World Bank Denies Corruption Allegations
Two months after first covering allegations of corruption in a $30 million World Bank loan to improve the water system in Yerevan on this blog, the media in Armenia has finally gotten round to covering the accusations even though they had been approached by a British whistleblower, Bruce Tasker, before the parliamentary election in May. Moreover, as the allegations had first surfaced in an interim report released by a 2004 parliamentary commission, it’s fair to say that the media as well as civil society failed to do its job or fulfill its function.
Neither followed up on criticism of the international banking organization by Deputy Speaker of the Armenian National Assembly, Vahan Hovannisian, but now that The Observer newspaper published details of Tasker’s allegations on Sunday, the local media has finally covered the story. Yesterday, Aravot, Haykakan Zhamanak, and one other covered the allegations. Today, A1 Plus and RFE/RL reported on the claims made against the World Bank in Armenia, and its reluctance to send an investigation team to Yerevan to clear the matter up once and for all.
The World Bank on Thursday again shrugged off embarrassing allegations about gross misuse of a $30 million loan to Armenia that were first made by an Armenian parliamentary commission in 2004 and have resurfaced in recent weeks.
The loan was part of a 1999 World Bank project designed to upgrade the country’s water infrastructure and improve Yerevan residents’ access to drinking water. The Armenian parliament formed in 2003 an ad hoc commission to investigate the effectiveness of these and other large-scale infrastructure projects financed by Western donors.
In its first report made public in March 2004, the commission headed by deputy speaker Vahan Hovannisian concluded that the water scheme has failed to achieve its main objectives to due to mismanagement and corruption among government officials and private firms. The report deplored the fact that 27 percent of the World Bank funds have been spent on project management, overheads and logistics.
The World Bank office dismissed the claims at the time, insisting that the project’s implementation has been a success.
The Washington-based institution, which has been Armenia’s principal lender, was again put on the defense recently by Bruce Tasker, a Yerevan-based British engineer who had participated in the 2003-2004 parliamentary inquiry as an expert. Tasker detailed those allegations on his website and effectively implicated the World Bank in the alleged corruption.
“The fact is it was not an isolated case of a few thousand dollars here or there, it was tens of millions of dollars,” Britain’s “The Observer” newspaper quoted him as saying on Sunday.
The RFE/RL article is pretty balanced and quotes both sides of the story, even going as far as reporting that the prime minister, Serzh Sarkisian, believes Tasker has an axe to grind. Perhaps that’s true, as he also claims blacklisting the World Bank, but it is also the case that senior members of the present government are implicated in what Tasker alleges. Unfortunately, they did not contact the expat worker even though I could have put them in touch.
Nevertheless, they do paint a truer picture of the reported “success” of the water project than the World Bank does as well as raise other issues which should be considered.
Prime Minister Serzh Sarkisian also weighed in on the case late Wednesday, saying that his government is ready to again look into the corruption allegations. “The World Bank looked into his claims and found no serious violations,” he said. “I think in spite of that we will once again address the matter because the opinion of the English engineer is extremely important for us.”
Sarkisian at the same time questioned the credibility of the allegations, saying that Tasker has a personal grudge against a French company that currently manages the Yerevan water network and its Italian predecessor that used the World Bank loan. “That engineer used to work with the Italians, then the French didn’t hire him and then other events took place and he appealed to the World Bank,” he said.
[…]
The World Bank loan was tied to the Armenian government’s sweeping reform and restructuring of the country’s obsolete water and sewerage network. As part of that reform, hundreds of thousands of Armenian households had to buy and install water meters in their homes. The government had promised that, as a result, virtually all Yerevan residents will have running water 24 hours a day by 2004. It has clearly failed to fulfill the pledge.
Veolia Eau, the French utility giant running the Yerevan network, has said that it will need a decade to ensure 24-hour water to the vast majority of local households. The operator argues that as much as 80 percent of drinking waters leaks out of eroding pipes before reaching consumers. The World Bank funds were supposed to significantly reduce the huge losses.
The A1 Plus article, however, is not as balanced and relies too much on what the World Bank has to say on the matter. However, I have informed them that they can quite easily contact Tasker in Yerevan and even pointed them in the direction of the Armenian-language version of his blog which details his allegations. Interestingly, despite the information online, only one of the media outlets so far have bothered to consult or quote from the blog — English or Armenian.
Regardless, according to A1 Plus, the response from the World Bank is quite adamant. Their position is that despite high levels of corruption virtually everywhere in Armenia, nothing went wrong with this project.
