I’ve just received a copy of the November edition of New Internationalist magazine in which my albeit short piece on the continuing saga of alleged corruption in World Bank projects in Armenia is included. Although I can’t see the text on the New Internationalist web site, because it’s now published I can at least now include the text here on my blog.

New Internationalist, NI 406
November 2007, p26

Skulduggery: Fuelling corruption in Armenia

It all seemed to be on the up and up for Bruce Tasker. In 2004, he was invited to become a special consultant to an Armenian parliamentary commission examining the use of $3 billion in international donor funds. He accepted the invitation – but he never could have guessed what would happen next.

The Armenian capital, Yerevan, was used as a case study for the World Bank-funded $30 million Municipal Development Project to improve its water supplies. Tasker, a veteran British development worker, and his team, discovered not only project failure but also an administration riddled with corruption, to the tune of tens of millions of dollars.

So, taking the Bank’s stated concern with corruption in the former Soviet Republic at face value, Tasker reported his findings, not only to the parliamentary commission, but also to the Bank’s office in Yerevan. Rather than act upon the commission’s interim findings, Tasker says that the bank turned on him.

Alleging blacklisting by the bank for reporting the illegalities, Tasker believes that pressure was applied on the government to prevent full public disclosure. He claims that taking the matter further would have revealed colossal fraud and corruption and that all the players, including senior government officials and foreign workers, would lose out. ‘The World Bank is fuelling corruption in Armenia,’ Tasker told New Internationalist.

Despite the documented allegations, no action has been taken – including by the World Bank’s own internal watchdog, the Department for International Integrity (INT). The allegations against the Bank and British nationals involved in the project were, however, reported by Tasker to the British Embassy, which informed the Foreign & Commonwealth Office and in turn, the Serious Fraud Office.

In March 2007, the Washington-based watchdog Government Accountability Project (GAP) took up Tasker’s cause and filed its own complaint with the INT in the hope that an investigation into the documented cases of corruption and fraud would be launched.

When the INT finally responded this August, it gave no indication of when it would investigate the matter. According to INT, the case was considered to be of “medium” priority and dependent on “the availability of investigative resources.” The letter came just days before GAP released its annual report on the INT. The Armenian case was singled out for specific criticism.

Tasker jokes about the INT’s reluctance to investigate the matter: ‘I should consider myself fortunate… the low priority cases are simply filed away with no further action’. Following on from the forced resignation of World Bank president Paul Wolfowitz, this new revelation hammers yet more nails into the coffin of the Bank’s credibility. Self-righteous finger-wagging should start at home.

Onnik Krikorian

Although the media here refused to cover this story when given the chance to some months ago, blogs were responsible for exposing allegations of corruption in World Bank projects in Armenia long before others did. In particular, allegations of corruption were first documented by British whistleblower Bruce Tasker on his own blog, Blowing the World Bank Whistle, and then here on Oneworld Multimedia.

Tasker set up his blog when news outlets here refused to cover the story at the beginning of the year although the former finally did so only after this blog brought the alleged scandal to greater public attention. Eventually, some media outlets here did follow suit, but many publications here and abroad were hesitant in taking material from yours truly when I approached them. Nobody wanted to get on the bad side of the World Bank.

However, New Internationalist published my short piece on Tasker and his battle with the World Bank at the end of October. Now, RFE/RL reports that the scandal has hit the big time in Yerevan. However, the World Bank continue to deny any wrongdoing. Time will tell.

A U.S. anti-corruption watchdog joined on Thursday a British whistleblower in accusing the World Bank of covering up what they see as gross misuse of a $30 million loan that was meant to upgrade Armenia’s battered water infrastructure.

The loan was part of a 1999 World Bank project designed to quickly improve supplies of drinking water in Yerevan. 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 due to mismanagement and corruption among government officials and private firms. The report also deplored the fact that 27 percent of the World Bank funds have been spent on project management, overheads and logistics.

The World Bank dismissed the claims at the time, insisting that the project’s implementation has been a success. Earlier this year it was again put on the defensive 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 allegations were picked up by the Government Accountability Project (GAP), a Washington-based group that specializes in whistleblower protection and scrutinizes World Bank projects around the world. It urged the bank’s Institutional Integrity Department (INT) to launch an official investigation.

The GAP’s international director, Beatrice Edwards, said on Thursday that she and Tasker spent the past two days meeting with U.S. and British diplomats and the head of the World Bank’s Yerevan office, Aristomene Varoudakis. She said the latter again denied any wrongdoing on the part of his lending institution.

“Mr. Tasker produced two documents that show quite clearly that there was corruption and fraud in the municipal development project, and we were told that these documents signified nothing of importance,” Edwards told a news conference in Yerevan.

