
More Debarment Transparency Urged
The World Bank action was welcomed by one advocate of greater Bank transparency who noted that most other international financial institutions do not disclose debarments. “The other IFIs could really take note,” said Aneta Wierzynska, senior policy director at Transparency International-USA.
The Bank maintains a list of 111 firms and individuals it has debarred since 1999 from doing project-related development work.
Also urging more transparency around debarment was Daniel Kaufmann, until late last year the director of Global Programs at the World Bank Institute, who wrote Jan. 14 about various recent corruption scandals in a World Bank blog.
Kaufmann, now at the Brookings Institute, wrote:
All International organizations, such as the UN, EU, the World Bank, Regional Development Banks, as well as bilateral donor agencies, and, more broadly, all governments, need to have fully transparent sanction mechanisms in place. Firms found to have engaged in bribery should be debarred from contracts with such organizations or governments. Such debarment should be public. Such transparent disclosure is a major deterrent to such corrupt practices, as it significantly raises the (reputational) cost of engaging in such practices.
In such international organizations and governments that award contracts to such firms, full and detailed disclosure of the sanction and of the extent of the misdeed should be timely and not be limited to small companies or mere individuals. Mighty multinationals, regardless of how ‘politically untouchable’ they may have been in the past, ought not get special dispensation any longer from governments or international organization when they have been engaged in bribery.
Timely public debarment is not only important for non-Ponzian companies like Siemens, of course. Earlier public debarment of Satyam (their bribery was known for many years, even if it was only the tip of the Ponzian iceberg) would have lowered the cost to India’s IT industry. Clearly, while Siemens and Satyam corruption scandals are very different, this recommendation applies to both cases.
By Toby McIntosh
Filed under: IFTI Watch