“The World Bank does not have evidences of deception or inadequate management on the Yerevan water supply program”, announced Aristomene Varoudakis, Head of the Yerevan Office of the World Bank reflecting on the British engineer’s accusations.
[…]
“We have no definite answer as why this problem has emerged again, since this story was concluded for us”, said Aristomene Varoudakis. According to him, Tasker has turned to the World Bank’s Institutional Integrity Department. “It is completely an independent judicial body, and is responsible only to the Chairman of the World Bank and has nothing in common with other project departments and sectors. We do not know whether this investigation is underway or not, since the investigation will begin after receiving appeal and coming out of the financial resources”.
However, it is fair to say that the British Embassy’s response is pretty much in line with what the Ambassador, Anthony Cantor, told me when we met last month to discuss the matter. That is, the British Embassy has an obligation under U.K. law to report all allegations of corruption to the relevant authorities even if they happen abroad. Basically, they say, the Ambassador had no choice but to get involved regardless of the claims themselves.
Two hours ago I returned from my meeting with the British Ambassador, Anthony Cantor, at my Embassy and have this to report. Basically, Cantor acted as an Ambassador and within diplomatic rules by remaining impartial in the matter. However, he did confirm that the Embassy has passed on Tasker’s allegations to the Foreign & Commonwealth Office (FCO) who in turn passed them on the Serious Fraud Office as all of them are obliged to do under British Law. So, according to the Ambassador, the Embassy is simply doing what it is obliged to do when someone makes complaints about possible corruption in any country involving a British firm or nationals.
When I raised this issue with one British journalist recently he said that such a response is to be expected from a diplomatic mission overseas. Regardless, here’s how A1 Plus reported the official response from the British Embassy in Yerevan and it is pretty much in line with what Cantor told me last month.
The press secretary of the British Embassy in Armenia Armine Grigoryan informed “A1+” that according to the UK Bribery and Corruption Law all British embassies in the world are obliged to account the British government about the corruption cases, just as the British Embassy in Armenia has done”.
“In its letter to the World Bank, the British Embassy in Armenia expressed hope that the investigation of Bank’s Institutional Integrity Department will be carried out properly. The Embassy did not urge or order the Bank to carry out the investigation. We do not want and we cannot carry out an investigation or order it”, pointed out Armine Grigoryan.
We should mention that the British Ambassador Anthony Cantor sent the letter on 29 May and as Armine Grigoryan ensures: “The Ambassador does not expect any respond to his letter. But we are aware that the World Bank is engaged in the settlement of this problem”.
Anyway, after forwarding the A1 Plus article to Tasker he then sent me his response. The email was also cc-ed to A1 Plus, the World Bank’s Aristomene Varoudakis and Beatrice Edwards from the Washington-based Government Accountability Project (GAP) which supports him in his claims and who told me in an email that the evidence of corruption provided to them was “compelling.”
[…] GAP is legal counsel for Bruce Tasker, and we have verified that his allegations of corruption in the Municipal Development Project in Yerevan are compelling. On his behalf, we submitted his allegations of corruption and a complaint of retaliation against him to INT at the World Bank, and we have been told verbally that INT will investigate. We do not know when they will take action, however.
This is what Tasker wrote in that email. As I said, copies were also sent to A1 Plus, the World Bank and GAP.
Hello again Onnik,
I have now read the A1+ article and send you this reply:
Regarding the main comment from Mr Varoudakis that the “water meters were not the objective of the program, but were its consistent part. “Only due to them we managed to raise the 18 percent of recruitment to 79 percent. The water supply would never be in an appropriate condition in Armenia if the recruitment percent was not raised. Only 1,3 percent of the program’s 35 million USD was allocated to that”, added Mr Varoudakis”.
I attach a copy of page 19 of my annotated World Bank “Implementation Completion Report” on the Municipal development Project, that shows the success on the water meters was increased by 13 times, from 20,000 projected water meters, to a final total of 277,000 meters. My blog http://better-not-wb-the-wb.blogspot.com/ covers this point quite clearly and that states the total number of subscribers according to the operator was 289,000 and each had an average of 1.5 water meters, some two some three and some only one - a total of 433,500 meters.
According to the ICR, the project should have “installed or replaced 20,000 water meters. The target was exceeded by a factor of 13 with 277,000 water meters installed”.
This point is also covered earlier in the ICR, and there is no mention of the subscribers buying the water meters and paying for installation, as they have already paid for them under the WB credit.
The total value of 433,500 meters, each costing about $15 dollars, and about the same cost for the installation ($30 total) is $13,005,000, that A. Utilities and the WB are claiming success for, but which in fact was paid for by Yerevan’s water consumers.
