Feature: Contractual Obligation or Fraudulent Practice?
Each year, ADB approves thousands of contracts to consulting firms worth many millions of dollars. Most of these consulting firms then engage individual consultants to carry out the specific tasks of the project. Contractual disputes arise from time to time between the firm and consultant, with alleged non-payment of fees a recurring theme.
Ordinarily, such contractual disputes are beyond ADB's influence. However, this is not always the case, particularly when a consulting firm becomes the subject of repeated complaints of non-payment of consultants' fees.
ADB expects its consultants, whether firms or individuals, to act with the highest ethical standards. Conscious and systematic non-payment of fees to a firm's consultants for indefensible reasons may constitute a breach of this expectation.
 So where does the Office of Anticorruption and Integrity (OAI) fit into this picture given that OAI is responsible for investigating allegations of fraud or corruption?
As many of these matters are legitimate contractual disputes, OAI will not intervene. Nonetheless, if reasons for the non-payment are unjustifiable, systematic and/or deliberate/reckless, this may amount to a fraudulent practice which is violation of ADB's Anticorruption Policy.
Under the Anticorruption Policy, a fraudulent practice is defined as being:
...any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.
If, for example, upon investigation, a certain firm is found to have engaged consultants without any intention of paying them in accordance with their contracts, or has been reckless as to whether or not it will honor the terms of the contracts, then this may amount to a fraudulent practice.
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Case: Sanction imposed on firms for systemic non-payment of consultants' fees
OAI recently found that systemic non-payment of consultants' fees by a consultancy firm was a very useful indicator of further breaches of the Anticorruption Policy.
In this case, the firm had gained a reputation for not paying its consultants on a range of projects over a period of time. OAI considered that if the firm was not willing to honor agreements made with its consultants, then it was more probable than not that it would also fail to observe the highest ethical standards in other areas of its activities.
Having been made aware of these and other red flags, OAI examined a range of allegations it received against this firm.
The firm and its directors were subsequently found to also have engaged in a corrupt practice*. The Integrity Oversight Committee imposed sanctions on these entities for lengthy periods. |
What you can do
If you become aware of a firm that appears not to be paying its consultants on a systematic or regular basis, or over a range of projects, then please bring it to the attention of OAI via email at integrity@adb.org.
While it may be simply bad business practice on the part of the consultancy firm, and OAI may not be in a position to intervene on such contractual disputes, it could be a symptom of a much deeper malaise. |
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