October 3, 2006
The World Bank has announced that its Board of Executive Directors has approved a new Voluntary Disclosure Program intended to encourage entities to report fraudulent and corrupt practices involving projects financed or supported by the World Bank. Administered by the World Bank’s Department of Institutional Integrity, the Voluntary Disclosure Program allows entities that have engaged in fraud, bribery, corruption, and other wrongdoing in connection with World Bank-financed or supported projects to avoid sanctions if they self-report their wrongdoing and comply with non-negotiable, standardized terms and conditions. The benefits afforded to entities entering the Program are significant. Such participants
Avoid debarment from World Bank programs for disclosed misconduct;
Avoid having their identities disclosed to the public or to third parties such as government authorities in connection with self-reported information;
Avoid the payment of any monetary fines or other sanctions;
Avoid being placed on the World Bank’s public “black list” of entities found to have engaged in fraud or corruption; and
Maintain their eligibility to compete for World Bank-supported projects.
The new rules governing self-reporting under the Voluntary Disclosure Program mark a significant shift in World Bank policy, representing an emphasis on compliance and internal controls as opposed to punishment. In announcing the Program, World Bank President Paul Wolfowitz said that the Voluntary Disclosure Program is “[d]esigned to prevent and deter corruption in [World Bank] projects and contracts,” and “encourage companies to adopt business practices that will contribute to a more competitive and healthy private sector.” Prior to the implementation of the Program, the World Bank had publicly debarred more than 330 firms and individuals. Under the Voluntary Disclosure Program, entities should now undertake a new calculus in determining whether to voluntarily report wrongdoing uncovered in connection with World Bank-financed or supported projects. This analysis may often be implicated in transactions where companies have paid bribes internationally and face liability under the Foreign Corrupt Practices Act.
Any individual or entity, other than World Bank employees, that has received World Bank financing or support in connection with a project is eligible to enter the Voluntary Disclosure Program, except that the Program is not available to individuals or entities that are under active investigation by the World Bank. Entities that are under criminal investigation by a government authority may be eligible for the Program so long as the criminal investigation does not relate to an activity financed or supported by the World Bank. If a criminal investigation by a government authority relates to a World Bank-financed or supported activity, the Voluntary Disclosure Program may not be available in those cases where the World Bank is aware of the investigation. Under such circumstances, the Department of Institutional Integrity will open its own investigation into the case. The Voluntary Disclosure Program is not available to entities providing goods or services directly to the World Bank through its General Services Department.
Rules Governing The Program
To enter the Voluntary Disclosure Program, a participant must complete an Entry Request Form and Background Data Sheet and accept the Program Terms and Conditions. Upon entering the Program, a participant must agree not to commit any misconduct in any World Bank-financed or supported project and must disclose known misconduct that has already been committed. Next, the participant must conduct an internal investigation and submit a report detailing its findings. The Voluntary Disclosure Program may not alter the Bank’s obligation to comply with a validly issued subpoena by a government authority.
Within one year of submitting an investigative report, the World Bank will conduct an audit – at the expense of the entity – of up to 30% of the contracts discussed in the entity’s report. The participant must then implement a robust internal compliance program and hire an independent compliance monitor, who must be approved by the World Bank. The World Bank will conduct three annual reviews of the monitor’s reports – once again, at the expense of the entity – and suggest additional ethics measures, as it deems necessary. Participants should therefore expect to remain in the Voluntary Disclosure Program for 4 or 5 years, until the Program runs its full course.
At the conclusion of the compliance phase, the World Bank will prepare a report containing a summary of all the participant’s disclosures. This report will be shared with the Offices of the Bank President and General Counsel. A redacted version of the report – intended to preserve the anonymity of the participant – may be shared with World Bank member countries and other designated audiences such as anti-corruption non-governmental organizations.
Upon entering the Program, participants face a mandatory 10-year public debarment in accordance with applicable World Bank procedures should they: (1) fail to voluntarily, fully, and truthfully disclose all misconduct; (2) continue to engage in misconduct during the term of the Program; or (3) commit a material breach of the Program’s terms and conditions.
Although this Program has substantial hurdles for entities and many ongoing commitments, the total amnesty afforded to self-disclosing entities may be quite attractive to organizations that discover fraud or improper payments and are concerned about the ramifications of voluntary disclosure. The only equivalent amnesty program offered by the U.S. Department of Justice is the Antitrust Division program, which allows the first entity to report an antitrust violation to completely avoid prosecution. See http://www.usdoj.gov/atr/public/guidelines/0091.htm.
Gibson, Dunn & Crutcher’s Business Crimes and Investigations Group is available to assist with any questions you may have regarding these issues. For further information, please contact the Gibson Dunn attorney with whom you work or F. Joseph Warin (202-887-3609), firstname.lastname@example.org; or Andrew S. Boutros (202-887-3727), email@example.com in the firm’s Washington, D.C. office.
© 2006 Gibson, Dunn & Crutcher LLP
The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice.