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World Bank Fraud and Corruption
Investigations Hotline
P.O. Box. PMB 137
4736 Sharon Road, Suite W
Charlotte, NC 28210
USA
Montevideo, 18th July 2001
Dear Sirs,
Please consider the following
Appeal for investigation on Development
Gateway for "misuse of Bank funds or positions"
Summary
We believe that in the formation of the
World Bank’s Development Gateway internet initiative
several irregularities have been committed that should be
reported and investigated. These include a misuse of Bank
funds and positions, gross waste of Bank funds, cost
mischarging or defective pricing and perhaps even fraud and
misleading of public opinion.
The Bank has allocated around $7 million
to this scheme, creating a website which is shortly to be
transferred to be managed by a new foundation.
We are concerned that Bank funds are
being spent without proportion to the expected results to
create a website intended as a public relations tool. While
it is a legitimate activity for the Bank to defend itself
from criticism, it is a clear misuse of funds to divert to
public relations monies intended to combat poverty. Further,
it is a gross violation of editorial ethics to misrepresent
a propaganda operation as a genuine independent Internet
portal about development in the Internet. Potential donors
are being misled to make grants to a supposedly independent
Foundation that in fact is just an appendix of the Bank.
The Gateway was not requested by any of
the Bank’s intended beneficiaries and will only benefit a
private entity created by the Bank and whose governance is
still largely unknown. That entity, formally a US
foundation, is using Bank monies to contract services from
the Bank without any bidding process like those the Bank
usually requires from its grant recipients.
We are also concerned that senior World
Bank managers, especially the Bank’s President James
Wolfensohn and the former Vice President for Human
Resources, Richard Stern, have used their positions at the
Bank to create a new organisation in which they will hold
positions and presumably extract private benefits,
distracting time from their core tasks and using the
diplomatic energy of their positions at the Bank to promote
the initiative and raise funds for it.
This appears to contradict the guidelines
on "misuse of Bank funds or positions".
The document called Ethical Guide For
Bank Staff Handling Procurement Matters In Bank- Financed
Projects states that:
"In dealing with procurement
matters, Bank staff shall […]
avoid strictly any conflict of interest
or even the appearance of a conflict of interest in any
matter related to the performance of the staff member's
duties; [and …]
disqualify him/herself from outside
employment or activities, including dealings with former or
future employers and employment after separation, that
conflict with his/her Bank duties and responsibilities.
"
Whilst the Development Gateway is not a
classical Bank procurement situation, the same standards
should surely apply to the Global Development Gateway but
this has not been the case in practice according to the
evidence we offer below.
No similarly detailed definition is
offered by the Bank of the concepts of "waste of
funds", "cost mischarging" and
"defective pricing", probably because they are
obvious. In this case, 7 million dollars have already been
spent and some 30 million dollars a year are budgeted for a
website that will not be sustainable even if the declared
targets are met. The money already spent and the sums
requested to continue the activity are disproportionate with
the product they are supposedly paying for.
It is obvious that many public-interest
or educationally oriented activities may require permanent
subsidies. But in this case it should be taken into account
that no external actor has demanded the creation of such a
site, that two regional consultations with civil society
organizations (in Africa and Latin America) failed to
support the proposed Gateway and that solid criticism was
raised and never properly answered during lengthy on-line
consultations. Many international websites on development
already have been created by multilateral agencies and NGOs.
In all countries where the Development Gateway plans to
establish "national gateways" Internet portals
already exist, as can easily be found by looking in the Yahoo
directory. Instead of contributing to develop national
capacities, the Development Gateway plans to establish
subsidized state-run media operations that will compete
unfairly with existing efforts.
There is already solid criticism against
the Bank (an intergovernmental body) engaging in media
activities. Through this new "Gateway" further
state control of the media is promoted, contradicting the
Bank’s declared policies.
Further details
1.
In his Memorandum to the Executive Directors, dated June 27,
2001, The World Bank’s president James Wolfensohn, informs
that "the World Bank Group is considering
contributing [to the Development Gateway] an
additional $5 million over the next three years from its
Development Grant Facility, subject to Board approval. A
request for the first tranche of this contribution, $1
million for the FY02 has been endorsed by the Development
Grant Facility Council." This makes it clear that
the grants allocated to the Gateway were intended for
development purposes.
2. Yet, an internal Bank document
(SecM2001-0048) of January 26, 2001, titled Strategic
Directions for External Affairs: Facing Challenges, Defining
New Opportunities, states (page 12) that "the
External Relations Department aims to [adopt]
cyber-campaigning approaches using the Internet and mass
electronic mail responses to reply to critics. The
Development Gateway offers an opportunity for a quantum leap
in the development community's ability to network online and
engage with new audiences." The text is clear in the
revealing what the real purpose of the Gateway is: to
influence public opinion in favor of the "development
community", which in this case means clearly the Bank
itself. We consider that it is a deviation of funds to spend
for public relations monies intended to combat poverty.
Further, it is a gross violation of editorial ethics to
misrepresent a propaganda operation as a genuine independent
editorial activity.
