WB: Mike part of syndicate

Please see official statement of World Bank on the meeting with senators below.

by JP Lopez
Malaya

The World Bank had named presidential spouse Jose Miguel Arroyo as a participant in the rigging of biddings for WB-funded road projects and this information was relayed to the Ombudsman 15 months ago.

This surfaced after a briefing yesterday by WB officials of senators on an investigation in 2006, which found that a “cartel” of local and foreign contractors, assisted by public works officials and two “public figures,” had been colluding in bidding for contracts.

The “public figures” were Mr. Arroyo and the late Sen. Robert Barbers.

The collusion led to the blacklisting of three local and five foreign contractors and the suspension of the release of the second tranche worth $232 million of WB loans to the National Roads Improvement and Management Project (Phase 1).

The findings of WB investigators were summarized in a referral report dated Nov. 13, 2007, which was transmitted by Suzanne Rich Folsom, director of the WB Department of Institutional Integrity (INT), to Ombudsman Merceditas Gutierrez.

A copy of the report, marked “strictly confidential,” was distributed to the media after the technical briefing conducted by country director Bert Hofman, regional counsel Anthony Toft, and communication officers David Theis and Leonora Gonzales.

From the “received” stamp on the first page, the copy of report given to mediamen apparently was a reproduction from the one submitted to Sen. Miriam Defensor Santiago, chairman of the committee on economic affairs which started the investigation into the bid riggings.

Santiago earlier said the name was of Mr. Arroyo was never mentioned in the referral report. She was supported by Senate President Juan Ponce Enrile.

In the cover letter to the nine-page referral report, Folsom told Gutierrez that the report could be used “as a basis for undertaking its (Ombudsman’s) own investigation into the allegations in order to determine whether any laws of the Philippines have been violated.”

But Folsom said the report could not be used “by your government as the basis for initiating any administrative, criminal or civil proceedings… or be cited or referred to in the course of any investigation.”

“It is incumbent upon me to inform you that the information in this letter and the attached report is provided without prejudice to the privileges and immunities conferred on the World Bank by its Articles of Agreement,” Folsom said.

The cover letter recalled that as early as May 2006, the INT has already briefed Gutierrez on the “interim findings of an administrative fact-finding inquiry that we had conducted into allegations of fraud and corruptions in the first phase of the Philippines National Roads Improvement and Management Project.”

“INT had briefed your office at the time, as the Filipino Secretary of Finance had indicated to us that your office would be leading any potential investigation into the matter on behalf of the Filipino government,” Folsom said.

The letter said INT first briefed Finance Secretary Margarito Teves in April 2006 in Washington D.C. Six months later, the INT closed its investigation.

The NRIMP 1 investigation and sanctions timeline also showed that in January 2008, INT investigators met with the Office of the Ombudsman to further discuss the case and offered additional assistance.

It also said that the World Bank provided additional documentary evidence to the Office of the Ombudsman and offered further assistance, including offer from the vice president of INT to meet personally with the anti-graft body.

The findings contained in the referral report said that “the INT investigation adduced evidence of the existence of a collusive scheme amongst the contractors, DPWH officials, and public figures.”

“Specifically, the information that INT reviewed in the course of its investigation into this matter identifies the following contractors, DPWH officials and Filipino public figures as having participated in the collusive scheme,” the report said.

Named in the scheme are four Filipino contractors, five Chinese contractors, five South Korean contractors, and a Thai contractor.

DPWH officials identified in the report were former Secretary Florante Soriquez, assistant regional director Huillio “Boy” Belleza, and a Tito Miranda.

“Numerous witnesses testified that a cartel exists in the Philippines, controlling bidding on road projects by international and local contractors,” the report said.

It said over a dozen witnesses have testified that a “well-organized cartel, managed by contractors and government officials, controls DPWH contract allocation, and set inflated contract prices on projects funded by the bank and counterpart organizations.”

In its conclusion, the INT said “corruption of DPWH bidding appears systemic and has undermined the willingness of companies to compete on Filipino road projects.”

Sen. Panfilo Lacson said WB officials hinted the institution might stop lending to the Philippines if authorities failed to act on the report.

Lacson said stopping the lending was one of the “options” available to the institution.

“That was very vivid in my mind when it was mentioned. It was mentioned nonchalantly, hindi talaga diniin, pero sa tingin ko it was good enough para iparating sa atin ang mensahe na do something about this WB report na pinadala sa atin. Kung hindi, they may exercise their option not to lend the Philippines anymore,” he said.

Lacson was among the senators who attended the closed-door technical briefing.

“One important information na nabanggit kanina, ang sabi ng WB representative, kung sakaling makita nila ang gobyerno, kung sino ang may jurisdiction over the firms that they debarred, ay walang ginawang aksyon doon sa kanilang binigyan na information na puwedeng pagbasehan ng ebidensya, ang isang option nila is not to lend anymore,” he said.

Debarred were E.C. de Luna Construction Corp. and its owner Eduardo C. de Luna, Cavite Ideal International Construction and Development Corp., and CM Pancho Construction Inc.

Also during the briefing, WB executives “did not deny” that a Japanese contractor said he received “rough treatment” from Mr. Arroyo when alleged bribes were discussed, Lacson said.

“They just smiled,” he said. “But they also did not confirm.”

Lacson said the briefing also provided “useful information” showing that some members of the executive branch still had a lot of explaining to do.

Hofman maintained that they could not discuss investigations into cases of corruption.

Sen. Manuel Roxas II, vice president of the economic affairs committee, thanked the WB executives for honoring the invitation of the Senate, saying “it’s very important for us that we exercise the investigative powers of the Senate so that we get to the bottom of these anomalies or alleged anomalies.”

