WASHINGTON (TrustLaw) - The way World Bank’s top anti-bribery cop sees it, New York City homicide investigators on the TV show “Law and Order” have got it easy: They flash badges, use search warrants, get subpoenas, and the victims talk.
Not so for Stephen Zimmermann. The World Bank’s man in charge of pursuing those who steal from the poor has no such powers to dig into the 10,000 complaints of fraud, corruption and collusion received annually on projects funded by the development bank - one of the biggest global lenders in fiscal 2012, making $57 billion in grants and loans.
He must rely on documents, evidence from those who may have benefited from bribery, and help from national authorities. However, corruption can be difficult to prove when the victims are the world’s poorest who suffer from the delivery of shoddy products and services years later in nations where officials all too often are unwilling to cooperate because they were colluding in the crime, receiving a kickback or a bribe.
“This is not a crime where there is a dead body,” Zimmermann, director of operations at the World Bank’s Integrity (INT) Vice Presidency, said in an interview in his Washington office.
It requires finding creative ways to send a strong message that the World Bank is serious about its anti-corruption strategy and committed to doing clean business.
“The challenge for us is to try to leverage our results. We need to look for cases and investigations where we can leverage the deterrent value for the rest of the world,” said Zimmermann, 51, who took his position in 2009 after heading up the Integrity office at the Inter-American Development Bank and working on the U.N. Oil for Food probe and as an assistant U.S. attorney investigating money laundering, fraud and financial crime in Maryland.
Zimmermann said INT's 90 staff members - divided into six teams, each responsible for about 15 countries - focus on cases that will make businesses sit up and take notice, so that they no longer think it’s worth trying to rig bids for a World Bank project.
“It is not necessarily the size of the company, but that is of note. It is the nature of the scheme, the development dollars involved. We will also look for jurisdictions where we have not been before - we might say we have not had a significant project in South Asia, let’s look for a project in South Asia,” he said.
Another technique to create impact is cooperating with national authorities, who can pursue criminal investigations into allegations of theft, fraud, corruption and bribery. Zimmermann struck memorandums of understandings with eight authorities last year. The World Bank as an international agency is restricted to pursuing administrative actions. Its sanction is to ban firms from bidding on future projects.
The suspension of lending last June on the $2.9 billion Padma Bridge project is an example of such multinational cooperation. After finding evidence of corruption by senior government officials and bidders, the World Bank froze lending until Bangladesh meets certain conditions. Canadian police meanwhile are investigating the case and already have charged two former employees of the Canadian engineering firm SNC Lavalin who were involved in bidding for a consultancy contract on the project.
The majority of World Bank cases, however, are far smaller.
According to the Integrity division’s annual report, of the 10,000 complaints filed in the fiscal year that ended June 30, 2012, 512 cases were reviewed and investigations opened on 81 - representing a mere fraction of the total complaints or of the more than 25,000 loans outstanding. Ninety cases were closed in fiscal 2012 and of those, investigators found that the allegations had merit in a little more than half.
Some defense lawyers for companies facing World Bank probes and project staff complain that the Integrity division can take far too long investigating cases that are small, leaving a cloud of suspicion hanging over a business’ operations and a development project.
These figures appear to give the new World Bank President Jim Yong Kim pause. In an introduction to the Integrity office’s annual report, Kim acknowledged the operational challenges that Zimmermann’s office faces, but suggested a new approach might be needed.
“How can we balance thorough project vetting with swift implementation? Are we successful if our projects are clean, yet corruption is pervasive elsewhere in the same environment? These kinds of questions beg a new approach to anti-corruption work as a cutting-edge ‘science,’” Kim wrote.
Zimmermann said on average his investigations take 14 months, which he considered reasonable. As for defense lawyers saying that the process is cumbersome, he said it is their job to pick holes in the process as part of defending a client’s case.
Of the 42 entities that were barred from doing business with the World Bank last fiscal year, 69 percent of the cases were for fraud, which critics say is a relatively simple to prove if there is an altered bidding document or bank statement. Zimmermann said that very often the case starts out as one of suspected corruption and collusion, but his team faces investigative hurdles and are unable to gather sufficient proof.
It is rather like prosecuting Al Capone - the 1920s Prohibition-era mobster suspected of mass murder - whom federal investigators eventually nabbed for tax evasion.
“We want to get them on something,” said Zimmermann.