“Mr. Vardoulakis told us to go to the Department of Institutional Integrity where we have already been,” she said, adding that the department has told the GAP that the fraud case is a “medium priority” for it. This means that the case will not be investigated by the INT anytime soon, she said.

[…]

Tasker claims that the installation of water meters was a major source of corruption among Armenian and foreign officials as well as private firms involved in the project’s implementation. He says local contractors alone were able to pocket up to $10 profit on the sale of each meter by charging customers for installation.

Veolia Eau, the French utility giant running the Yerevan network, now says 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.

Anyway, all my posts on this alleged corruption scandal are here, while Bruce Tasker’s blog is here.

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.

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After first being covered in the blogosphere, Bruce Tasker’s allegations of corruption in a World Bank project in Armenia have now hit international headlines with the U.K.’s The Observer carrying a story today. Interestingly, Tasker approached local Armenian media outlets such as Armenia Now and Hetq Online, as well as local NGOs such as the Center for Regional Development/Transparency International Armenia (CRD/TI Armenia), with these allegations just before the May parliamentary election, but none followed up on the hundreds of pages of evidence that Tasker says he has.

Frustrated, in lieu of any media outlet here interested in the allegations, Tasker then set up his own blog to disseminate the information he had instead. Tasker also approached this blog and after assessing the documents he provided, Oneworld Multimedia concluded that this story should be presented to the public. An email to the World Bank office in Yerevan was less than adequately responded to, and the response from the Washington-based Government Accountability Project (GAP) backed up Tasker not only with regards to his allegations, but also in further claims of blacklisting by the international banking organization.

Hetq Online eventually covered the allegations in August, albeit only after reading posts made on this blog first, but an English translation was never made available to a non-Armenian speaking audience. At any rate, Tasker’s allegations were only covered by the online publication after it was first exposed on his own blog as well as this one. Highlighting the importance of bloggers in reporting such stories, Notes from Hairenik, Martuni or Bust, and Nazarian also covered the story that was otherwise ignored by media outlets and local NGOs perhaps too dependent on foreign donors.

Anyway, my article for New Internationalist will be published in the November edition of the magazine, but in the meantime, The Observer’s Economics Editor, Heather Stewart, also covers the story.

Britain is urging the World Bank to investigate allegations of corruption and embezzlement in a $35m (£17m) water project in Armenia, which the Washington-based body says are only of ‘medium priority’. Bruce Tasker, a British whistleblower, says he has presented the bank with evidence of large-scale fraud in a project to improve the water supply in the Armenian capital Yerevan, but it has so far refused to carry out a full-blown investigation.

With its conciliatory new boss Robert Zoellick at the helm, the World Bank is keen to make a fresh start after the humiliating departure of Paul Wolfowitz earlier this year. Wolfowitz stormed into the bank promising to crack down on corruption, but ended up being embroiled in an ethics scandal of his own concerning lavish pay rises for his girlfriend, Shaha Riza.

Persuading the world’s richest countries that their taxpayers’ money is being well spent is a critical part of Zoellick’s job, but the Armenian case is just one of a backlog of allegations waiting to be examined by the Bank’s Institutional Integrity Department - or INT, as it is known.

INT wrote to Washington-based pressure group the Government Accountability Project (Gap), which is backing Tasker’s claims, saying the case was ‘rank ordered “medium” priority, and as such remains in a queue pending the availability of investigative resources’.

The British Ambassador in Armenia has written to the World Bank, urging it to carry out a full investigation.

‘We’ve run into a wall,’ said Gap’s director, Bea Edwards. ‘We have extensive documentation. It involves high-level government officers, a lot of money and basic services. What else do they want? They’ve been completely unhelpful.’

She says the Armenian case is important, because it could point to potential problems in the way other World Bank projects are run, particularly in the former Soviet Union.

Tasker is a British engineer appointed by an Armenian parliamentary commission investigating the Yerevan scheme. He claims that as soon as he began to examine the details of the project, it became clear that it was riddled with corruption, ‘from start to finish, from top to bottom. The fact is it was not an isolated case of a few thousand dollars here or there, it was tens of millions of dollars.’

The original purpose of the project was to repair Yerevan’s pipelines, and improve the water supply to households, but he says that by the time the work got under way it had shifted to installing water meters instead.

Tasker claims contractors were able to pocket up to $10 profit on the sale of each meter by charging customers for installation. His commission was told that the average number of water meters per customer was 1.5.

[…]

Jeff Powell, of pressure group the Bretton Woods project, said it was still too often left to politicians to decide which allegations to pursue. ‘This case is indicative of the fact that senior management and the board of the World Bank have not taken seriously the issue of corruption,’ he said.

A World Bank spokesman said he would not comment on a specific case.

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I’ve just received the final edit of my albeit short article on possible recriminations against Bruce Tasker by the World Bank in Yerevan after the British national was part of a special parliamentary commission which uncovered alleged corruption and mismanagement in the international banking organization’s operations in Armenia.

