- The Washington Times - Thursday, September 13, 2007

The World Bank department that investigates fraud and corruption in the agency’s lending is hobbled by a “siege mentality” within its walls, according to a report being released today.

The report on the bank’s Department of Institutional Integrity was put together by an independent panel headed by former Federal Reserve Board Chairman Paul A. Volcker. The Washington Times obtained a copy from a senior World Bank official.

A bank spokesman declined to comment on the report yesterday.

The department, according to the report, has achieved some success since its creation six years ago and “is staffed by dedicated and competent personnel.”

Although the report cites the department’s use of “innovative strategies” in its investigations, it also points to “serious operational issues and severe strains in relations with some operations units” that have hurt the World Bank’s relations with other countries.

The report cites “resistance among important parts of the bank staff and some of its leadership” to the department’s work, adding that tensions increased when the department became more aggressive in response to former bank President Paul Wolfowitz’s emphasis on fighting corruption.

The report also said the department suffered from a perception “that it was under attack by bank operating units protective of their projects and lending portfolios.”

The report said the department’s “siege mentality” and reluctance to communicate has caused “growing mutual distrust” that has undermined progress toward an institutional response to the threat of corruption in bank operations.

The discord within the bank in dealing with investigations, the report said, has undermined relationships with important borrowers.

Part of the problem may be the continued concern that anti-corruption efforts can be seen as “anti-development,” the report said, citing a tendency to avoid confrontation with borrowing countries who are members of the World Bank Group.

“A lack of common purpose, distrust, and uncertainty has enveloped the anticorruption work of the bank,” the report said.

It said some World Bank units “have failed to recognize the importance of anticorruption and governance efforts in working with client nations.”

The report makes some specific recommendations, including giving the integrity department’s director the rank of vice president, moving responsibility for investigating minor staff misconduct out of the department, increasing diversity of the unit’s staff and subjecting the department to regular internal audits and other measures to evaluate its performance.

The bank said it would establish a working group to consider the recommendations and will post the report and its own proposals on its Web site.

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