2007 Accomplishments
Complaints Received
In 2007, OAGI received 211 new complaints or allegations from a variety of sources. This represents a significant increase of 23% over the 171 complaints received in 2006. Of the 171 complaints received in 2006, 33 were still being screened in 2007. While the specific reason for the rise in complaints is not known, OAGI considers that the accessibility of OAGI's web-based reporting facility, coupled with the efforts to publicize ADB's strong anticorruption stance both inside and outside of ADB, has raised the profile of anticorruption and has made it easier for people to report their suspicions.
Complaints to OAGI may be made in writing, by telephone, by e-mail, online, or by visiting OAGI at ADB. See Details.
As Figure 1 shows, complainants preferred contacting OAGI via e-mail, which accounts for 49% of total complaints received in 2007. OAGI accepts anonymous complaints. Of the 211 complaints, nine (or 4%) were anonymous. In a limited number of anonymous cases, OAGI could not pursue the case because of the lack of specificity in the anonymous complaint and the inability to contact the complainant for more information.
Figure 2 illustrates the number of complaintsreceived annually since 2003.
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Screening
OAGI screens all allegations received pertaining to ADB-financed activity and/or its staff. Complaints are typically acknowledged in writing without delay.
At the conclusion of the case screening or assessment
process,2 95 new investigations were opened during 2007. Notably, the PPRAs continued to identify "red flags" and were a source of "leads", which may warrant further investigation. As of 31 December 2007, 66 of these investigations are ongoing. Of the cases that were closed, 23 were due to insufficient evidence either to support the allegation or to demonstrate that the anticorruption policy had been violated. Six of the 95 investigations related to staff misconduct.
Figure 3 presents the number of complaints and investigations opened each month in 2007.
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Investigations
The 95 new investigations opened in 2007 represent a 12% decline over the 108 converted the previous year, mostly as a result of a more effective screening process.
Figure 4 shows the number of investigations opened annually since 1998.
As in previous years, the complexity of cases and ongoing staff vacancies resulted in an overall increase in the number of open investigations compared to previous years. For 2007, this was compounded by the substantial increase in the number of complaints reported to OAGI and the special performance and financial audit of four related technical assistance (TA) projects that OAGI managed and supervised. Special attention was paid to the prioritization and management of the investigations caseload (with an emphasis on finalizing the older cases). At the end of 2007, 95 investigations were ongoing, compared with 83 at the end of 2006, 89 at the end of 2005, and 81 in 2004. Throughout the year, OAGI averaged 97 open investigations, an increase of 4% compared with an average of 94 in 2006, 77 in 2005, and an increase of 32% compared with an average of 73 open investigations in 2004 (Figure 5).
At the end of 2007, substantial inroads had been made into completing outstanding cases from previous years. All cases opened in 2004 were closed. Of the 20 cases that remained open from 2005, 12 were closed-the remaining eight cases all arose from one PPRA and are still being investigated. There remains a total of 21 open investigations from 2006.
As part of its standard fraud and corruption inves-tigation methodology, OAGI conducts investigative missions to interview complainants, witnesses, and persons of interest in the field. During these missions, OAGI staff members also obtain and examine business and financial records and other related documents, in addition to conducting site visits to assess projects. During 2007, OAGI completed 17 investigative missions to 11 member countries. Such missions are not only essential for effective investigations, but they also provide an invaluable opportunity for OAGI to establish its presence in DMCs and to promote fraud and corruption awareness, and to publicize OAGI's role. Given the primacy of such missions for effective investigations, and the development of a more proactive approach to its investigations, OAGI will endeavor to increase its field investigations in 2008.
OAGI engaged firms, on a retainer basis, to assist in the investigation of specific allegations of fraud and corruption. This arrangement allows OAGI to issue work orders for investigations on a case-by-case basis. OAGI reviews all investigations conducted by the retainer firms and may conduct further investigation following those conducted by retainer firms, where appropriate.
In 2007, OAGI issued 26 work orders to retainer firms, compared to 25 work orders for 2006, 24 in 2005, and 15 in 2004. The overall increase in work orders over the last 4 years is the result of increased case complexity and ongoing staff vacancies, as well as the need to supplement language skills or knowledge of local environments. As OAGI's workload continues to increase, it is anticipated that more investigations will be referred to retainer firms. During 2008, OAGI will be reviewing its list of retainer firms with a view to expanding the number of firms available to undertake such work.