Mr Varoudakis added that “only 1,3 percent of the program’s 35 million USD was allocated to that”.
That is a question that needs to be resolved, and if only 1,3 percent of the program’s 35 million USD was allocated to water meter installation ($455,000), then why does the ICR claim benefit for $13,005,000, which is 37% of the total project value. Whatever answer the bank may cook up to this question, embezzlement is not calculated at the gain to the perpetrator, but by the loss to the injured party, which in this case was the $13,005,000 cost to Yerevan’s water consumers.
That is one aspect of my claim that I am asking the INT to investigate.
Another point is that I see the press secretary of “Yerevan Water” Murad Sargsyan prefers to distance himself from the matter - quite rightly so.
The point about why I eventually submitted the claim after two years of apparent silence is also covered in detail on my blog, but as a general answer, I submitted details of the corruption to the World Bank and to the INT in 2004, but at that time no action was taken.
Also, I have asked Mr Varoudakis for a meeting, but his office has replied to say he is too busy until he returns to Armenia from his overseas trip at the end of October.
Regards,
Bruce
Meanwhile, in private conversations with various expat workers here in Yerevan, all but one acknowledge that the World Bank project was plagued by corruption. The one dissenting voice, an Armenian-American, said he believed that Tasker was looking for corruption and wonders what his motivation for doing so was. However, it is worth pointing out again that the issue at hand is more one of whether the allegations of corruption revealed by the 2004 parliamentary commission have been fully investigated yet and it would certainly seem as though they have not.
Again, to repeat my position on the matter. If the World Bank is serious about investigating allegations of corruption in its projects worldwide, as well as encouraging recipient governments to practice transparency and accountability, it should dispatch an investigation team from its INT to Yerevan and upgrade the case’s priority from “medium” to “high.” This is especially the case given the fact that the doubts raised by the 2004 parliamentary commission are now once again in the public eye.
Clearly, this matter is now one that needs to be resolved immediately.
It’s also worth pointing out one more thing as well. As already mentioned on this blog, Tasker approached several media outlets and local NGOs with this case before the May parliamentary election, but faced with no interest from all but one of them, Hetq Online, it was up to bloggers to cover this case instead. Tasker even set up his own blog in Armenian and English which has been extensively linked to from this one so there is also no reason why journalists can’t consult that for additional information — or even to contact him, in fact.
Any journalist wanting to contact Tasker can also contact me and I’ll be more than happy to pass any emails on to him. I’m also personally interested in making contact with anyone out there who has first hand experience of World Bank projects in Armenia and can comment on the allegations. All information will be treated in the strictest confidence and all sources will be protected unless stated otherwise.
Meanwhile, unlike the news reports which have not approached every party to this case, this blog has — Tasker, GAP, the World Bank, and individuals in the IMF and various international organizations here. Moreover, each and every one of those involved in this matter has the right and ability to respond to anything reported on this matter in the comments section below. I think the case for blogging as a democratic tool and one that can bring accountability and transparency to the fore in Armenia has been made.
Incidentally, my article on all of this will be out in the November issue of New Internationalist magazine at the end of this month. For sure, I don’t think we have heard the last of this story which was first brought to attention in the blogosphere and not in the local media even though Tasker did approach the latter at the beginning of this year. Tasker’s blog is here and related posts on this blog are here.
I would like firstly to reply to a comment from the one dissenting voice, an Armenian-American, who said he believed that Tasker was looking for corruption and wonders what his motivation for doing so was.
My answer is that when I agreed to accept Vahan Hovhanissian’s request and join the commission in October 2003, it was on the understanding that I would manage a team of specialists who would gather publicly available information on credits, grants and humanitarian assistance, and register that information into a computer program which we would develop. The nine commission members, Deputies of Parliament, would then determine which of the programs were better and which were worse. This is all covered in my end-of-year report to the commission of September 2004.
In November 2003, Vahan started an effort to persuade me to carry out an investigation into a specific World Bank credit project, and he spent the next three months pressing me to do that. Eventually Vahan gave me an ultimatum, either I would do as I was asked, or I would be unceremoniously dismissed from the commission.
I asked Vahan why he insisted that we study a specific project, adding that we would undoubtedly open a tin of worms, and the commission would not have the clout to put the lid back on. Vahan insisted that corruption in Armenia had already escalated to an unacceptable level and the commission was obliged to make an effort to curtail it.
