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World Bank Tribunal Highlights Manipulation of Albania Investigations

Bea Edwards, June 23, 2010
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In its March 2010 session, the World Bank’s Administrative Tribunal handed down two decisions in cases related to the Albania Integrated Coastal Zone Management and Clean-Up Project (AICZM). Over the course of the past three years, this project has become the source of controversy both at the Bank and in Albania. It is now clear that as the project moved through the preparation pipeline, the Board of Directors was misled about the commitment of the Government of Albania to suspend its displacement plans pending the adoption of measures to mitigate the effects of removal on the village of Jale. The Board of Directors was informed that the Albanian government had agreed to a moratorium on displacement when in fact it had not. In addition, disputes subsequently developed about the application of safeguard policies, the scope of the project’s activities, and the contracting of the Prime Minister’s son-in-law as Project Coordinator.

After the Project began implementation and Albania’s Construction Police demolished dwellings in Jale without any mitigating resettlement plan, a complaint about the Bank’s role reached the Inspection Panel. As the Panel sought answers to the questions raised in the complaint, senior management at the Bank became unresponsive and left the Panel to struggle with delays and misinformation.

In January 2008, the Department of Institutional Integrity (INT) began a preliminary inquiry into the circumstances surrounding the misinformation given the Board about resettlement safeguards. In February ‘08, information about the demolition in Jale, Albania leaked to Fox News, which chronicled the events publicly and brought US Congressional pressure to bear on the Office of World Bank President Robert Zoellick. According to the Tribunal judgments related to project staff published on June 17, 2010:

 

An announcement on the Bank’s Intranet, dated 17 February 2009, stated that

 

[T]he President has asked the World Bank’s Department of Institutional Integrity (INT) to lead an Accountability Review into alleged misrepresentation by Bank staff to the Inspection Panel and internal events surrounding the Project preparation, Board presentation, and Project supervision, and will take appropriate corrective action (AT Decision 430: para. 50).

What followed at INT amounts to a narrative of abusive, intrusive and improper pursuit of staff members for purposes of convenience. The conduct of INT’s investigations of this project is especially objectionable because World Bank staff members have no recourse to national court systems when their due process rights are violated.

The chronology of events leading to the machinations at INT shows that senior management essentially empowered the investigative department to ensure that “heads rolled” regardless of which heads they were. At the same time, senior management did nothing to promote legitimate reforms and ensure that the abuses occasioned by the Albanian project did not recur. The end result is that at least two staff members were arbitrarily mistreated and harassed, those truly responsible escaped sanction, and no structural changes took place to strengthen the safeguards that would prevent future unmitigated demolitions in Bank projects.

 

The Conduct of the Investigations

At the outset, it must be recognized that the demolition carried out in Albania was a violation of human rights (and Albanian law), and that the circumstances surrounding it point to the likelihood of corruption on the part of the Albanian government counterpart. As the Tribunal acknowledged, however:

[A]ttributing individual responsibility must be carried out with respect for the principles of due process, transparency, and fairness, so as to guarantee that any effects on individuals were justified by the facts as assessed by legitimate standards (AT Decision 430: para. 66).

Tribunal Decisions 430 and 431 make clear that in the opinions of the judges, the right to due process was repeatedly ignored by INT as the department, at the instruction of the president’s office, sought to construct an image of accountability rapidly for what had happened in Albania. The decisions at issue involve the Task Team Leader for the Project between October 2004 and May 2007, and the Director and Regional Coordinator for Southeast Europe in the Eastern Europe and Central Asia (“ECA”) Region between April 2003 and December 2007.

As a result of INT’s improper investigative practices, denial of due process and interference with the decision-making of the Department of Human Resources, one staff member lost her managerial rank, and both were transferred to corporate responsibilities rather than project operations for a three-year rotation. Both were subjected to ex post facto ‘supplemental’ performance reviews and sanctioned formally.

In both cases the Tribunal was scathing in its assessment of the practices at INT.

  • An “accountability review” became a de facto misconduct investigation, but the targets of the investigation were never given the counsel nor information needed to respond adequately to allegations made against them.
  • The alacrity with which the accountability review was undertaken in the wake of the critical Fox News articles strongly suggests that the action was a result of political pressure and institutional embarrassment and that INT lent its services to management’s desire for scapegoats in this instance. Rather than responsibly determining who was accountable for World Bank involvement in the Albania demolitions and the deception of the World Bank Board of Directors, INT became the linchpin of an illegitimate targeting of staff members for political expediency.
  • INT contributed extensively to disciplinary actions under cover of administrative discretion.
  • INT exceeded its authority (and competence) by recommending to HR possible disciplinary measures to which the targeted staff members might be subjected.
  • A “Draft Report” was sent to management by INT for the purpose of orienting apparent disciplinary decisions despite the fact that no indications of misconduct had been identified.

In short, according to the Tribunal:

 

INT’s procedure, in addition to deviating from its regular process and mandate under the Staff Rules, raises a number of concerns. The result of the Bank’s conflation of an administrative/performance review procedure with the disciplinary procedure of a preliminary inquiry is that the affected staff, including the Applicant, were not given proper notice of the allegations, accusations or imminent adverse actions against them, nor an adequate opportunity to be heard before an adverse decision was taken in their case.

Systemic Problems at INT

Violation of the due process rights of Bank staff members has been a long-standing and organic problem at INT. It is an issue that transcends the tenure of Bank presidents and INT directors. Over the past five years, serious challenges to the practices of INT have arisen under presidents Wolfowitz and Zoellick, and under directors Suzanne Folsom and Leonard McCarthy.  Former INT director Folsom occasioned such frequent and fundamental complaints that Bank president Wolfowitz was obliged to convoke a special panel chaired by Paul Volcker to review the structure and investigative processes at INT. At the request of staff members, GAP prepared a parallel report on INT, and both reports were released in September 2007.  Both reports were critical.

