West Africa, Nutrition Project
Local project and international donor officials in a US$25 million nutrition project approved multiple sole source training contracts to local consulting firms in exchange for kickbacks of 12½% of the contract values. The bribes were paid in cash in local currency to middlemen who distributed the proceeds to the corrupt officials. One of the international donor officials involved in the scheme deposited millions of US dollars to a Swiss bank account in the maiden name of his spouse.
Most of the consulting firms were shell companies set up shortly before or during project implementation to receive bogus contracts and execute the kickback scheme. The consultant’s fees were grossly inflated, as were the number of contracts awarded. Much of the training, which was intended to improve the health of young children, was never delivered. Many reports of the non-existent training sessions were copied verbatim from previous reports.
The investigation disclosed that the same donor staff member took bribes on another project in the region in exchange for contract awards, and, in at least one instance, agreed to not cancel a consulting firm’s training contract after it failed to comply with its Terms of Reference. Among other failings, the firm presented its programs and materials in French and English, neither of which were understood by the trainees, rather than in Portuguese as required.
The scheme was detected when one of the kickback payers boasted to colleagues that he was winning multiple contracts in exchange for the payments, who in turn reported the case to investigators for the donor organization.
South Asia, Procurement Support Agencies
Several senior officials of two state-owned Procurement Support Agencies (PSAs), hired to manage the procurement process in large, internationally financed health sector projects, demanded kickbacks from bidders and consulting firms in exchange for: contract awards, favorable inspection reports and the prompt processing of invoices. The PSA officials reportedly shared the kickback payments with government officials.
In order to execute the scheme, the PSAs manipulated the bidding process to exclude other qualified bidders through a variety of means, including rigging the contract specifications and leaking inside information to favor certain firms.
The scheme was detected as the result of complaints to the donor agency from several excluded consulting firms and the inspection of the books and records of the winning firms.
Latin America, Microenterprise Road Maintenance Project
Project officials in a US$35 million road maintenance project extorted kickbacks and personal “loans” that were not repaid from twenty-six “microenterprises” hired by the project. Employees of the small firms, which were allocated US$2.5 million of the project funds to help clean the roads, also reported that project officials demanded kickbacks to process their contract payments and forced them to contribute to the purchase of an SUV for the personal use of the Project Director.
In order to fund the kickbacks, the corrupt officials over-priced the clean up contracts by 15% to 67%, and reduced the duration of certain contracts from twelve to eight months, without reducing the contract amounts. The bribes were disguised on the payer’s books as loans or dividends to enterprise members.
The scheme was discovered when the owners of the microenterprises complained to the donor agency.