The prior post described the World Bank’s procedures for handling allegations of fraud in Bank-financed projects. This post looks at the types of evidence and mitigating factors that can be part of a decision to impose sanctions.
As we said, the World Bank Sanctions Board can impose five possible sanctions. They are (i) reprimand, (ii) conditional non-debarment, (iii) debarment, (iv) debarment with conditional release, and (v) restitution or remedy.
In a recent case from India that resulted in only a reprimand, here’s some evidence and mitigating factors the Sanctions Board looked at:
Repeated pattern of conduct: The Sanctions Procedures require consideration of the severity of the misconduct in determining the appropriate sanction. A repeated pattern of conduct is one example of severity.
Magnitude of harm. The Sanctions Procedures require consideration of the magnitude of the harm caused by the misconduct in determining a sanction.
Voluntary corrective action. The Sanctions Procedures provide for mitigation where the respondent took voluntary corrective action. Voluntary corrective actions may warrant mitigation, depending on the timing, scope, and quality of the actions — and if they show the respondents “genuine remorse and intention to reform.” The respondent bears the burden of presenting evidence to substantiate any claimed voluntary corrective action.
Cessation of misconduct: The Sanctioning Guidelines suggest that mitigation may be appropriate where the record shows a respondent’s cessation of the alleged misconduct. An example is voluntarily withdrawing bids after learning of potential fraud or graft.
Internal action against responsible individuals: The Sanctioning Guidelines suggest that mitigation may be appropriate where the record shows that a respondent’s management took “all appropriate measures to address the misconduct.” That includes “disciplinary and/or remedial steps with respect to the relevant employee.”
Effective compliance program: The Sanctioning Guidelines suggest that mitigation may be appropriate where the record shows a respondent’s “establishment or improvement, and implementation of a corporate compliance program.” The timing of an asserted compliance program can be an indication of good faith (or not).
Cooperation: The Sanctions Procedures provide for mitigation where a respondent “cooperated in the investigation or resolution of the case.” Some elements of cooperation are a respondent’s assistance with the World Bank’s investigation, an internal investigation, admission or acceptance of guilt or responsibility, and
voluntary restraint from bidding on World Bank-financed projects.
Other factors. The Sanctions Board might also look at how much time has passed since the alleged misconduct, the respondent’s prior record of compliance, the adverse consequences of debarment on the respondent and its employees, and proportionality with prior Sanctions Board decisions involving other respondents.
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World Bank Sanctions Board Decision No. 79 (Sanctions Case No. 299) IBRD Loan No. 4818-IN India (dated August 10, 2015) is here (pdf).
The World Bank Sanctions Procedures are here (pdf).
The World Bank Sanctioning Guidelines (as of January 1, 2011) are here (pdf).
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Resource Alert: There’s a World Bank Sanctions Board event in DC on September 30 at 4:00 pm. It’s called Promoting the Rule of Law in the Fights Against Corruption and Poverty. More info and registration here.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.