The Observer, UK
Sept 30 2007
World Bank puts Armenian fraud case on hold
Britain wants action on reports that a water project is mired in
corruption. Heather Stewart reports
Sunday September 30, 2007
The Observer
Britain is urging the World Bank to investigate allegations of
corruption and embezzlement in a $35m (£17m) water project in
Armenia, which the Washington-based body says are only of ‘medium
priority’. Bruce Tasker, a British whistleblower, says he has
presented the bank with evidence of large-scale fraud in a project to
improve the water supply in the Armenian capital Yerevan, but it has
so far refused to carry out a full-blown investigation.
With its conciliatory new boss Robert Zoellick at the helm, the World
Bank is keen to make a fresh start after the humiliating departure of
Paul Wolfowitz earlier this year. Wolfowitz stormed into the bank
promising to crack down on corruption, but ended up being embroiled
in an ethics scandal of his own concerning lavish pay rises for his
girlfriend, Shaha Riza.
Persuading the world’s richest countries that their taxpayers’ money
is being well spent is a critical part of Zoellick’s job, but the
Armenian case is just one of a backlog of allegations waiting to be
examined by the Bank’s Institutional Integrity Department – or INT,
as it is known.
INT wrote to Washington-based pressure group the Government
Accountability Project (Gap), which is backing Tasker’s claims,
saying the case was ‘rank ordered "medium" priority, and as such
remains in a queue pending the availability of investigative
resources’.
The British Ambassador in Armenia has written to the World Bank,
urging it to carry out a full investigation.
‘We’ve run into a wall,’ said Gap’s director, Bea Edwards. ‘We have
extensive documentation. It involves high-level government officers,
a lot of money and basic services. What else do they want? They’ve
been completely unhelpful.’
She says the Armenian case is important, because it could point to
potential problems in the way other World Bank projects are run,
particularly in the former Soviet Union.
Tasker is a British engineer appointed by an Armenian parliamentary
commission investigating the Yerevan scheme. He claims that as soon
as he began to examine the details of the project, it became clear
that it was riddled with corruption, ‘from start to finish, from top
to bottom. The fact is it was not an isolated case of a few thousand
dollars here or there, it was tens of millions of dollars.’
The original purpose of the project was to repair Yerevan’s
pipelines, and improve the water supply to households, but he says
that by the time the work got under way it had shifted to installing
water meters instead.
Tasker claims contractors were able to pocket up to $10 profit on the
sale of each meter by charging customers for installation. His
commission was told that the average number of water meters per
customer was 1.5.
The bank’s failure to pursue the allegations underlines the critical
findings of a panel chaired by former Federal Reserve chairman Paul
Volcker, which revealed serious weaknesses in the way the way INT
investigates allegations of wrongdoing. INT is run by a Wolfowitz
appointee, Suzanne Folsom. Volcker’s team found that the unit had
achieved ‘some notable successes’, but warned of ‘serious operational
issues and severe strains in relations’ with other parts of the bank,
and said its work had sometimes contributed to ‘counterproductive
relations’ with both donor and recipient countries.
Wolfowitz’s critics had accused him of cracking down hard on alleged
corruption in countries where the US has a political axe to grind,
but turning a blind eye to problems in more friendly regions of the
world.
Jeff Powell, of pressure group the Bretton Woods project, said it was
still too often left to politicians to decide which allegations to
pursue. ‘This case is indicative of the fact that senior management
and the board of the World Bank have not taken seriously the issue of
corruption,’ he said.
A World Bank spokesman said he would not comment on a specific case.