- integrity office reads riot act against corrupt businesses, consultants in several Latin American countries

Cases of fraud and corruption inquiries involving projects funded by the Inter-American Development Bank (IDB) have more than doubled over the past five years according to the recently released 2009 Institutional Integrity Report prepared by the Bank’s Office of Institutional Integrity (OII).

According to the report the number of inquiries, consultations and allegations relating to corruption and fraud associated with bank-funded projects totalled 309 last year compared with 142 in 2004. The number of inquiries by the OII last year also increased by 87 over 2008.

Of the total number of enquiries received by the bank last year 163 were classified as allegations while the remaining 146 were classified as consultations. Of the latter amount 25 concerned integrity issues in what the report described as “non-sovereign guaranteed operations.”

Last year 15 per cent of the new allegations received by the bank were submitted anonymously, 11 per cent were reported by IBD Group staff and the remaining 74 per cent were made by third parties. Reports of fraud and corruption relating to IDB-funded projects have been both internal, relating to allegations of malpractices involving IDB Group staff and external, relating non-IDB personnel. Last year, 84 per cent of the allegations relating to fraud and corruption were external and the remainder were internal.

The IDB report lists the details and outcomes of several cases handled by the OII last year pertaining to offences committed by private and public functionaries and companies that included fraudulent practices and extortion. The cases involved IDB-funded projects in Paraguay, Bolivia, Honduras, Colombia, Guatemala, Peru, Ecuador, Panama.

The highest levels of prevalence of corrupt projects requiring IDB sanctions occurred in Panama where seven members of a single Panamanian firm – Education Tecnica Especializada – including the firm’s owner along with the firm itself were permanently debarred from involvement with IDB-funded projects. Several individuals and firms from Guatemala, Bolivia, Colombia and Honduras were debarred from involvement with IDB-funded projects for periods of up to 12 years. Public officers, legal representatives of project beneficiaries and owners and senior managers of private firms contracted to complete IDB-funded projects who became caught up in corruption scams were also debarred from involvement with IDB-funded projects for varying periods.

The IDB’s Office of Institutional Integrity was set up in 2004 to receive and investigate reports of practices prohibited by the bank and the outcomes of its investigations can lead to sanctions imposed by the bank’s Sanctions Committee.

The 2009 report documents specific cases of fraud and extortion including one in which a construction firm was paid US$325,000 to secure supplies for an IDB Group-funded project but acquired supplies that did not meet the specifications set out in its bid. The OII investigation found that the firm submitted a fraudulent purchase invoice, forged a certificate and provided catalogues for supplies that did not match those described in the bid. In another case involving fraud and corruption the report alludes to an IDB project before the executing agency had completed the bid evaluation. “The firms conducting the project reported that they began the work because the executing agency told them that they were the winning bidders and that the first payment had not been made by the executing agency,” the report said.

Another case documented in the report involving bribery and the manipulation of the bid process described a case in which two consultants working for an executing agency directing an IDB-financed programme agreed to be contracted by a firm that eventually won a contract in the IDB programme. The consultants provided services paid for by the winning firm based on access to confidential information facilitated by their consultancy positions with the IDB.

In yet another case documented in the report, a consultant recruited by the IDB was fingered for soliciting gifts and misleading rural beneficiaries on matters pertaining to an IDB project.

Last year seven individuals and three firms were permanently debarred from IDB-funded projects while a further 14 individuals and 9 firms were debarred from involvement with IDB-funded projects for five years. All told, 36 individuals and 16 firms were sanctioned by the IDB last year for various corruption-related malpractices.