It’s Another World At That Bank

Like everyone else, we’re stunned by the news coming from the World Bank these days. First Satyam, then Wipro, and now Megasoft Consultants Ltd. All three Indian outsourcing companies have been banned from doing business with the Bank because they violated the fraud and corruption provisions of its procurement guidelines. Satyam’s ban is eight years; Wipro’s and Megasoft’s are four years.

The three companies are obligated to comply with the Foreign Corrupt Practices Act. Satyam and Wipro are “issuers” and subject to the antibribery and accounting provisions; Megasoft Consultants is a “domestic concern” and subject to the antibribery provisions. Staffers at the World Bank are “foreign officials” under the FCPA, so giving or promising to give them anything of value to obtain or retain business with the Bank might be prohibited. All that is quite clear.

What’s not clear at all is why the World Bank, an international public organization that advertises its global leadership in fighting corruption, didn’t until now publish the names of companies and individuals that it has banned as suppliers. Despite the public’s interest, the Bank only revealed the names on Sunday, after news groups and others protested the lack of transparency.

For its part, the Bank said its policy of keeping the bans secret “let it move more quickly,” according to the Wall Street Journal. Now, though, it’s listing 111 companies and individuals that it has banned, with some bans dating back to 1999. (Satyam and Wipro were banned in June 2007, and Megasoft in December 2007.) Most of the 111 bans are permanent, while others have a duration of up to 15 years.

So, will U.S. authorities investigate Satyam, Wipro, and Megasoft Consultants for violating the Foreign Corrupt Practices Act? What about the rest of the 111 companies and individuals named by the World Bank? And will staffers at the Bank itself ever be investigated by an outside agency for corruption as well?

How important is all this? Here’s what the Bank has said about other people’s corruption:

It undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends.The harmful effects of corruption are especially severe on the poor, who are hardest hit by economic decline, are most reliant on the provision of public services, and are least capable of paying the extra costs associated with bribery, fraud, and the misappropriation of economic privileges. Corruption sabotages policies and programs that aim to reduce poverty, so attacking corruption is critical to the achievement of the Bank’s overarching mission of poverty reduction.

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Our colleague, Russ Stamets, is working through these cases from an Indian perspective and contributed to this post. (Russ holds a Master of Business Laws from the National Law School of India in Bangalore, making him one of the few Western lawyers with an advanced Indian law degree.) We’ll be hearing more from him in the days to come.
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