OAGI closed 83 investigations in 2007, compared with 115 investigations in 2006. It should be noted, however, that the number of investigations referred to the IOC actually increased from 21 in 2006 to 28 in 2007, representing a rise of 33%.
The summary status of reported allegations of fraud and corruption is presented in Appendix 1.
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Nature of Investigations
Investigations are currently categorized as fraud, corruption, combination of fraud and corruption, or others.3
As Figure 6 illustrates, in 2007, 36% of cases were categorized as fraud, 29% as corruption, and 24% as others, while 11% involved a combination of fraud and corruption. When compared to 2006 (Figure 7), 2007 showed a significant increase in the number of cases that involved both elements of fraud and corruption.
A case involving both elements of fraud and corruption is placed in the separate category of fraud and corruption. Cases involving instances of abuse, coercion, obstruction to an OAGI investigation, and where they do not, otherwise, fit into the category of fraud or corruption, are categorized as others. The increase in the others cases (indicated in Figure 6) is a result of investigations arising from PPRA findings in 2007 compared to 2006.4
The category of fraud includes cases of mis-representation, submission of false documents, false claims, and other activities, such as overpricing of bid estimates. Comparative charts in Figures 8 and 9 show that instances of misrepresentation dominated in 2007 and 2006.
The category of corruption includes cases of abuse of position, conflict of interest, collusion, kickback, theft/embezzlement, and bribery and extortion. As shown in Figures 10 and 11, collusion in the procurement process was the most common form of corrupt act, representing 67% of cases in 2007 and 46% in 2006, respectively.
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Sources of Investigations
Staff and OAG audit reports were the two main sources of investigations of fraud and corruption in 2007, representing a combined percentage share of 81%, while 19% of investigations were received from external sources (Figure 12). By way of contrast, Figure 13 shows the comparative experience of prior years.
Figure 14 illustrates the contribution of differing sources of investigations over the years.
Staff are significant contributors to ADB's fight against corruption, with their contribution peaking in 2004. Audit reports have, in the last 3 years, become an increasingly valuable tool in the anticorruption effort. Both these sources will continue to be the main targets of OAGI's work in 2008. Also in 2008, OAGI will increase its outreach to ADB stakeholders to encourage appropriate reporting by "outside parties".
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Subjects of Investigations
Eighty-five percent of the investigations opened in 2007 related to ADB-financed projects (Figure 15). This proportion is an increase from previous years (Figure 16).
Investigations involving ADB staff primarily include violations of ADB's staff Code of Conduct, such as abuse of ADB's assets and equipment, abuse of ADB benefits (housing/rental subsidy, dependency allowance, and leave entitlements), questionable medical insurance claims, conflict of interest situations, and abuse of power. In 2007, eight cases involved senior staff members.
In contrast, investigations in relation to ADB-financed projects typically involve bidders, consultants, contractors, and suppliers committing acts of collusion, misrepresentation, submission of false documents, bribery, and theft.
Other subjects of investigation in relation to other ADB-financed activities (e.g., ADB internal administration or private-sector activities), comprise the remaining 4%.
When the subject of an investigation is ADB staff, OAGI refers the results of the investigation, with its recommendations, to BPMSD. This is explained in the next section entitled Referrals.
When the subject of an investigation is related to an ADB-financed project, the results of OAGI's investigation are handed over to the Integrity Oversight Committee (IOC). This stage is further elaborated in the section entitled Sanctions.
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Referrals
In 2007, OAGI referred six cases to BPMSD for disciplinary action (Table 2), and reported the findings of an additional four cases to BPMSD. BPMSD is the department responsible for imposing disciplinary procedures on staff for any behavior that violates its Code of Conduct. This would include all behavior that comes under the categories of fraud and corruption, or behavior that involves abuse, coercion, conflict of interest, breach of contract, and other misconduct.
A summary of significant cases involving ADB staff can be found in Appendix 3.