As a result of the Volcker Panel’s report, the Bank agreed to implement 18 recommendations designed to reform and improve INT procedures. This was apparently largely accomplished by the end of 2009, even as the abusive investigations – now detailed in the Tribunal decisions discussed above – were in progress. In other words, superficially INT was being reformed while, in practice, serious abuses continued unabated.

The explanation for this schizophrenic process was exposed – also by the Administrative Tribunal – in 16 decisions handed down in December 2009. These decisions revealed that former INT director Folsom had undermined the work of the Volcker Panel by recruiting a panel member to act as her informant. The panel member informed Folsom which of her staff members were meeting with the panel, and what these staff members had said. Folsom systematically retaliated against those who criticized her, thus sabotaging the reforms even as they were formulated. A special Grievance Panel had to be convoked to address the issue, which awarded affected staff members substantial sums as compensation for the professional and personal harm they sustained. Then-new INT director McCarthy, refused to comply with the Grievance Panel’s recommendations for compensation, and the staff members took their appeals to the Tribunal.

The Tribunal decided that Folsom’s unethical conduct obliged the Bank to make compensatory payments to staff harmed by INT of nearly $3 million. When GAP requested that the Bank’s General Counsel investigate Folsom’s actions, we were told that the matter was closed. GAP also filed a bar complaint against Folsom, which was also closed without investigation.

Although Folsom left the Bank in January 2008, the situation at INT was not categorically improved by McCarthy. He arrived in April 2008 and less than one year later, actionable allegations of misconductin his native South Africa surfaced against him in the press. McCarthy was accused, via unimpeachable evidence, of manipulating a high-level corruption investigation for political gain and of using improper and provocative intelligence gathering sources and methods. His conduct was described in a report issued by the Joint Standing Committee on Intelligence (JSCI) in the South African Parliament. When GAP requested that president Zoellick open an inquiry into this matter, our letter failed to produce a response. Now, the recent Tribunal decisions show, INT has abused its investigative authority for purposes of political expediency, damaged two careers in the process and obligated the Bank to make compensatory payments of over $200,000 to targeted staff members.

Five years of proven, on-the-record misconduct and abuses in INT provide a clear case for independent oversight of this oversight body. For its part, the Volcker Panel apparently recognized this, and recommended that an Independent Advisory Oversight Board be established. In July 2009, World Bank management announced that the new board was in place.

It is not clear, however, where the oversight board was or what it was doing while the INT investigation into the malfeasance associated with the Albanian Coastal Zone Management Project proceeded. It is evident, however, that to the extent that an independent board is “advisory” it is not an effective oversight mechanism because it has no executive authority. It cannot direct the institution to implement reforms or take corrective action. The terms establishing this board, which deprived it of any consequential influence, is, in fact, an illustration of the way in which the Volcker Panel pulled its punches. The phrase “independent advisory oversight board” has a comforting ring to it, but in practice, it means virtually nothing.

The Tribunal decisions of the past two sessions demonstrate that the Volcker Panel’s exercise of 2007 must be revisited. Any reasonable observer would conclude that the following steps should be taken:

  • The General Counsel must open an inquiry into the identity of Folsom’s informant on the panel and the consequences of the resulting sabotage on reforms at INT.
  • McCarthy should be placed on administrative leave pending an inquiry into his role in obstructing the implementation of the decisions of the INT Grievance Panel in 2008, and in the procedures employed in the wrongful investigations of Task Team Leader for the AICZM Project between October 2004 and May 2007 and the Director and Regional Coordinator for Southeast Europe in the Eastern Europe and Central Asia (“ECA”) Region between April 2003 and December 2007.
  • World Bank staff must be afforded due process, particularly in light of the Bank’s immunities.  In consultation with and with the consent of the Staff Association, an effective Independent Oversight Board should be established with executive authority that does not include the members of the existing advisory board.

All of the problems identified by the Tribunal in these two cases emphasize a single structural weakness in the internal investigative procedures used at the Bank: the separation between the president’s office and INT is permeable and can be superseded when convenient. Initially, in fact, Folsom served simultaneously as Counselor to the President and as Director of INT. Although she publicly defended this dual role, the Volcker Panel recommended that she relinquish her title as counselor. [3]

While McCarthy serves only as Vice President for Institutional Integrity, it appears that he can be used by management to produce expedient results. Structural changes are therefore required, and the independence of INT from the demands of senior managers must be guaranteed.


[1] The Volcker Panel set out a recommendation for the establishment of an versight mechanism at INT, but the recommendation was weak: “The Need for an Independent Advisory Oversight Board. A small external Advisory Oversight Board should be established to protect the independence and strengthen the accountability of INT. Reporting to the President and the Audit Committee, it should meet periodically to review the administration of INT, its professionalism, its diversity, and its progress toward stated objectives.”

[2] The IAOB was made up of former Australian treasurer Peter Costello, former US diplomat and scholar, Chester Crocker, former Philippine Ombudsman Simeon Marcelo, and Swiss jurist Mark Pieth.

[3] “As per INT’s board-approved Terms of Reference, the head of the department reports directly to the President – just like a Counselor does. Since the President isn’t staff, INT has no 'jurisdiction,' for lack of a better term, over him. I'm an ethics lawyer, and have done quite a bit of work on Conflicts of Interest – my titles pose no such conflict.

I should add, incidentally, that being Counselor to the President – the title, I mean – is actually important externally, in this line of work. When you’re meeting with Ministers and cabinet-level officials, you carry a bit more weight if your title shows you have the ear of the President.

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Beatrice Edwards is International Program Director of the Government Accountability Project, the nation's leading whistleblower advocacy organization.