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Following on from reports by British national Bruce Tasker that the World Bank is guilty of turning a blind eye to allegations of fraud and corruption in its Municipal Development Project in Armenia, the Government Accountability Project (GAP) has made specific mention of these concerns and the failure of the organization’s own internal watchdog to investigate the matter.

The Government Accountability Project is a leading nonprofit public interest group that promotes government and corporate accountability, and might be best known to some for the role it played in the removal of Paul Wolfowitz as President of the World Bank.

In early 2007, GAP was responsible for exposing fraud and abuse at the highest levels of the World Bank. In May 2007, World Bank President Paul Wolfowitz left the international organization in the wake of wide-ranging scandals based on multiple releases of documents over the previous two months by GAP.

GAP released evidence or exposed information showing that: Wolfowitz’s companion, Shaha Riza, received salary raises far in excess of those allowable under Bank rules; Riza received a questionable consulting position with a U.S. defense contractor in 2003 at Wolfowitz’ direction that has resulted in State and Defense Department inquiries; Juan José Daboub, Bank Managing Director and Wolfowitz-hire, attempted to remove references and funding for “family planning” in Bank projects; Wolfowitz’ office was responsible for weakening a “climate change” strategy document; Bank Senior Management delayed reporting to Bank staff that a fellow staffer had been seriously wounded in a shooting in Iraq; World Bank lending to Africa during Fiscal Year of 2007 has plummeted; and Wolfowitz was trying to broaden the Bank’s portfolio in Iraq over Board opposition.

Anyway, GAP today released its annual report into the World Bank’s Department of Institutional Integrity (INT) and specifically raises concerns with the international organization’s operations in Armenia and in particular its failure to investigate well documented cases of alleged corruption, fraud and embezzlement.

On February 27th 2004 a consultant to the Parliament of Armenia reported to the World Bank country manager in Armenia that the Municipal Development Project, which would privatize the water system in Yerevan, had been corrupted. […]

[…]

The fraud appeared to be ongoing at the end of 2006, and the consultant contends that he has been the subject of damaging reprisals because of his involvement in the study. Consequently, the case was resubmitted to INT by GAP in March 2007. The British Government has had details of the problems since the time of the study in 2004, and INT is aware that the UK’s Serious Fraud Squad is monitoring the proceedings. Despite repeated phone calls and a letter requesting information, neither GAP nor the consultant have been able to ascertain the current status of prospective calendar of the investigation in the five months that have elapsed.

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Because of the recent Pan-Armenian Games I’ve not had time to post anything on the continuing battle by British national Bruce Tasker to have an investigation team sent from Washington to look into specific allegations of widespread corruption in World Bank projects in Armenia. However, now that the games are over, I’m back on it. To summarize the story so far in Tasker’s own words, this is what he writes on his blog.

In 2004, the Commission reported the fraud, corruption and embezzlement to the World Bank Armenia Country Manager and to the Department of Institutional Integrity, but by the end of 2006, rather than the problems being resolved, the individual who managed the study found that he had become the subject of World Bank ‘Whistleblower’ reprisals.

The whistleblower then found that the Bank’s own Department of Institutional Integrity often prefers to punish whistleblowers rather than to solve the problems within the Bank, and despite ever-increasing commitments by the major international institutions to clamp down on corruption, it is virtually impossible to find an organisation to support a claim against the Bank.

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The Government Accountability Project (GAP), a U.S. based organization which aims “to protect the public interest by promoting government and corporate accountability through advancing occupational free speech and ethical conduct, defending whistleblowers, and empowering citizen activists” has just featured news of Bruce Tasker’s allegations against the World Bank in Yerevan on its front page.

Bruce Tasker, a specialist on the commission established by the Parliament of Armenia to study the country’s foreign assistance, has documented widespread corruption and the embezzlement of public funds associated with the World Bank’s Municipal Development Program and the Government’s Integrated Finance Rehabilitation Plan, supported by the Bank and monitored by the IMF. Among other things, Tasker has reported the diversion of tens of millions of dollars from the Yerevan water company by the International Operator, who managed the World Bank-financed project. Although the Armenian Parliament and the World Bank received Tasker’s allegations in 2004, together with compelling evidence, three years later, neither the government nor the Bank have adequately addressed the problem.

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By now most readers should know where Bruce Tasker’s blog, Blowing the World Bank Whistle, and there’s probably now no need to link to it so frequently. However, his latest post did catch my eye because to this day I am still confused as to why consumers were expected to pay for water meters to be installed rather than the company who stood to gain the most from their introduction.

The Municipal Development Project was designed and approved for the Yerevan water company to resolve a number of problems, including reducing the enormous amount of water it loses every day - the main reason why the company keeps increasing the water tariff. According to the World Bank, the Yerevan water company loses four times more water than its subscribers actually use.

