Bank Finds Former INT Attorney under Wolfowitz Guilty of Unethical Conduct;
Same Attorney Involved in AIG Controversy
(Washington, D.C.) – Today, April 6, the Government Accountablity Project (GAP) filed a complaint with the Washington, D.C. Bar Association against Suzanne Folsom, former Director of the Department of Institutional Integrity (INT) at the World Bank from 2006 to 2008. The complaint reveals unethical actions taken by Folsom as the manager of the Bank’s investigations unit, including improper interference with an external review, abuse of authority, harassment, and deception of INT staff.
According to the complaint, concerns about mismanagement at INT under Folsom became so serious in 2007, that then-World Bank President Paul Wolfowitz was obliged to convene an independent external panel chaired by Paul Volcker to review the investigative practices in place. In the two years since the Volcker Panel issued its report, Bank management has repeatedly heralded the implementation of the Panel’s recommendations as evidence of effective action to combat corruption. Rulings handed down in December 2009 by the Administrative Tribunal (AT), the Bank’s internal court, in response to sixteen complaints filed by INT staff members, however, illustrate Folsom’s deliberate and substantial interference with this supposedly independent commission. The rulings show that Folsom manipulated the inquiry in order to influence its findings and weaken its recommendations.
When Folsom managed INT, GAP also released a report on management at the unit that documented widespread irregularities, in contrast to less critical conclusions of the Volcker Panel.
The bar complaint is available on GAP’s website by clicking here.
Folsom’s Source inside the Volcker Panel
Specifically, Folsom recruited a member of the Volcker panel to inform her of the identities of the panel’s witnesses, as well as the content of what they said. Ruling No. 419, for example, describes Folsom’s interference in detail; the text identifies Folsom as “Ms. X:”
In October 2005 the President of the Bank appointed Ms. X as Acting Director of INT. She became Director of INT in January 2006.
The INT staff member who exposed Folsom’s manipulation is identified as “the Applicant.” In the text of the ruling, the witness for World Bank management is quoted admitting Folsom’s illicit contact with the Volcker panelist:
[The Applicant] makes reference to sub rosa conversations [Ms. X] regularly had with a member of the Volcker Panel during which she would receive information on the INT staff who registered concerns about INT management with the Panel. [Ms. X] indeed told me that she engaged in these meetings and even informed me of the name of the specific panel member. ... [Ms. X] indeed told me and [the Applicant’s supervisor] that [the Applicant] was among the staff who spoke ill of [Ms. X] and that she would punish him, that he would never get promoted (AT Decision 419, para. 45)
Acting on information from her informant, Ms. Folsom then retaliated against those who criticized her.
“Folsom’s action inevitably had a chilling effect on other INT witnesses before the Volcker Panel,” said GAP International Director Bea Edwards. “The Panel informant violated the witness’ confidentiality and exposed them to Folsom’s reprisals. Other staff members saw that happen. The Tribunal rulings taint the conclusions of the entire Volcker review.”
Misleading the Panel Regarding INT Practice
The rulings also show that Folsom altered her management practices in order to mislead the Volcker Panel about the administration of INT (AT Decision 410, para. 52). The witness for management explained to the Tribunal how Folsom invented department-wide evaluation criteria solely for the benefit of the panel:
This change [to the Results Agreement] was a consequence of [Ms. X’s] decision during the latter part of the third quarter of the OPE [Overall Performance Evaluation] cycle to have the management team develop and issue across the department standardized Results Agreements for investigators, without prior notice to INT staff, and was based on [Ms. X’s] stated desire to showcase the standardized Results Agreements in her submissions to then impending Independent Review Panel headed by Chairman Volcker.
Instead of presenting the Panel with documents that accurately reflected INT performance standards, Folsom produced fictitious accounts of her management practices. Her version of administrative procedures stood uncorrected when the Panel issued its findings and made recommendations for “reform.”
What the Rulings Do
The sixteen appellants to the Tribunal alleged that they suffered: violations of due process, breaches of confidentiality, a hostile work environment, unfair treatment, and abuse of discretion at the hands of INT management (AT Decisions 408 - 423, para. 3). Tribunal judges validated these complaints and attributed the responsibility for the chaos at INT to Folsom. INT staff members have said informally to GAP that under Folsom, INT became little more than a “plumbers’ unit,” dedicated to plugging the information leaks that embarrassed Wolfowitz as Bank president. They added that the correctives recommended by the Volcker Panel were insufficient.
A Separate Ruling against Folsom
In a separate ruling cited in GAP’s Bar Complaint, the World Bank’s Tribunal revealed that Folsom personally intervened in an improper investigation of the General Counsel of the private sector lending arm of the Bank, the International Finance Corporation, and conveyed the impression to a senior manager that the investigation’s target was guilty of misconduct allegations when, in fact, she was not.
The ruling found that Folsom’s actions in this case damaged the former General Counsel’s professional and personal reputation, and forced her into early retirement as a result of the stress of a protracted, intrusive and investigation.
As a consequence of all seventeen decisions, the Bank will pay the victims over $2 million in damages and compensation.
Folsom’s Departure & the Lack of Bank Action
Ultimately, Bank President Robert Zoellick forced Folsom to resign in January 2008.
“Ironically, Folsom was forced out for leaking confidential Bank documents to the press,” said Edwards. “In a sense, the head plumber herself was fired for leaking.”
As a condition of her departure, however, Folsom pocketed a severance payment of about $400,000. Additionally, an INT staff member claims that Zoellick allowed Folsom a weekend of unfettered access to INT offices during which she was free to remove and shred documents.
Although the Lead Internal Investigator at INT, Wayne Nardolillo, informed the AT that Folsom told him the identity of her informant on the Volcker panel, World Bank management appears to have taken no action to hold the panel member to account, to determine the influence this member had on the panel’s final recommendations, or to revisit the Volcker exercise for the purpose of instituting real reforms in corruption investigations. On the contrary, Bank management continues to tout the recommendations of the Volcker Panel as if they were credible rather than distorted by Folsom’s unethical influence.
Folsom’s Recent AIG Controversy
Three months after leaving the World Bank, Folsom was hired by AIG as the chief compliance and regulatory officer. From AIG, she collected a second golden parachute of $1 million after less than two years at the company, even as other AIG executives fought the imposition of the $500,000 annual pay caps by Kenneth Feinberg, the Paymaster for bailed-out US corporations and banks. Folsom, who left “to pursue other opportunities,” accompanied AIG’s General Counsel, Anastasia Kelly, out the door, who openly left the company because of the pay caps after counseling other AIG executives on how to avoid them. Senator Charles Grassley is inquiring into the generous terms of Folsom’s simultaneous separation.
Government Accountability Project
The Government Accountability Project is the nation’s leading whistleblower protection organization. Through litigating whistleblower cases, publicizing concerns and developing legal reforms, GAP’s mission is to protect the public interest by promoting government and corporate accountability. Founded in 1977, GAP is a non-profit, non-partisan advocacy organization based in Washington, D.C.