BS : Volcker says World Bank lax on graft : Sept 14, 2007
Volcker says World Bank lax on graft
By Krishna Guha and Eoin Callan in Washington
Published: September 13 2007 05:00 | Last updated: September 13 2007 05:00
Paul Volcker, former Federal Reserve chairman, on Wednesday blamed World
Bank staff and directors for failing to take corruption sufficiently
seriously and said this had been the root cause of strife over its internal
anti-corruption watchdog.
Mr Volcker’s comments come ahead of Thursday’s release of a report that
concluded the Bank’s anticorruption unit should be stripped of
responsibilities for minor staff misconduct and placed under new oversight.
Mr Volcker’s comments will be seen by supporters of Paul Wolfowitz as a
vindication of the former bank president who was forced from office in an
ethics scandal, but present tricky challenges for his successor, Robert
Zoellick.
In an interview with the FT on Wednesday, Mr Volcker said his inquiry had
“reconfirmed” there was “ambivalence in the bank as to whether they really
want an effective anti-corruption programme or not”. “The board itself has
been ambivalent.”
He indicated this uncertainty extended to ministers and representatives of
its leading donors. He saw “some parallels” with his prior investigation
into the United Nations’ handling of the oil-for-food programme.
While every bank official who talked to his committee claimed they took
corruption seriously, he doubted this was always the case.
There were “legitimate complaints on both sides” about the anti-corruption
unit. But he attributed the tension largely to those at the bank not
sincerely committed to its anti-corruption efforts, saying this was the
“underlying fundamental” problem.
While he had heard numerous complaints about the unit, headed by
Mr Wolfowitz’s ally Suzanne Folsom, he had not come across any evidence of
“systematic” misconduct on its part or investigated the claims. Mr Zoellick
said on Wednesday he planned to “keep Suzanne on”.
Mr Volcker’s analysis of the bank’s problems drew criticism from current and
former bank officials, who feared it would undermine support for the
multilateral institution on Capitol Hill. They said he had not consulted
widely enough but thought the recommendations of the panel appeared largely
balanced.
The report will say “severe strains” between the unit and other departments
led to “counterproductive relations between the bank and borrowers and
funding partners”. It will recommend the unit be stripped of key
responsibilities and placed under new external oversight. The bank “should
reassign” responsibility for probing minor staff misconduct to another
department, share information better and set up a consulting arm to liaise
with bank units.
Ms Folsom’s “current role as counsellor to the president should be dropped
in the interest of clarifying the [unit’s] purpose and independence”.
Mr Zoellick said the report contained “a good set of recommendations for us
to follow up”. But he emphasised that he was conducting a parallel review
and would invite comments over the next 45 days before acting.
Mr Volcker cited as evidence of ambivalence over corruption a fight over Mr
Wolfowitz’s proposed anti-corruption strategy at the bank’s annual meeting
in Singapore last year.
Most European and developing country representatives give a different
account, saying Mr Wolfowitz’s proposal was badly thought through and gave
the bank’s president too much discretion.
Publication : BS; Section : Financial Times; Pg : 8; Date :14/9/07
URL : http://www.ft.com/cms/s/0/ea70e9e6-616c-11dc-bf25-0000779fd2ac.html