3. The creation of a new
"Gateway Foundation" to run the portal was
announced by the Bank as a reaction to the criticism that a
portal run and funded by the Bank would not be a credible
source of independent information. Yet, the Foundation will
contract the Bank to provide staff, infrastructure and
services necessary for it to function. Any legitimate
independent recipient of Bank funds is required to conduct
an open bidding process before contracting services from
third parties. Why was the foundation exempted from this
rule? On what basis has the Bank decided to fund an entity
even before it was properly created? If it is true that this
"Independent Foundation" is contracting back to
the Bank, staffed by the Bank, situated in the Bank,
entirely designed by the Bank and largely capitalized by the
Bank, we may be facing a case where eventual donors and
perhaps even the American authorities that granted it legal
status as a non-profit organization, may have been deceived
in their good faith to accept a non-existing independence.
4. According to its business-plan,
the Gateway should achieve in five years, five million
pageviews a month. This is a huge amount of money for a very
limited achievement. If such a site carried one
"banner" (advertisement) per page and was paid for
it the high sum (according to present-day standards) of $50
per CPM (thousand ads displayed), it would receive, after
five years a quarter million dollars a month and still be
operating at a huge loss (i.e. receiving large subsidies),
even while having achieved its pre-defined target. The
present and futures subsidies of the operation are mainly
going to benefit a highly paid staff, currently working for
the Bank and in the future for a Bank-subsidized foundation.
The signatories of the present claim have had the experience
of building a Southern-based national portal in Uruguay now
delivering one million pageviews a month in two years with
less than half a million dollars of total expenditure. ( http://www.uruguaytotal.com).
To spend over a hundred of million dollars (according to the
expenditure projections) in a website of global interest
expected to achieve in five years just five times the
present usage of a local interest portal in a developing
country of only 3 million inhabitants seems to be a case of
overspending that needs scrutiny.
5. Frank Vogl, vice-chairman of
Transparency International, senior ethics advisor to the
Ethics Resource Center and World Bank's Director of
Information and Public Affairs from 1981 to 1990, recently
stated that "we do not believe this (the training of
journalists) is an arena that aid agencies — bilateral or
multilateral — should enter. These agencies are
government-owned and work first and foremost for
governments. There are good reasons not to support
state-owned media. Therefore, I suggest that it is
inappropriate for state-run agencies, including the World
Bank, which is totally publicly owned, to engage in media
training programs. I appreciate that this is something that
the World Bank and the World Bank Institute may find hard to
swallow, because they have some expert staff who have sought
to train journalists in developing countries. The Bank needs
to understand it lacks broad credibility in this specific
field, and its engagement is inconsistent with its own
research that finds state media so wanting. If the Bank
wants to be engaged in this area, then it should provide
funding to the excellent independent institutes of
journalism training that abound." (see the whole text
at http://www.mediachannel.org/views/oped/vogl.shtml
). These same concepts apply also to the creation of
"portals" or "websites", which are
essentially editorial and journalistic activities. The Bank
already has a "window", called InfoDev, to support
Internet-related initiatives and it also has its own website
to address the need of informing the public about its
activities. Overfunding an unnecessary activity is a misuse
of funds. Creating and promoting a "trademark" and
a website with public monies and then giving away that asset
to a private institution not accountable to the public is a
dubious operation that requires close scrutiny.
6. Richard Stern, World Bank Vice
President for Human Resources until the end of last year, is
now acting CEO for the Gateway Foundation. We believe that
he used his position during the final months of last year in
a way that transgressed a reasonable understanding of his
role as Vice President for Human Resources and which appears
to have resulted in a new position for him outside the Bank.
We believe it was inappropriate for him to spend his time
last year while employed by the Bank working to found a new
institution from which he may now or in the future receive
remuneration and recognition. This appears to be in
contravention of the above statement from the Ethical Guide,
covering "outside employment or activities".
We request that you examine Mr Stern’s
activities over the last year in connection with the
Gateway. In particular his activities at the Annual Meetings
in Prague and thereafter where it is reliably reported that
he was active in meetings to promote the idea of the
Gateway, for example in the UK. Witnesses to Richard Stern’s
attendance at meetings in Prague and in the UK can be
provided on request. We assume there were many other such
meetings in other countries, but cannot confirm this at this
time.
7. We believe that similar arguments
can be extended to Mr Wolfensohn, who is rumoured to
be lining up to be the director of the Gateway Foundation.
It is unclear what remuneration or benefits he may receive
in this role while remaining as Bank President (or
thereafter), but we believe that again there is a conflict
of interest involved in the Bank spending $7 million on
establishing an initiative, floating it off as an ‘independent’
entity, then providing up to three directors and the CEO for
the Foundation.
