Report to the President: Office of Anticorruption and Integrity

2011 Annual Report

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• Publisher: Asian Development Bank
• Year: 2012
• Print ISBN: 9789290925644
• eBook ISBN: 9789290925651
• Edition: 1
• Topic: Business
• Subtopic: Corporate Governance
• Index: Business

The report describes the activities of the Office of Anticorruption and Integrity of the Asian Development Bank in 2011, particularly its awareness-raising activities, its work on case investigations, project procurement-related reviews, and due diligence. It includes a summary of significant cases completed in 2011.

The Office of Anticorruption and Integrity: Accomplishments

Casework

Receiving Complaints of Integrity Violations

OAI began 2011 with 95 open complaints. During the year, OAI received an additional 225 new complaints of fraudulent, corrupt, collusive, coercive, or obstructive practices, conflict of interest, or abuse involving ADB-financed, supported, and administered activities and alleged misconduct by ADB staff.² This is the highest number of complaints received annually so far. Of these complaints, 53% were received from ADB staff, while 44% came from external parties. The remaining 3% of complaints arose from project procurement–related reviews (PPRRs) that OAI conducted (see Figure 1). These are generally consistent with the number of complaints received in 2010.

Figure 1
Sources of Complaints, 2011

OAI continues to receive the majority of its complaints via e-mail. In 2011, 166 complaints were brought to OAI’s attention by e-mail, representing 74% of all complaints received (see Figure 2).

Figure 2
Mode of Receipt of Complaints, 2011

OAI respects a complainant’s desire to remain anonymous. It encourages anonymous complainants to establish a web-based e-mail account that can be used to discuss their concerns with OAI. Anonymous complaints are assessed in exactly the same manner as complaints from known sources. Information on how to report allegations of fraud and corruption are outlined in Appendix 6 of this report and on the ADB website.³

OAI always acknowledges the receipt of complaints when the complainant provides contact information. Due to its high annual caseload, OAI does not keep complainants informed of the progress of their allegation. OAI, however, advises complainants when the case has been concluded, although detailed information is kept confidential.

Complaint Case Screening

Section 30 of ADB’s Integrity Principles and Guidelines provides that OAI examine all complaint to determine whether these warrant further investigation. During screening, OAI considers whether or not the complaint is

• within OAI’s jurisdiction,

• credible,

• verifiable, and

• material.

If all four case screening criteria are met, the complaint is converted into an investigation. OAI’s complaints assessment team screens all complaints received.

During the year, 94 complaints were converted into investigations, 117 were closed. At the end of 2011, 109 cases were still being assessed.

OAI closes a complaint when it does not meet all four case screening criteria. The closure does not necessarily indicate that the allegation is untrue or that the complainant is mistaken. Of the cases that were closed during 2011, 19 were found to be outside OAI’s jurisdiction; i.e., they did not involve ADB-financed, administered, or supported activities, or the complaints did not relate to an integrity violation. Forty-eight complaints were found not to be credible while a further 16 cases could not be reasonably verified. The remaining 34 cases were closed as these were not considered significantly material to justify the resources required to investigate the complaint. Decisions made on every complaint received by OAI as a result of screening are recorded in OAI’s case management system.

Investigations

OAI applies a rigorous and critical investigative methodology by gathering and examining evidence to prove or disprove allegations. OAI investigations are administrative in nature, with the burden of proof that of “on the balance of probabilities” rather than “beyond reasonable doubt.”

Box 2
Case—Falsification of Bank Guarantee

A contractor allegedly submitted a fraudulent bank guarantee for a road rehabilitation project. The contract provided for the release of mobilization advance payment upon the contractor’s submission of a bank guarantee that should be valid until the advance has been liquidated through proven, eligible contract expenditures.

The contractor submitted a bank guarantee and received the advance payment, but the guarantee expired before the advance was fully liquidated. To cover this gap, the contractor submitted a second, but falsified, bank guarantee. The contract was later cancelled because of security issues and the government called in on the bank guarantee. Although the contractor honored its obligation through payment of the outstanding advance, ADB’s Integrity Oversight Committee debarred the contractor for 2.5 years for fabricating and submitting a falsified bank guarantee.