On that understanding, and trusting Vahan Edwardovich to his word, I stipulated that we must have a concrete basis for initiating a study into any specific project, and I would need written authorisation from the Head of Committee (Vahan). At that time, the local construction company “Betartshin”, had written to the Commission complaining that it had won a tender to build a water reservoir for the Municipal Development Project and the work had been taken away from them and given to another local construction firm, which happened to be owned by a member of our commission. Betartshin had refused to pay a backhander to have the work finally approved.
I interviewed the directors of Betartshin, and after they confirmed the details of their complaint, I agreed to carry out the study.
To answer another question raised by our PM Serge Sargsyan, about my working for the Italian A. Utilities, company and the French company Veolia not hiring me. Serge Arzatovich has been incorrectly informed, I have NEVER worked for the Italian company, or for the French company, nor have I ever asked for a job at either company.
However, in February 2004, when visiting the Garni water pumping station, which should have been taken out of service after hundreds of thousands of Municipal Development Project dollars had been spent to convert the water supply to gravity feed, a senior official of the water authorities offered me a job to work as deputy to Richard Walkling, who was the Authorised Representative of the International Operator, A. Utilities, and at the same time General Director of the Yerevan water company, to which A. Utilities was under contract – a very serious conflict of World Bank project terms and conditions and certainly not in the best interests of Armenia’s taxpayers.
I turned down the offer, adding that Walkling was a disgrace and I would never be associated with him in a working capacity. Walkling is still a disgrace and as far as I know, now works for the French company Veolia, under the present World Bank financed water project for Yerevan, whilst the INT ignores continuous requests to carry out an investigation into my claims.
In June 2004, when most of the fraud and corruption had been exposed, and which I had reported to the World Bank and the INT, Vahan Edwardovich changed his position and attempted to close down the study. Hence, Vahan did not report the final results of the study to the Armenian people and the Word Bank ignored the allegations of corruption that I had reported to their country manager and to the INT.
Comment by Bruce Tasker — October 4, 2007 @ 11:02 pm
Incidentally, it’s worth pointing out that none of the local media reports I’ve seen so far have made mention of the Government Accountability Project (GAP) singling out the Armenia case as one of a few examples of where the World Bank’s INT has failed to act.
I posted about that here.
Comment by Onnik — October 5, 2007 @ 1:21 am
BTW: Someone just gave me a heads-up on the fact that some of the people I know are friends or close colleagues of those expat workers implicated and accused by Tasker. This probably explains why one of them initially offered to put me in touch with one other expat worker who privately detailed corruption in World Bank activities, but who has now remained silent and not sent me those details. Well, that’s fair enough, although not necessarily good for the country, but it does indicate one thing.
Just as Yerevan and it’s population is so small that corruption, nepotism and connections are everywhere and unavoidable, I fear that the same is true for the expat/repat community. I know a number of instances where this is the case and while it is probably only natural given the situation, there is no doubt about it. There needs to be stricter controls and tighter monitoring with increased transparency not only for the government and civil society, but also for international organizations and diplomatic missions too.
Ask me to describe the current situation in one word, and there’s only one that seems appropriate — incestuous.
Comment by Onnik — October 5, 2007 @ 11:06 am
Now that my action against the World Bank is starting to attract the attention of the Armenian media, I wish to express my appreciation to Onnik Krikorian, who has demonstrated his true independence as a journalist by accurately reporting on my ‘Blowing the World Bank Whistle’ action to rein in corruption in World Bank projects in Armenia.
The action started in March this year when my claim was submitted to the INT, the World Bank’s watchdog organisation in Washington, and since that time regular updates have been widely distributed throughout the Armenian media.
But it was only after the action hit the mainstream UK newspapers that any of the other ostensibly independent Armenian papers eventually decided to cover the story. That includes both locally and internationally orientated papers, which until this week have presumably considered the ever-increasing international scrutiny of Armenia’s corruption to be of insufficient interest to warrant exposure to the Armenian public.
But thanks to Onnik’s resolute Oneworld Media coverage, the Armenian media has eventually had little other choice but to do the right thing and cover the story – each in its own way, to suit its own political agenda, and often with the Armenian version presenting one story and the English version another, as per this weeks A1+ coverage.
The Bank’s new country manager now contends that there was no significant fraud or corruption, even thought GAP’s Washington lawyers have found that there is sufficient documented evidence of high-level and wide-ranging corruption to warrant a full investigation. At the same time, the Bank’s Department of Institutional Integrity continues to ignore repeated requests from high-level international officials and may never carry out an investigation. But Oneworld exposure has already helped to generate the attention needed for the World Bank to take a much closer look at its activities in Armenia.