Roxas led the senators who attended the briefing after Santiago went on leave.

Hofman said: “We fully recognize, respect, and appreciate the Senate’s role in this process. We hope that through this briefing we can contribute in a modest way to your efforts, and clarify the use, role and regulations and procedures of our investigative and debarment processes.”

But he added, “We respectfully request your understanding that we will not be able to discuss the details of individual cases of investigation and debarment.”

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World Bank official statement after the informal Technical briefing with the Senators

At the invitation of Finance Secretary Margarito Teves, an informal technical briefing was held with members of the Senate at the Senate Building on February 24, 2009, on the investigative and sanctions processes of the World Bank in cases where fraud, corruption, collusion, coercion and/or obstruction, as defined by the World Bank, is alleged or suspected in World Bank-funded programs and projects. The World Bank would like to thank Finance Secretary Teves for his invitation and the honorable members of the Philippines Senate for attending.

The World Bank appreciates the initiative of the members of the Philippine Senate, especially the Committee on Economic Affairs, to follow up on the World Bank’s findings in relation to the Philippines National Roads Improvement and Management Program (NRIMP-1) Project. This initiative—together with efforts by Office of the Ombudsman, the Department of Public Works and Highways, and the National Bureau of Investigation to probe into the matter—contributes to our shared goal of improving governance and fighting corruption in the Philippines.

The informal technical briefing was intended to provide information on the role of the World Bank’s Integrity Vice Presidency (INT) in investigating allegations or suspicions of wrongdoing in relation to World Bank financed programs and projects; the nature of the World Bank’s investigative and sanctions processes; the types of documents and reports produced in the course of these processes; and how such reports might be used for follow-up actions appropriate under the laws of the member country in which wrongdoing is alleged to have occurred. The informal technical briefing did not discuss the results of investigations conducted by INT in specific cases or countries, nor any particular deliberation of the World Bank’s Sanctions Board.

INT, an independent unit of the World Bank, investigates allegations or suspicions of fraud, corruption, collusion, coercion, and obstruction, as defined by the World Bank, related to Bank Group-supported activities. During the informal technical briefing, the World Bank representatives clarified that INT’s investigations are administrative in nature, in that they are primarily intended to allow the World Bank to determine if its own rules, policies or procedures, have been violated by firms or individuals. Such violations may become the basis for the World Bank to exercise remedies under its legal agreements with its borrowers or to pursue sanction proceedings against firms or individuals. The purpose of such investigations, the exercise of remedies and sanctions proceedings is to help the World Bank meet its obligation to ensure that funds that it provides to borrowers are used for their intended purposes. INT’s investigations are not criminal investigations, and are not intended to substitute for any investigative activities that may be required to be carried out by domestic authorities pursuant to domestic law.

The World Bank representatives explained the nature of collusive practices, which the World Bank currently defines as “an arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party.” The World Bank representatives described in general terms some indicators of collusion that have been found in past investigations through the review and forensic analysis of bidding documents. These included symmetry among bid prices, questionable disqualification of some bidders, sequential bid securities, and abnormally high bids, among others.

The World Bank representatives clarified the distinction among three types of documents that may be issued by the World Bank following the conclusion of an investigation, namely a Referral Report, a Notice of Sanctions Proceedings, and a Redacted Report.

A Referral Report is a summary of investigative findings issued by INT to appropriate government authorities. Referral Reports make no judgment as to whether the laws of the member country have been violated.

A Notice of Sanctions Proceedings is a confidential document produced by INT and issued by the World Bank’s Evaluation and Suspension Officer to respondents in sanctions cases, including documentary and testimonial evidence necessary for respondents to answer allegations against them.

A Redacted Report is a summary of investigative findings issued by INT to World Bank member country governments, the World Bank’s Board of Executive Directors and the general public, following the World Bank’s redaction and review protocol.
The Referral Report summarizing INT’s investigation findings concerning NRIMP-1 were shared with the Government of the Philippines in November 2007. Because the Referral Report includes sensitive information which may be relevant to possible investigations in the Philippines and contains no judgment as to whether the laws of the Philippines may have been violated, it was shared on a strictly confidential basis to allow the investigative authorities in the Philippines to undertake their own investigations if deemed warranted and reach their own conclusions, in each case based on Philippines law.

A member country government that has received a Referral Report and is seeking to investigate the case can always ask the World Bank for additional information. In this case, the World Bank has offered follow-up assistance to the Ombudsman in conducting her investigations. In addition to the Referral Report, the World Bank has also provided the Office of the Ombudsman additional documentary material relevant to the matter.

The World Bank representatives clarified that, separately, when evidence from an INT investigation shows that firms or individuals may have engaged in sanctionable practices as defined by the World Bank, INT prepares a Notice of Sanctions Proceedings (NOSP). When the results of an investigation are submitted to the Sanctions process, this is done in an effort to enable the World Bank Group Sanctions Board to decide whether or not firms and/or individuals should be debarred from being awarded further World Bank-financed contracts or be otherwise sanctioned. The World Bank representatives noted that the World Bank can only sanction firms and individuals involved in World Bank-financed projects, not government officials.
The Redacted Report concerning INT’s NRIMP-1 investigation will be posted on the INT page of the World Bank’s website shortly.

The World Bank representatives noted that both the Referral Report and the other documentary findings are now in the hands of the Office of the Ombudsman (OMB). The World Bank firmly believes that it has provided the Philippines authorities with the relevant body of information to consider in carrying out whatever investigation the Government deems appropriate.