At the beginning of 2011, OAI had 102 open investigations. During the year, 96 investigations were closed, and 94 new investigations were opened, leaving 100 open at the end of the year.

OAI conducted five investigative missions during the year and retained external investigators, including those with specific expertise on information technology, engineering, laboratory, and language, for example.

Types of Investigations

Investigations conducted by OAI in 2011 covered the range of integrity violations as defined by ADB. Allegations of fraudulent practice formed the majority of investigations at 60%. Corrupt, collusive, and coercive practices contributed in roughly equal portions at 37% total, with “others,” including sanctions violations and conflicts of interest, comprising the remaining 3% (Figure 3).

Figure 3
Investigation Classification, 2011

Misrepresentation constitutes 52% of allegations pertaining to fraudulent practice, with submission of false documents (including bank guarantees, bid securities, or curricula vitae) at 27%. False or inflated financial claims represent 18% of the investigations (Figure 4).

Figure 4
Fraud Cases, 2011

Subjects of Investigations

Complaints regarding ADB-financed project activities formed the majority of the investigations conducted by OAI in 2011 (84%). Ten percent of subjects investigated in 2011 were ADB staff (Figure 5). OAI is mandated to investigate staff cases involving allegations of violations of ADB’s Anticorruption Policy. OAI also investigates cases referred to it by the Budget, Personnel, and Management Systems Department (BPMSD).⁴ Appendix 3 describes the process for investigating staff cases.

Figure 5
Subject of Investigations, 2011

It is important to note that the communication and exchange of information among the integrity offices of other MDBs greatly assisted in OAI’s investigations in 2011. ADB routinely shares information with the World Bank’s Integrity Vice Presidency and has received assistance from said office that has facilitated OAI’s investigations.

Box 3
Case—Submission of Near-Identical Bid Proposals Leads to Debarment

In support of their bids for a consultancy services contract for an irrigation project, five firms submitted bid proposals that bore striking similarities, including wording, font, format, and layout of the curriculum vitae of proposed experts. The bid prices of the five proposals differed by only $110. The address of experts proposed by one firm belonged to a second firm; two firms used the same fax number although they were located in different towns; and personnel schedules submitted by two firms contained the name of a third firm. OAI’s retainers confirmed that two of the firms had common shareholders.

Two of the five firms replied to OAI’s requests for responses and clarifications pertaining to the similarities in their bids, one of which accepted a 3-year recommended sanction. (OAI inferred from this firm’s response that it responded on behalf of another firm which had common shareholding, given its assertion that these two firms operated as one.) The two remaining firms did not respond to OAI’s attempts to contact them.

OAI presented findings pertaining to the four firms that did not accept OAI’s recommended sanctions, along with their key officers, to the IOC. The IOC concluded that, given the preponderance of evidence, the firms and individuals named had engaged in fraudulent and collusive practices. The IOC imposed a 4-year sanction on two firms and its four directors and/or principal shareholders, and a 5-year sanction on the two firms and its two directors that did not respond to OAI’s inquiries.

Box 4
Case—Obstructive Practice Detected in a Fraud Investigation

In its technical proposal for a contract to supply gas pipeline fittings for a large energy project, a bidder submitted manufacturer and supplier documents that contained red flags for fraud, including addresses on the manufacturer’s websites that differed from those on manufacturer documents, and identical e-mail addresses on the manufacturer documents and the bidder’s stationery. The executing agency declared the bidder nonresponsive on the suspicion of fraud and referred the matter to the resident mission, which ...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• FIGURES, TABLES, AND BOXES
• ABBREVIATIONS
• EXECUTIVE SUMMARY
• PERFORMANCE AT A GLANCE
• THE OFFICE OF ANTICORRUPTION AND INTEGRITY: 2011 INITIATIVES
• THE OFFICE OF ANTICORRUPTION AND INTEGRITY: ACCOMPLISHMENTS
• APPENDIXES
• Back Cover