Development & Aid, Economy & Trade, Headlines, North America

FINANCE: Only Bravest Whistleblowers Pucker Up at Development Banks

Jim Lobe

WASHINGTON, Jul 8 2004 (IPS) - Insiders at the World Bank and other multilateral development banks (MDBs) who want to blow the whistle on corruption or other forms of mismanagement are insufficiently protected against retaliation, says a major study released Thursday by a group that specialises in protecting whistleblowers.

While the World Bank is rated as the most protective of four MDBs studied by the 27-year-old Government Accountability Project (GAP), it still has a long way to go in devising procedures that will encourage potential whistleblowers to offer information without worrying about losing their jobs or other retaliatory measures.

Of the three other banks – the Inter-American Development Bank (IDB), the Asian Development Bank (ADB) and the European Bank for Reconstruction and Development (EBRD) – the report, ‘Challenging the Culture of Secrecy’, rated the EBRD the worst in according protections to whistleblowers.

”Our study demonstrates that none of the banks has reliably safe channels for whistleblowers to make a difference against corruption”, said GAP Legal Director Tom Devine. ”The bottom line for now is that GAP cannot responsibly recommend that whistleblowers work with the bank policies (for raising their complaints)”.

But he also stressed that all of the banks appeared committed to providing whistleblower protections in the interests of maintaining transparency and improving their operations.

”We are engaged with the banks to make constructive improvements for an effective programme”, said Devine, who noted that the report was compiled with help from other groups, including the Washington-based Bank Information Centre (BIC) and Institute for Policy Studies, CEE BankWatch in Prague, and the OneWorld Trust in London, as well as a number of academics and former MDB officials.

Whistleblower protection, along with other efforts to promote transparency and discourage corruption, has become a major concern in recent years, not just with regard to developing countries but in wealthy nations as well. The U.S. Congress has enacted a number of whistleblower protection laws to encourage federal employees aware of fraud or other mismanagement to report it without having to worry about retaliation or harassment.

In 2002, it passed the Sarbanes-Oxley Act that extended whistleblower protections to employees of any publicly traded corporation who reported fraud or other violations of regulations of the Security and Exchange Commission (SEC).

Whistleblower protection provisions have also become standard in international anti-corruption conventions and treaties, such as those recently adopted by the United Nations, the Organisation of American States (OAS), and the Council of Europe.

In January, Congress passed a new law that requires the U.S. Treasury – which represents Washington on the governing boards of the MDBs – to use its influence there to establish new anti-corruption and transparency guidelines, including complaint systems consistent with U.S. and international law, by June 2005. GAP has been working with Treasury on developing benchmarks for progress.

The issue has emerged as a significant concern of Congress. At the first of a series of scheduled hearings on anti-corruption efforts by the MDBs in May, the chairman of the Senate Foreign Relations Committee, Richard Lugar, charged that the World Bank itself had lost to corruption about 100 billion dollars – a figure the bank strongly rejected – that had been slated for development since 1946, or nearly 20 percent of its total lending portfolio.

”While MDBs profess ‘zero tolerance’ for corruption in the projects and programmes”, testified BIC Executive Director Manish Bapna to the committee, ”this rhetorical commitment has not always been meaningfully implemented”.

One way to fight corruption, however, is to encourage staff to denounce it, and that can only be done if they are confident they will not suffer retaliation by their superiors or any other harm as a result of coming forward, according to GAP, which has accumulated more experience in working with whistleblowers than any other U.S. organisation.

To assess the effectiveness of whistleblower protections, GAP developed a checklist of 24 variables that, in turn, can be divided into five different categories. Based on its written policies, actual procedures and other information obtained by GAP, each bank was then assessed a score for each variable and category, with 100 as a perfect score.

With an optimal score of 40 points, the ”scope of coverage” category was the most important. To get all 40 points, a bank must extend protection to any relevant witness, such as bank staff, or other interested party, such as proposed beneficiaries of bank projects, against harassment or retaliation. In this category, the World Bank performed best with 27 points, followed by the IDB (26), the ADB (23) and the EBRD (16).

A second category awarded up to 12 points for procedures that ensured whistleblowers were given full rights of appeal to an independent body that was free from possible conflicts of interest and operating under basic due process. In this category, the World Bank again scored highest but with only four points, while the EBRD again brought up the rear with only one point.

As to the standards of proof the whistleblower had to meet to win a case of harassment or retaliation, the World Bank was awarded six out of a possible eight points, followed by the EBRD (5), the ADB (4) and the IDB (3).

In the fourth category – relief for whistleblowers who win their claims of retaliation – the EBRD scored the highest with 13 out of 20 possible points, followed by the World Bank (11) and both the IDB and ADB (8).

Finally, on whether the institutional channels for whistleblowers had actually proven effective at fighting corruption or other abuses of power, the World Bank and ADB received eight of a possible 16 points. The IDB and EBRD received six points.

Altogether, the World Bank scored highest with 60 points out of 100, followed by the ADB with 50, the IDB with 49 and the EBRD with 45.

All of the banks lost points as a result of two policies they all have in common: enforcing bans on communications by staff with external parties concerning information that may be deemed ”detrimental” to the banks themselves. And, while all four have established mechanisms to hear complaints by the supposed beneficiaries of their projects, none provides protection against retaliation by their own governments, for example.

All of the banks also lost points for failing to provide truly independent forums for hearing claims by whistleblowers.

The report, which devotes about 40 pages of analysis to each bank, noted the institutions are embracing whistleblower protection as an effective management tool but still falling short of what is required. ”Ultimately, the banks’ current policies may well have the effect of suppressing efforts to bring wrongdoing to light”, said Greg Watchman, GAP’s executive director.

”Unless these policies are significantly strengthened, witnesses to corruption will remain silent.”

A spokesman for the World Bank told IPS that while it was pleased with the report and intended to continue working with GAP, some of the study’s information was ”not current” and ”the bank has made substantial progress on a number of issues since GAP began preparing the report”.