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The World Bank and International Development Banks Are Using Financial Clout to Ensure Fairness

The World Bank and International Development Banks Are Using Financial Clout to Ensure Fairness

May 7, 2012

An article in the Wall Street Journal this week highlights the efforts that international development banks are making to prevent corruption during the bidding process for contracts for large infrastructure projects, which are often financed by the banks and can be worth hundreds of millions of dollars.

Alstom SA, a major French engineering firm, is being investigated for possibly bribing government officials in Slovenia during the bidding for construction of a $927 million power plant there. Slovene officials are said to have leaked details to Alstom SA about the bid submitted by Siemens AG, which was competing for the contract. Alstom ultimately won the contract after submitting a bid for the project that was about $100 million dollars lower than the Siemens bid.

The World Bank, along with other regional development banks, have been stepping up efforts in recent years to police and prevent bribery and corruption in major development projects.As another WSJ article explains, Alstom has been investigated and found liable several times before for a total of more than $50 million in fines, including in Zambia, Latvia, Tunisia, and Malaysia. Besides monetary fines, banning guilty firms from bidding on future projects for a period of time (known as blacklisting or debarment) is the other major tool that the banks are using to punish firms. The World Bank blacklisted Alstom for 3 years because of its bribery in Zambia, but the ban can be reduced to 21 months if Alstom complies with the World Bank’s terms and agrees to allow officials from the World Bank to monitor their compliance. These blacklistings offer a very compelling reason for firms to comply with anti-corruption laws, because even a ban of only one year results in losing the ability to bid on and profit from these lucrative development projects.

Large international corporations such as Alstom are complex, sprawling institutions with thousands of employees with many large projects all over the world at any given time. As a result, it is very difficult for a company to ensure that rogue employees are not breaking the company’s own rules or laws like the Foreign Corrupt Practices Act and the UK Bribery Act. Guidepost Solutions has the ability to monitor not only debarred or suspended companies, but also the large international construction projects themselves on behalf of government quasi government and private banks, for fraud waste and abuse.


About the author

Oconnell_webANDREW J. O’CONNELL
PRESIDENT, INVESTIGATIONS AND PRIVATE CLIENT PROTECTION
aoconnell@guidepostsolutions.com

Andrew J. O’Connell serves as president of the Investigations and Private Client Protection practice at Guidepost Solutions. He is a former federal prosecutor and federal agent with expert investigative and security consulting experience. Mr. O’Connell oversees and conducts private investigations and security assessments throughout the United States and the world. Andrew can be reached at aoconnell@guidepostsolutions.com.

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