Republic of Iraq

Emergency Private Sector Development Project

                         Redacted Report




                                     March 2018
                                Statement of Use and Limitations

This Report was prepared by the World Bank Group (the WBG) Integrity Vice Presidency (INT).
It provides the findings of an INT administrative inquiry (the Investigation) into allegations of
corrupt, fraudulent, collusive, and/or coercive practices, as defined by the WBG for purposes of
its own policies, rules and procedures (the WBG’s Framework regarding Anti-corruption), in
relation to the WBG-supported activities. The purpose of the Investigation was to allow the WBG
to determine if the WBG’s Framework regarding Anti-corruption has been violated.

This Report is being shared to ensure that its recipients are aware of the results of the INT
Investigation. However, in view of the specific and limited purpose of the Investigation underlying
this Report, this Report should not be used as the sole basis for initiating any administrative,
criminal, or civil proceedings. Moreover, this Report should not be cited or otherwise referred to
in the course of any investigation, in any investigation reports, or in any administrative, civil, or
criminal proceedings.

This Report is provided without prejudice to the privileges and immunities conferred on the
institutions comprising the WBG and their officers and employees by their respective constituent
documents and any other applicable sources of law. The WBG reserves the right to invoke its
privileges and immunities, including at any time during the course of an investigation or a
subsequent judicial, administrative or other proceeding pursued in connection with this matter.
The WBG’s privileges and immunities cannot be waived without the prior express written
authorization of the WBG.




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                                     Executive Summary

This report provides the findings of an administrative inquiry by the World Bank Group Integrity
Vice Presidency (INT) into allegations that three subsidiaries of a company – Company A,
Company B, and Company C (collectively, the Companies) – may have engaged in misconduct in
connection with the Emergency Private Sector Development Project (the Project) in Iraq.

A consortium between Company A and Company B was awarded a contract under the Project (the
Contract). Evidence indicates that Companies A and B failed to disclose its use of two agents,
retained through Company C, in connection with the Contract.

The World Bank imposed sanctions on the Companies.




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Background

The Emergency Private Sector Development Project (the Project) in Iraq was designed to provide
a number of priority building blocks necessary to help develop the Iraqi private and financial
sectors. The Project was financed by a multi-donor trust fund. It closed in 2012.

A consortium between Company A and Company B (the Consortium) – subsidiaries of the same
company (the Parent Company) – bid for a Project contract (the Contract), and subsequently signed
the Contract with the Project Implementation Unit (PIU).

At that time, Company C, another subsidiary of the Parent Company, was responsible for
contracting with agents on behalf of all Parent Company subsidiaries. Company A, Company B,
and Company C are collectively referred to as the Companies throughout this Report.

Allegations

The World Bank Group Integrity Vice Presidency (INT) received allegations that some of the
companies failed to disclose the use of agents in connection with the Contract when they were
required to do so.

Methodology

INT’s investigation consists of, among other steps, a review of Project documents, as well as
statements obtained from the Companies.

Findings

        Evidence indicates that the Companies failed to disclose their use of two agents in
        connection with the Contract.

The bidding documents for the Contract required that the Consortium disclose “commissions or
gratuities, if any, paid or to be paid by us to agents relating to this bid.” In response, the Consortium
stated “None,” which was then incorporated into the Contract.

However, evidence indicates that the Companies retained two agents in connection with the
Contract: Agent A and Agent B. Evidence indicates that the Companies paid 5% of the Contract
value to Agent A and 1% of the Contract value to Agent B in commissions.

The Companies told INT that they had failed to disclose its formal engagement of Agent A at the
time of the Contract signing, but asserted that they had not hired the two agents when they
submitted their bid for the Contract. However, evidence indicates that the Companies planned to
retain and had informally engaged both agents at the time of bid submission and in advance of
Contract signing.

Specifically, evidence indicates that both agents’ consultancy agreements with the Companies
provided that the agents were appointed as consultants to provide assistance and advice re



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obtaining the Contract. Evidence further indicates that Agent B’s first activity report included
“services provided during offer phase and prior to signature.” In addition, according to an
employee of the Companies (the Employee), Agent B was engaged informally at the time of the
offer submission and Agent B was involved in bid preparation.

In response to INT’s letter, the Companies asserted that at the time the Contract was signed, the
Company A and Company B Contract signatories were not aware that Company C had retained
agents, and that the failure to disclose the agents was the result of a disorganized company that
had since been reformed.

However, the Employee stated that Company A and Company B must have been aware of Agents
A and B because their costs (totaling 6% of the Contract value) were listed in the Companies’
accounting documentation. The Employee stated that they would have necessarily known
specifically about Agent B (who helped with bid preparation), but that s/he was not sure about
Agent A.

Follow Up Action by the World Bank

The World Bank has imposed sanctions on the Companies.




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