8. This procedure is hard to justify
in the Bank, a publicly funded institution which is supposed
to work to promote the public interest. The principles in
the Ethical Guide for Bank Staff should apply to all such
institutions. Particularly so for an organisation which,
like the Bank, works in many countries to promote good
governance and anti-corruption initiatives. (Ref, Wolfensohn’s
speech at The 9th International Anti-Corruption Conference,
Durban 10 to 15 October 1999 http://www.worldbank.org/wbi/gac/gac_pdfs/durban-jdw.pdf
).
9. Clearly the Bank, which is talking
about transparency and good process in the use of public
sector funds, must at all costs avoid perceived or actual
conflicts of interest regarding the use of Bank time and
money. Bank President Wolfensohn stated that "we
have looked, in terms of our approach, at the issue of
governance, at the issues of legal and judicial reform. We
have also said that the same applies to financial systems.
You cannot have equity, you cannot have opportunity unless
you have a smoothly and appropriately administered financial
system. And that was most recently proven in Korea, Thailand
and Indonesia in the Asian crisis. And, of course, one needs
to confront, in all of these places, the issue of
corruption." Comprehensive
Legal And Judicial Committee Plenary Session,
5 June 2000.
These allegations are troubling in
themselves, but all the more so as we and many others have
been arguing for over a year that the Gateway represents an
unneeded, heavily-subsidised initiative which will compete
unfairly and in a damaging manner with existing country- and
topic-focussed internet sites. (See, for example Roberto
Bissio’s 20 July 2000 message archived on :
www.bellanet.org/gdgprinciples).
We therefore request you
to investigate this matter seriously. Please get back in
touch with us if you require further information.
Roberto Bissio and Dr. Carlos Abin
About the claimants:
Mr. Bissio, a journalist, is coordinator of Social Watch ( www.socialwatch.org)
and Latin American secretary of Third World Network. He is a
member of UNDP’s civil society advisory committee and has
written extensively on the role of information technologies
in development.
Dr. Abin is Executive Director of the Instituto del Tercer
Mundo (www.item.org.uy).
As a lawyer he has advocated diverse actions in defence of
the environment, freedom of communications and defence of
human rights.
Both claimants are Uruguayans, working from Montevideo: c/o
ITeM, Jackson 1136, Montevideo 11200, Uruguay
Phone: +598 (2) 4196192, Fax: +598 (2) 4119222.
Annex:
Ethical Guide For Bank Staff
Handling Procurement Matters In Bank-
Financed Projects
Date:
April 23, 1998
To: Procurement Family and Accredited Staff
From: Katherine Sierra, Director and Head,
Operational Core Services
1. The Bank's Code of Professional Ethics
issued in September 1994, summarizes the rules of conduct
contained in the Articles of Agreement, the Staff Principles
and the Staff Rules. It stresses that the highest level of
professional ethics is expected from staff members. To
facilitate compliance, Staff Rule 3.01, "Outside
activities and interests" is circulated each year. This
Rule authorizes the issuing of additional rules requiring
some or all members in an organizational unit to avoid
specified kinds of activities because of the staff members'
duties.
2. This memorandum is being circulated to reiterate the
importance of the Code to staff handling procurement in
Bank-financed projects and to provide a motivating force in
the day-to-day ethical behavior of the staff. The Bank is
increasingly helping countries in their efforts to reduce
corruption, and it is essential that these efforts be
balanced by internal efforts to maintain the highest ethical
approach to procurement.
3. Bank staff handling procurement in Bank-financed projects
should be particularly aware of the requirements imposed by
chapter three of the Principles of Staff Employment, which
set out the broad principles of integrity, independence and
discretion that constitute the ethical behavior of staff. In
dealing with procurement matters, Bank staff shall exercise
objective impartial judgment, and carry out their duties
with due care and competence. Against this background, staff
shall:
· avoid
strictly any conflict of interest or even the appearance of
a conflict of interest in any matter related to the
performance of the staff member's duties;
· respect
the confidentiality of information received in the course of
duty and never use it for personal gain, as stated in
Section 4.01 of Staff Rule 3.01. Information given in the
course of duty should be true and fair and never designed to
mislead;
· decline
acceptance directly or indirectly of any gratuity, gift,
favor, entertainment, or anything of monetary value from
anyone who has an interest in seeking business in Bank
related projects. Exceptions are authorized in section 4.05
of Staff Rule 3.01;
· disclose
to his/her line manager any personal interest which may
influence or appear to influence the staff member's
impartiality in any matter relevant to his or her duties;
and
· disqualify
him/herself from outside employment or activities, including
dealings with former or future employers and employment
after separation, that conflict with his/her Bank duties and
responsibilities, except as provided in Sections 4.02, 4.03
and 6.02 of Staff Rule 3.01.
4. The above provisions are not intended
to cover every situation which may arise in handling
procurement matters. It is understood that the staff
member's self-discipline and sense of higher duty will
underlie the observance of these provisions.
http://www1.worldbank.org/publicsector/anticorrupt/ethicalguide.htm
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Jackson 1136, Montevideo 11200, Uruguay
Phone: + 598 (2) 419 6192 - Fax: + 598 (2) 411 9222
E-mail: item@item.org.uy
Updated: July 19, 2001
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