And now that the story has reached the attention of the Armenian Prime Minister, with his intervention, this action could lead to real improvements for a significant amount of Armenia’s lesser privileged – and that would be thanks in no small part to truly independent Oneworld media coverage.
Bruce Tasker
Blowing the World Bank Whistle
Comment by Bruce Tasker — October 5, 2007 @ 11:24 am
I just received an email from a former Reporters Without Borders person who now works for France 24. Anyway, from what I understand from that email, these allegations and the use of blogs to cover them before the local media did will be reported on by the station.
I would imagine that there’s now no stopping this story until the World Bank’s INT sends an investigation team to Yerevan. Let’s see. There is no reason why they should not now that the allegations raised by a parliamentary commission in 2004 have resurfaced again.
The allegations weren’t properly dealt with back then so let’s hope they are now. Really, it’s the only logical thing that can happen now.
Comment by Onnik — October 5, 2007 @ 2:27 pm
Comment by Onnik — October 5, 2007 @ 9:44 pm
Onnik - In as much as your Oneworld blog has far more traffic than my ‘Blowing the World Bank Whistle’ blog, I am sure you will not mind if I use your blog to respond to Aristomene Varoudakis’s recent assertions that my claims are unfounded.
I have sent you copies of the original documents that I refer to here and which are small parts of my submission to GAP in Washington, and which in turn are in part the basis of my 29th March claim to the INT.
Here are the details for your readers:
The first document I sent to you clearly shows how at the time of the Municipal Development Project, Richard Walkling was both Authorized Representative of the International Operator (A. Utilities) and at the same time General Director of the Yerevan Water & Sewerage Company (YWSC). This situation started in June 2000 and is a VERY serious violation of World Bank rules and of the Municipal development Project management contract, which A. Utilities signed with the Yerevan Water & Sewerage Company. Effectively Richard Walkling represented both sides of the management contract, as ‘Principle’ and ‘Contractor’.
In 2002, the YWSC assets were re-valued, in accordance with a Government decree, and the overall value was increased from about $10 million to more than $120 million, before being depreciated to a final end of year figure of about $50 million.
The second document I sent to Onnik shows the variations between the ‘Aucon’ audited assets revaluation and the revaluation shown in the YWSC 2003 financial statement. Although the two documents show a similar total final value, the Aucon document shows the total for the revalued ‘Mobile Equipment’ and ‘Machinery & Equipment’ to be 610 million Drams (approx), about $1.2 million. The 2003 YWSC financial statement on the other hand shows the machines & equipment to be revalued at a massively inflated figure of 56 BILLION Drams (about $115 million!!) and then depreciated to about 13.5 BILLION Drams (about $26 million!!).
My E-mails with the Bank show that the Bank withheld the 2003 statement until AFTER the original end date of the Parliamentary Commission, which was 10th September 2004. But the Speaker of Parliament (Artur Baghdasarian) extended the Commission term, after which the Bank could simply not withhold the document any longer. So on 7th October 2004, the Bank eventually approved release of the statement to the Commission. On the 18th October, after having studied the document, I wrote to the Bank commenting on the grossly overstated revaluation figures for machinery and equipment. That over-valuation gave the YWSC, with Richard Walkling as General Director, the opportunity to claim more than 6 BILLION Drams (about $12 million) depreciation, which should have been no more than $3 million, as mobile equipments are devalued at 20% per year, whereas fixed assets are devalued at only 5%. This was yet another $9 million that Richard Walkling had arranged to be embezzled from the Armenian state budget – on top of several more tens of millions of dollars.
What is of particular interest with this event is that the Bank wrote that it had withheld the document for its own “assessment”. So this demonstrated quite clearly that the Bank was obviously a collaborator in this highly corrupt activity, as the Bank had every opportunity to regulate the problem.
So - when Aristomene Varoudakis says that in 2004 there was no significant project impropriety, he is VERY much mistaken.
Comment by Bruce Tasker — October 7, 2007 @ 5:42 pm
Bruce, no problem at all. As I said in the post, this comments section is such a place where anyone can respond to what’s been reported and this is especially the case for anyone mentioned or involved in this story.
However, I think it’s more in your interest to respond on your own blog, thus giving me the opportunity to make fresh posts with less work involved (sorry, but time is pressing for all of us) as well as driving more traffic to your blog through links and so on.
However, whichever way you choose is up to you. Probably both are most appropiate i.e. you can quote a little and link to the full response on your blog. You’ll also be able to monitor interest through your own stats as well.
Still, a more comprehensive and holistic approach is probably best and the beauty of blogs.
Comment by Onnik — October 7, 2007 @ 5:50 pm