World Bank sanction on French firm shows benefits of cooperation

19 June 2017. By Mark Bocchetti.

World Bank Sanctions Board on Friday handed down a one-year debarment to a French company that bribed a World Bank consultant to win contracts on a Romania health sector project, just two weeks after hammering a Dutch firm with a 14-year exclusion for similar conduct on the same project.

The disparity of outcomes is interesting because the conduct in each case was similar: each company had agreed, in writing, to pay commissions of 3-5 percent to a World Bank consultant employed to advise the Romanian Ministry of Health on procurement under the project.

The Sanctions Board parsed the conduct of the two companies using a series of aggravating and mitigating factors, providing insight into how the nature of the misconduct and the response of a company to a World Bank investigation can lead to very different results.

The case just handed down also identifies the consultant as a public official, raising the issue of whether the consultant assumed criminal liability for negotiating and accepting bribes to influence tenders on which he was employed as an advisor.

A UK jury convicted a loan officer at the European Bank for Reconstruction and Development on June 6 for taking bribes to influence loan decisions, and the Sanctions Board's June 16 decision reveals that the consultant was interviewed by City of London police.

"Re the case cited in the Sanctions Board Decision, the reference made is to a former Short Term Consultant who is no longer working at the World Bank Group," a World Bank spokesperson said on Monday. "As per standard procedure, investigative findings were referred to concerned national authorities."

The French company was not identified in the Sanctions Board decision, but the World Bank announced debarment of French company Ideal Medical Products Engineering on June 16 for one year. World Bank procurement documents identify Ideal as bidding on and winning tenders for medical equipment.

According to the June 16 decision, the French company's predecessor had agreed in July 2007 to make payments of 3-4 percent to the consultant. Invoices, e-mail and bank records substantiated the agreement, and company officials acknowledged in interviews that they had agreed to pay the commissions.

The French company argued that it was not aware that the consultant was functioning as a public official on the transaction. The Sanctions Board made short work of that defense, saying that Ideal officials were well aware that the consultant had a defined role in assessing bids and even had provided him with technical information used to exclude another company's bid.

"It is clear from the nature of the Procurement Advisor's services and his impact on the procurement process – which the Respondent's employees were aware of as indicated by the evidence discussed in Paragraph 29 above and the Sales Manager's testimony regarding contemporaneous communications with the Procurement Advisor – that the Procurement Advisor was functioning as a public official in reviewing Tender 2 procurement decisions," the decision said.

The French company also sought to defend itself by arguing that it should not be held responsible for conduct carried out by a predecessor company. The Sanctions Board made short work of this argument as well, noting that the asset sale had been engineered by the parent to spin off its hospital-related operations, and that both contracts and employees had been transferred to the new company.

The Sanctions Board deflected other objections on evidentiary issues with earlier rulings. Ideal had accused the World Bank's investigative unit, known as INT, of failing to disclose exculpatory information, but the board dismissed this argument after the unit turned over its interview with Ideal's CEO.

The board also turned away an attempt to obtain INT's interview with the consultant, ruling, after an in camera review, that the interview was not relevant. And it noted that INT did not have a copy of the City of London interview with the consultant that Ideal also had sought.

"The Sanctions Board also considered that the sanctions framework provides no right to discovery and does not give the Sanctions Board the mandate to compel INT to seek out evidence from national authorities," the board wrote.

While the decision does not provide a single reference point to differentiate its analysis from its earlier sanction of Dutch company Dutchmed, the Sanctions Board identified a number of specific points of aggravation and mitigation that provide a clue to its thinking.

Dutchmed was found to have carried out six specific corrupt practices over four contracts. Because each instance was factually distinct from the others, the Sanctions Board found that the "plurality" of Dutchmed's conduct warranted not just aggravation, but actual "multiplication" of the sanction.

While Ideal had agreed to pay commissions on four different lots under the same tender, three of which were financed by the European Investment Bank, this conduct did not trigger aggravation under the World Bank's sanctioning standards. Both companies were assessed aggravation for management's role in the conduct and use of sophisticated means.

However, Dutchmed and Ideal's conduct diverged on other points. The Dutch company refused to submit to a World Bank audit, leading the Sanctions Board to reject the company's claim that it could not be forced to incriminate itself in the face of a pending criminal investigation, and instead find aggravation for obstruction.

The Board also followed INT's recommendation and found "coercion" from the procurement consultant to be a mitigating factor in Ideal's misconduct. The consultant apparently told Ideal that if they did not play ball, they might not win any of the bids.

In addition, Ideal cooperated with the World Bank investigation, providing not just documentation but also allowing INT interviews of senior employees. And the Sanctions Board gave the French company additional credit for "voluntary corrective action" for adopting a code of ethics and providing a list of employees who have agree to abide by it.

For more insight into this subject read our earlier story "Sanctions Board rejects link of World Bank probe to prosecutions".

	Eliot Gao