Table 2: Staff Cases Referred to BPMSD |
| Nature of Misconduct |
Number of Staff |
Case Resolution |
Location |
| Abuse of dependency allowance |
5 |
Written reprimands |
Headquarters |
| Abuse of position |
1 |
Separation |
Headquarters |
| Fraudulent use of leave and medical benefits |
1 |
Separation |
Headquarters |
| Improper use of ADB telecommunications facilities |
1 |
Separation |
Headquarters |
| Medical insurance fraud |
2 |
Separation |
Country Office
Headquarters |
| Theft |
1 |
Separation |
Headquarters |
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Sanctions
The IOC is the sole authority to determine if the anticorruption
policy has been violated in relation to an ADB-financed activity, and to impose sanctions and/or reprimands accordingly. The sanctioning process is administrative in nature and is not a legal, judicial, quasi-legal, or quasi-judicial process.
The Integrity Oversight Committee |
|
The Integrity Oversight Committee (IOC) determines if bidders, consultants, contractors, suppliers, or other external parties to ADB-financed activity violated the anticorruption policy or procedures, and imposes the appropriate sanctions based on OAGI's findings and recommendations.
The IOC consists of three regular voting members and three alternate members who fill any vacancies that may occur among the regular members due to absences or conflict of interest.
Members are nominated by the Auditor General and approved by the President. The principal director of the Central Operations Services Office (COSO) or his designated representative and an assistant general counsel advise the IOC. The IOC decisions are by majority vote.
OAGI serves as the Secretariat to the IOC. |
The IOC's activities in 2007 involved
- 10 meetings
- 28 case discussions
- Sanctions on 61 firms and 48 individuals
- Reinstatement of 13 firms and six individuals
- Reprimand of one firm and seven individuals
|
Sanctions, by way of debarment from ADB activities, were imposed in 2007 as shown in Table 3.
Table 3: Entities Sanctioned by the Integrity Oversight Committee in 2007 |
| |
1–7 years |
10 years |
Indefinitely |
Total |
| Firms |
60 |
1 |
0 |
61 |
| Individuals |
15 |
0 |
33 |
48 |
Table 4 provides a history of IOC sanctions activity since 1998, when ADB adopted its anticorruption policy.
T
able 4: Sanctions (since 1998) |
| As of 31 December 2007 |
Firms |
Individuals |
| Total declared ineligible to participate in ADB-financed activities |
243 |
227 |
| Reinstated upon appeal |
2 |
2 |
| Reinstated upon expiry of minimum sanction period |
45 |
23 |
| Currently ineligible to participate in ADB-financed activities |
196 |
202 |
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Appeals
ADB has a formal mechanism, which allows individuals and entities that have been the subject of a sanction from the IOC, to appeal the imposition of that sanction to the Sanction Appeals Committee (SAC). SAC is comprised of three of ADB's Vice-Presidents. If it sees fit, SAC may reduce or lift sanctions, as well as require the IOC to reconsider a case. The Auditor General is the Secretariat to SAC. The appeals process is also administrative in nature.
Filing and Review of Appeals |
The individual or entity that has been the subject of a sanction
- Has 90 days to appeal that decision, and
- Must appeal in writing, stating clearly and concisely the reason(s) for the requested review of IOC's decision.
SAC, however, will only consider those appeals that
- Include new information that would have been relevant to the imposition of the sanction by IOC, and
- This new information was not known, or could not have reasonably been known, to the individual or entity at the time that explanations were sought by OAGI.
|
The Secretariat reviews all letters of appeal to ensure that only those appeals that meet these strict criteria are heard by SAC. In 2007, this review process was reassessed and enhanced to rationalize processes, that is, to more critically consider and record letters of appeal and to increase the levels of transparency and accountability.
During 2007, the Secretariat received appeals from eight individuals and 12 entities—20 appeals in total—in relation to a total of 12 investigations. The total of 20 appeals received for 2007 is a 15% increase over that received during the previous 12 months. All eight individuals, however, were directors of one or other of the entities that had been sanctioned. Only one of these appeals, made by an entity alone, met the appeals criteria. SAC considered—but later rejected—this appeal.
The remaining 19 appeals were rejected by the Secretariat because they did not provide any new evidence that would have been relevant to the IOC when it made its decision. As in previous years, these appellants simply referred to their previous good works or the importance of ADB projects to their businesses and sought a reduction in sanction because of the impact of this on their income. In almost all of these letters of appeal, the applicants generally admitted the breach of the anticorruption policy, which led to the sanction being imposed.
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