Oversight Crisis at Development Banks: Slashed Wrists, Blood-Smeared Offices and Workers Too Terrified to Complain: What Can Be Done to Root out Alleged Corruption at the World's Development Banks? (the World: Multilateral Finance)

Article excerpt

Yellow police tape sealed off a sixth-floor office in the exquisite headquarters of the Inter-American Development Bank (IDB) just two blocks from the White House. The tape barred entry to the room, but it could not contain the horror within, where a former official of an IDB Central American office, reportedly distraught over misconduct at the multilateral development bank (MDB), had slashed throat and wrists. While doing so, say IDB insiders, the former official wrote in blood on an office wall: "The bank is corrupt!"

The tragedy is reported to have occurred after the official blew the whistle to superiors concerning alleged abuse of power affecting IDB projects in the field. In response, the official had been transferred back to Washington. According to a former IDB officer familiar with the case, the official's "grade [job rank] was lowered" and the whistle-blower "was assigned to a small windowless office--something very important to bank staff--and given no responsibility." Then the "silent treatment" began.

Four other sources, including a highly placed bank official, have confirmed part or all of the story. Contacted at home by INSIGHT, the recovering bank officer had been on leave since the July 18, 2002, incident and continued to be under a physician's care. The officer would not comment on what had happened, nor would the IDB.

The incident offers emblematic and tragic evidence of what some officials at the MDBs tell INSIGHT are the risks they face in speaking out against wrongdoing at these institutions supported by U.S. taxpayers. Not only can doing the right thing lead to losing one's job, but foreign hires dependent on bank-sponsored work visas face additional risks. "Everybody is afraid," a well-placed IDB source tells this magazine. "Of course, they fear losing their jobs, but another way [the bank] keeps them in line is by threatening to take away their visas. If they lose their visas, they have to go home."

Similar concerns, say advocates for bank reform, are heard from inside the World Bank, the Asian Development Bank and the African Development Bank. "Experts I work with at the World Bank say that ff they make comments critical of the bank's position, they do so at what they have described as `great risk,' and they end up not being listened to anyway," says Korinna Horta, a senior economist at Environmental Defense, a citizen watchdog group. "I have firsthand knowledge that this happened in the case of the Chad-Cameroon oil-pipeline project."

According to a recent study by Northwestern University political scientist Jeffrey Winters, in the last five decades corrupt officials from Third World countries have skimmed an estimated $100 billion from World Bank loans. Not until 1996 did the World Bank institutionalize a strategy and mechanism for combating the corruption inside the institution, which next to the federal government is the largest employer in Washington. The years passed. In 2000, the bank shifted the chairs on the deck of what seemed to some like the Titanic, merging its corruption-and-fraud-investigations unit and its office of business ethics into a department of institutional integrity. That same year the General Accounting Office (GAO), the U.S. congressional watchdog, issued a report calling on the World Bank to make greater efforts to control corruption.

But the U.S. Treasury Department is the executive-branch overseer of the development banks. And in November 2000 it successfully killed recommendations to Congress proposed by the U.S. Agency for International Development (USAID) that greater public disclosure of the banks' operations be mandated and a better process of external and internal review be established to prevent potentially illegal loans from being approved.

More recently the International Financial Institution Advisory Commission, a congressionally mandated 11-member panel on the role and effectiveness of several international institutions, was created. …