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World Bank debars hydropower units of German family-owned conglomerate, orders $1.9 million restitution

The World Bank debarred two hydropower equipment manufacturers Wednesday for collusive and corrupt practices connected to projects in Pakistan and the Democratic Republic of Congo.

Germany-based Voith Hydro GmbH & Co. KG (VHH) was sanctioned for 21 months for engaging in collusive practices connected to a project in Pakistan and fraudulent practices connected to a project in the DRC. The first 15 months of the VHH sanction is a debarment with conditional release, and the remaining six months will be in the form of a conditional non-debarment.

China-based Voith Hydro Shanghai Ltd. (VHS) was debarred for two years and ten months for engaging in collusive and corrupt practices connected to a project in Pakistan.

Both VHH and VHS are ineligible to participate in projects and operations financed by the World Bank Group during the respective debarment periods.

VHH and VHS are subsidiaries of Voith Hydro Holding GmbH & Co. KG (VHZ).

VHZ is part of Germany’s Voith Group. The conglomerate was founded in 1867, has around 20,000 employees and locations in over 60 countries worldwide, and is one of the largest family-owned companies in Europe. Sales last year were around €4.3 billion ($4.6 billion).

In Pakistan, VHH and VHS arranged through a commercial agent to gain improper advantages, using advance access to confidential information from public officials, which is a collusive practice. On three different occasions, VHS also made improper payments to the commercial agent to obtain favorable decisions from public officials during contract execution, which are corrupt practices, the World Bank said

In the DRC, VHH failed to disclose in its bid intended payments to a commercial agent, which is a fraudulent practice. 

The Germany-based parent-company VHZ received a 21-month conditional non-debarment. VHZ and its affiliates — excluding VHH and VHS, and their controlled affiliates — remain eligible to participate in World Bank Group-financed projects as long as VHZ complies with its obligations under the settlement agreement.

According to the World Bank, VHZ failed to sufficiently supervise its subsidiaries.

As part of the settlement, the companies agreed to pay restitution of €1.77 million ($1.9 million) to the affected countries. They also committed to continue to fully cooperate with the World Bank Group’s Integrity Vice Presidency and to develop an integrity compliance program that reflects the principles set out in the World Bank Group Integrity Compliance Guidelines

The debarments of VHH and VHS qualify for cross-debarment by the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, and the African Development Bank.

A list of all World Bank debarred entities and individuals is here.

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