Argentina

Essential Public Health Functions and Programs Project

                                Redacted Report




                                              March 2019
                                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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Background

In July 2007, the Republic of Argentina (“Argentina”) and the International Bank for
Reconstruction and Development (the “Bank”) entered into a Loan Agreement for the Essential
Public Health Functions and Programs Project (the “Project”). The Project closed in December
2012.

The Project aimed to: (i) increase the coverage of ten prioritized Public Health Programs;
(ii) reduce the population’s exposure to principal risk factors associated with collective illness; and
(iii) improve the stewardship role and appropriate regulatory environment of Argentina’s public
health system. The Project sought to support Argentina’s Federal Health Plan and the plan’s
objectives to reduce mortality and morbidity associated with collective illness.

In May 2007, the Project Implementation Unit (“PIU”) tendered three lots for the supply of goods.
Company Y was awarded Lots 1 and 2. In November 2007, the PIU and Company Y signed the
approximately US$ 1,000,000 contract (“Contract A”).

In March 2009, the PIU tendered five lots for the supply of goods. Company X was awarded Lots
1, 2, and 3. In September 2009, the PIU and Company X signed the approximately US$ 9,000,000
contract (“Contract B”).

Allegations & Methodology

While investigating allegations that Company X had engaged in misconduct under a different
Bank-financed contract, INT encountered evidence suggesting Company X and Company Y had
engaged in misconduct when bidding for Contract B and Contract A, respectively. INT
accordingly opened a separate investigation, which included conducting missions, interviewing
subjects and witnesses, and reviewing documents.

Findings

   1. Evidence indicates that Company X had an undisclosed agency relationship with two
      individuals.

Company X submitted a bid for Contract B signed by an individual (“Agent A”) acting on behalf
of Company X, pursuant to power of attorney. Companies bidding for Contract B were obligated
to disclose any payment that they had made or intended to make to agents and/or other
intermediaries during the bidding phase and/ or contract implementation. Evidence indicates that,
in its bid, Company X expressly denied any actual or anticipated payments to agents.

However, evidence indicates that, contrary to Company X’s representation, Company X had
retained and agreed to make payments to two agents in connection with Contract B.

Evidence indicates that about two weeks before the bid submission deadline, Company X entered
into an agency agreement with Agent A and another individual (“Agent B”). Evidence indicates
that, according to this agreement, Agents A and B would provide broad support and services to

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Company X both during the bidding process and, if successful, during contract implementation.
Evidence indicates that, in exchange, Company X would pay Agents A and B in advance a total
of approximately US$ 15,000, and then, if the bid was successful, a commission equal to a
percentage of the contract value, varying from 2.5 percent to 5 percent, depending on the goods
involved.

Evidence indicates that following bid submission, but prior to contract award, Agent A sent a letter
to Company X seeking to terminate the agency agreement for both him/herself and Agent B (the
“Resignation Letter”). Evidence also indicates that Agent A asked that Company X pay their
approximately US$ 15,000 advanced payment. Evidence indicates that Company X made this
payment.

Evidence also indicates that after Agent A purportedly resigned, s/he signed the contract between
Company X and the PIU on behalf of Company X. Further, during contract implementation, Agent
A signed at least five letters submitted to the PIU on behalf of Company X. The PIU also contacted
him/her directly as Company X’s representative on at least three occasions.

Additional evidence indicates that: (i) Agent A had been Company X’s agent for at least five years
prior to bid submission; (ii) s/he was Company X’s agent throughout Contract B bidding and
execution; and (iii) Agent B’s and his/her putative resignation from the agency relationship was
fictitious, and was undertaken to avoid tax liability on invoices issued under his/her name.
Evidence indicates that the contents of the Resignation Letter had been produced by Company X;
s/he only signed it.

Evidence indicates that Company X fulfilled its obligations under the agency agreements with
Agents A and B, paying all agreed commissions.

   2. Evidence indicates that Company Y failed to disclose agency relationships and
      payments made during contract bidding and execution.

Companies bidding for Contract A were obligated to disclose any payment that they had made or
intended to make to agents and/or other intermediaries during the bidding process and/ or contract
implementation. Evidence indicates that Company Y left blank the portion of its bid meant for
disclosure of such payments.

Evidence indicates that Company Y failed to disclose that it had employed Agents A and B
(Company X’s undisclosed agents, as discussed above) as agents during the bidding and execution
of Contract A. Evidence indicates that Company Y was a supplier of products manufactured by
Company X, that it was a representative of Company X in the region, and that it retained Agents
A and B due to its relationship with Company X.

Evidence indicates that Company Y submitted a bid for Contract A, signed by Agent B, pursuant
to a power of attorney. Agent A attended the bid opening and signed Contract A as Company Y’s
representative. During contract implementation, Agent A also signed at least 20 documents
representing Company Y before national authorities. Evidence indicates that Agents A and B were
paid for their services in relation to Contract B.

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Corrective Actions

The World Bank imposed the administrative sanction of debarment with conditional release on
Company X and Company Y. These ineligibilities extend to any entity Company X or Company
Y control directly or indirectly.




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