IDB building in Washington, DC; Photo courtesy of flickr user wallyg

Over the course of the past year, GAP has received a succession of complaints about unethical practices at the Office of Institutional Integrity (OII) of the Inter-American Development Bank (IDB). OII is the unit responsible for investigating allegations of corruption, waste and fraud at the IDB, and Brígida Benítez has served as OII Chief since January 2010. In each case, the complaints sent to us were first circulated internally at the IDB.

Soon after she took her position, Benítez’s lack of experience in fraud investigations became a source of concern. As a former partner at Wilmer Hale, her previous responsibilities had focused primarily on litigation and commercial trade disputes. Even as she serves as OII Chief, her extra-curricular work continues in this field: during the past academic semester, she taught a course in transnational litigation at American University (AU).

It should be emphasized that not only does investigation require a different skill set than litigation, but in many ways the two approaches to a set of facts are diametrically opposed. While an investigator examines facts impartially, a litigator uses facts to construct a narrative favorable to his/her client. The selection of a litigator, rather than an investigator, to head the IDB’s investigative unit, therefore, raises doubts about the Banks’ commitment to an impartial OII.

Last fall, Taimour Lay wrote a review of World Bank performance by topic area for The Africa Report, titled The World Bank: Does It Pass the Test? (WBDPT). The grades were not good, ranging from a “B” in Agricultural Development to an “F” in Diversity and Merit. In between, the bank earned a “C” for its Anti-corruption and Accountability work.

The diversity grade is remarkable for a multilateral development bank focused on reducing poverty in Africa, and GAP research on the topic validates the grade. In July 2009, GAP released a report that found evidence of racial discrimination against black professional grade employees at the World Bank. The report, Racial Discrimination at the World Bank, documented the treatment of these employees in recruitment, retention and internal judicial decisions. Findings included that a race ceiling exists at the institution, and that the Bank’s legal system fails to address racial discrimination adequately. Specifically, the report details (again, as of July 2009) that of over 3,500 professional grade World Bank staff worldwide (more than 1,000 of whom are Americans), there were only four black Americans. Days after our report was released in 2009, GAP reported that racial slurs were written on the inside walls of the Bank.

GAP has also found problems with the Bank’s anti-corruption and accountability efforts: the departments responsible for anti-corruption investigations – Ethics and Business Conduct and the Integrity Vice Presidency – are long on rhetoric and policy announcements but short on casework and asset recovery.

The WBDPT report is a useful review, but the results are grim and the implications of the results are even more dismal. If, in its own corporate practices, the bank is discriminatory and fails to reward merit, if senior management and national counterparts can play fast and loose with bank resources without answering to anyone, then a lack of poverty reduction and development is to be expected in client countries is hardly surprising.

The arrest of International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn for alleged sexual assault has recently made headline news.  Prosecutors in the case now claim to have information that suggests that Strauss-Kahn had previously engaged in similar misconduct.

Indeed, in 2008 Strauss-Kahn was investigated at the IMF for sexual harassment and abuse of power. According to a 2008 IMF Ethics Office report:

In the fall of 2008, an allegation of a close personal relationship between the Managing Director and a senior staff member was brought to the attention of the Dean of the Board. The staff member in question had already voluntarily left the Fund and found employment at another organization. The issues to be resolved were whether the establishment of the relationship constituted sexual harassment and an abuse of authority by the Managing Director, in particular, either through encouraging the staff member to leave the Fund, or through preferential treatment in the terms and conditions of the staff member’s employment.

An investigation was launched and the Board ultimately concluded that no misconduct had occurred. But as one former IMF official told The New York Times:

Had Mr. Strauss-Kahn been a less senior person, he might [sic] been fired or at least ‘sent to Siberia’ because of the affair with his underling. He survived an investigation, in part, this person said, because the culture at the I.M.F. dictated ‘no rules’ for the managing director and because there was little appetite to rid the agency of a charismatic and effective leader when an international financial crisis looming.