Thousands of meters of new pipes were brought into the Republic to replace the worst parts of the water distribution pipeline. But the International Operator could not demonstrate to the Parliamentary Commission that those pipes had been used for the intended purpose. He did however provide a ledger of works orders showing that the pipes had been used for emergency repair jobs. But the Commission’s Lawyer deemed all of those works orders to be fraudulent. So where those pipes went remained an interesting question, the answer to which is no longer a closely guarded secret.

On the other hand, the International Operator could show that he had installed 415,500 water meters for domestic subscribers.

[…]

But the Municipal Development Project water meters were not installed by the project, they were Sold to Yerevan’s domestic water consumers, who also Paid for the Installation.

The revenue generated by the sale and installation of 415,500 water meters amounted to more than Twelve Million Dollars – a nice gift for A. Utilities from Yerevan’s water users.

This Blog repeats a request to the Department of Institutional Integrity to please stand by your promise to send a team of investigators to Yerevan and demonstrate your readiness to respond to claims of Fraud and Corruption in Bank Financed Operations, by carrying out a full investigation into this matter.

The full post is here.

Bruce Tasker has just posted the latest entry on his blog blowing the whistle on World Bank activities in Armenia. In the latest installment, he details how the Yerevan Water & Sewerage Company ran up operating expenses of $55 million. Not bad if you’re looking for an opportunity to siphon off money, I suppose — a “nice little earner,” as we say in England.

Throughout the period of the Municipal Development Project, when the International Operator, A. Utilities managed the Yerevan Water & Sewerage Company, the Company paid virtually none of its major electricity expense. So in January 2002, the Company had an electricity debt of about $18 Million – and Rising. The Government issued a Decree allowing the Company to ‘Write Off’ that debt, on the understanding that the amount should be used for Increasing the State Shares in the Charter Capital of the Company.

[…]

[…] in the year 2003, under the management of the International Operator A. Utilities, the Yerevan Water & Sewerage Company received benefits of:

Eighteen Million Dollars – Electricity Debt Written Off

Twelve Million Dollars – Government Loan Written Off

Eighteen and a Half Million Dollars – Government Grant

In the year 2003 the Company received benefits of Nearly Fifty Million Dollars

But in the same year, the Company recorded Revenues of about Six Million Dollars

And in that year, the Company recorded Expenses of Fifty-Five Million Dollars.

By the way, the Company recorded that in 2003, the Government grant of about 18.5 million Dollars was used to the increase the Charter Capital. The Charter Capital was not increased in 2003.

These are some of the reasons why Yerevan’s residents are being asked to pay more and more for their water. It is also why I am asking the World Bank’s Department of Institutional Integrity to send a team of investigators to Yerevan to study this matter.

The full post is here.

Now that Bruce Tasker’s allegations of corruption in World Bank activities in Armenia have come to the fore thanks to the blogosphere, especially given the fact that no media outlet here dared touch the story before we did, the whistle blower now raises questions about Deputy Speaker of Parliament Vahan Hovannisian’s role in the affair. Incidentally, the cost of the corruption alleged by Tasker appears to be very high indeed.

Throughout 2004, Armenia’s Deputy Speaker of Parliament, Mr. Vahan Hovhanissian, was the Head of a Parliamentary Commission, which spent the year studying the World Bank financed Municipal Development Project and the Government’s Integrated Finance Rehabilitation Plan, which was under the ‘Surveillance’ of the International Monetary Fund.

[…]

The study into the Municipal Development Project exposed wide-ranging fraud, corruption and embezzlement, to a value of considerably More Than the 35 Million Dollar cost of the project.

The study into the Government’s Integrated Finance Rehabilitation Plan exposed embezzlement scams valued at many tens of millions of dollars.

Mr. Hovhanissian Promised to Report the full and final findings of his Commission studies to the People of Armenia and his Whistleblower agreed to report the facts to the World Bank Armenia Country Manager and to the International Monetary Fund’s Resident Representative in Armenia.

[…]

But Mr. Hovhanissian turned his back on his Dashnaktutsiun Principles, preferring to strike allegiances with Armenia’s Political Powerhouses. Mr. Hovhanissian never told the facts to the Armenian People, so today the vast majority of Armenians continue to struggle with their every-day lives, whilst he and his new found friends and relatives wallow in their ill-gotten gains.

By January 2007, two years had passed since Vahan Hovhanissian reneged on his promise to the Armenian people. So this whistleblower applied to the Government Accountability Project in Washington, and gained their support for an application to the World Bank’s watchdog organization, the Department of Institutional Integrity; to request that they open an investigation into why the Bank had allowed such high levels of corruption to flourish in its projects - apparently unrestrained.

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