Mahmoud Mohieldin

Photo via flickr user World Economic Forum

This past Saturday, May 7, the Egyptian press announced that an administrative court annulled the deal privatizing the retail chain Omar Effendi five years ago. The ruling cited numerous legal violations regarding the sale of public assets, especially when such assets include architectural and cultural icons -- as the Omar Effendi sale did.

Even as it was sold in 2006, allegations of fraud cast a shadow on the transaction. A whistleblower accused then-Minister of Investment Mahmoud Mohieldin of forcing through the sale to a Saudi investor at a fraction of the chain’s real value. The press in Egypt reported that Mohieldin was the primary pusher behind the deal.

Like Mohieldin, the International Finance Corporation (IFC) of the World Bank Group was a cheerleader for the privatization of Omar Effendi, praising the agreement as a measure that will enhance growth in the country.  The IFC was also an investor. On its website, the IFC announced:

• $40 million in debt and equity financing, supporting an important privatization that will pave the way for future privatizations.
• Guidance: IFC’s experience with other international chains helped Omar Effendi revive its brand.
• Job retention and creation as demand grows for local sourced goods.
• Benefits for the country’s retail sector, which is a catalyst for further economic growth.

In a major breakthrough for United Nations whistleblowers, the UN Dispute Tribunal (UNDT) has ruled that Ethics Office decisions can be appealed through the UN justice system.

In Judgment No. UNDT/2011/063 (Hunt-Matthes v. Secretary-General of the United Nations) UNDT Judge Vinod Boolell ruled that “when a claim relates to issues covered by ST/SGB/2005/21 [the UN Secretariat’s whistleblower protection policy], a staff member is entitled to certain administrative procedures and that if he or she is dissatisfied with the outcome, he or she may request judicial review of the administrative decisions taken.” (paragraph 40) The judge therefore found that the Ethics Office’s determination that there was no prima facie case of retaliation in the Applicant’s case can be reviewed by UNDT.

As a contributor to the UN whistleblower protection policy, GAP notes that the policy was indeed designed with the intent that Ethics Office decisions could be appealed through the organization’s internal justice system. Such judicial review may be the only way that UN whistleblowers will receive a fair evaluation of their case, as the Ethics Office’s record of protecting whistleblowers from retaliation is abysmal.

According to Ethics Office reports to the Secretary-General, from August 1, 2007 to July 31, 2010, a prima facie case of retaliation was found in 1.4%* of the requests for protection from retaliation received by the Office (2 of 145 cases)* **. Thanks to this important precedent, the 98.6%* of UN whistleblowers who were previously denied protection from retaliation will now have the chance to appeal Ethics Office denials through the justice system and may finally receive relief.

The authoritative Egyptian newspaper Al-Ahram is reporting that the department store chain, Omar Effendi, privatized in a non-transparent and allegedly corrupt financial arrangement in 2006, is to return to public ownership within the month. Al-Ahram cited Egyptian Public Sector Enterprise Authority Representative Adel Mowazi as the source of the information.

Reversion to public ownership would be the first legal step taken by the new government to respond to allegations of corruption made by whistleblower Yahia Hussein Abdel-Hadi and filed with the Prosecutor General in February 2011, after the fall of the Mubarak regime. According to the allegations, an 85 percent ownership stake in the Omar Effendi chain was sold to a Saudi corporation in exchange for barely 50 percent of the amount calculated by the government’s own valuation committee. The deal was arranged and promoted by Mahmoud Mohieldin, now a Managing Director of the World Bank.

Yahia Hussein Abdel-Hadi accused Mohieldin, the ex-minister of Investment under Mubarak, of railroading the valuation committee into recommending the sale of the Omar Effendi sale to the Anwal Company of Saudi Arabia for an amount that was $100 million less than the cumulative valuation of the chain’s physical assets.