Government Accountability Project
National Office
202.408.0034 • www.whistleblower.org
March 29, 2007
Suzanne Folsom, Director
Department of Institutional Integrity (INT)
The World Bank
Re: The case of Mr. Bruce Tasker
Dear Ms. Folsom:
We are legal counsel for Mr. Bruce Tasker, a systems engineer and business development consultant, and 12-year resident of
Mr. Tasker has retained our services for the purposes of clarifying disclosures of misconduct he made concerning private and public sector officials implementing a World Bank funded project as part of his report to the Parliament of Armenia. His investigation on behalf of the CGHA Commission revealed widespread corruption associated with this project and these officials. He maintains that as a result of his disclosures, World Bank officials have “blacklisted” him from participating in future World Bank-funded projects.
The Government Accountability Project (GAP) is a nonprofit public interest group that promotes accountability by advancing occupational free speech and defending employees and citizens who expose wrongdoing in their governments or in the organizations for which they work. Mr. Tasker’s disclosures about corruption in the World Bank-funded Municipal Development Project (MDP) in Yerevan, Armenia, and the resulting reaction of the World Bank’s Department of Institutional Integrity (INT) are deeply disturbing, especially in light of the fact that the corruption outlined by Mr. Tasker is potentially ongoing. Despite Mr. Tasker’s well-documented disclosure, no effective action has been taken by the Bank to safeguard the project and its funds. On the contrary, steps have been taken to suppress Mr. Tasker’s report, silence him, and harm his reputation and career in the development community.
Chronology of Events
The Parliament of Armenia established the CGHA Commission in September, 2003, and the Speaker of Parliament appointed Mr. Tasker Senior Specialist and Analyst. In November, CGHA Commission members determined that the examination of specific loans and projects fell within their scope of work and in January 2004 they included the MDP as one of operations to be studied. Specifically, the MDP was included in the Commission’s review as the result of a communication received on November 10th, 2003. In a letter, Betartshin, a local construction company, alleged improper exclusion from a bidding process held under the auspices of MDP.
The MDP included six components: an immediate investment program, a private sector management contract, an operating investment fund, capital investments, housing and technical assistance. The total project cost was US$ 35.5 million. The World Bank, through its low-interest loan window for poor countries, the International Development Association (IDA), provided US$30 million of this sum, and the Government of Armenia contributed US$ 5.5 million.
The World Bank provided the funds through a credit agreement with the Government of Armenia, represented by the Ministry of Finance (Borrower) (now the Ministry of Finance & Economy) and a sub-credit agreement between the Borrower and the Yerevan Water & Sewerage Company (YWSC) (Beneficiary) (at the time of project implementation the Yerevan Water & Sewerage Enterprise [YWSE]) facilitated transfer of funds to the Beneficiary. The Credit Agreement required a Security Agreement between the Borrower and the Beneficiary, under which the Beneficiary would pledge all its assets as security against the loan.
During the month of January, 2004, Mr. Tasker held a series of meetings with project officials representing the Yerevan Water and Sewerage Company (YWSC), including Mr. Richard Walkling, the Authorized Representative of ACEA & Company Armenian Utility S.C.A.R.L. (A. utilities), the International Operator (ARIO); Mr. Andronik Oganessyan, presented as the Executive Director of YWSC at the time; and Mr. Varazdat Avoyan, Director of the MDP Project Management Unit (MDPMU). In a meeting on January 9th with Mr. Walkling, Mr. Tasker requested information about the Betartshin complaint and other contracts affected by the MDP. Little information was forthcoming.
Through multiple inquiries and meetings, and a study of documents, Mr. Tasker and the CGHA Commission established that the PMU of the MDP had not been properly registered with the Government of Armenia at the time of signing the project sub-credit agreement. Further, the Commission found that although the MDP credit with the World Bank stipulated that the PMU must be registered and staffed prior to World Bank disbursal of funds, the disbursal occurred without a legally registered PMU.
It later became apparent that the Authorized Representative of the International Operator (ARIO) had been appointed as the General Director of the YWSC. In effect, Mr. Tasker found that, although the International Operator was party to a Performance Based Management Contract with the YWSC to manage in-country works under the Municipal Development Project, their Authorised Representative was implementing the project as General Director of the Yerevan Water and Sewerage Company.
Mr. Tasker, in his report, showed that the Government of Armenia, through its Ministry of Finance, had in fact obtained a credit from the World Bank through the signing of falsified document, signed by the Director of a non-existent PMU and endorsed with a counterfeit stamp. Moreover, Mr. Tasker and the CGHA Commission demonstrated to Mr. Roger Robinson, the World Bank Country Manager (WBCM) through a presentation at a meeting at the National Assembly on February 27th, 2004 that: a) the Municipal Development Project sub-credit agreement included a counterfeit stamp of a non-existent Project Management Unit; that b) Mr. Walkling, the ARIO, had been appointed as the General Director of the YWSC, creating a conflict of interest; and that c) the security agreement between the Borrower (the Ministry of Finance) and the Beneficiary YWSC had not been established.
Although Mr. Walkling’s conflict of interest was not illegal, it nonetheless contravened the requirements of the management contract between the Operator and the YWSC and created a convergence of authority through which he, as the ARIO, became a central figure in wide-ranging project related corruption, including a campaign to embezzle public funds.
In the absence of an effective and independent management unit Operator, the MDP had been implemented in the interests of its various authorities, rather than in compliance with its original objectives for the benefit of the population of
However, through agreement between the Operator, the YWSC, and the fraudulent MDPMU, and with authorization from the Armenia State Water Committee, the objectives of the project had been changed. The project was now funding the installation of water monitoring and domestic water metering systems. This change afforded contractors opportunities to generate profits by appropriating nearly US$ 10 on the sale of each meter. In nearly all cases, customers were obliged to pay for the meters, pay for and arrange installation and fund the additional cost of fixtures and fittings.
In 2002 an intensive domestic water meter program required subscribers to have water meters installed, and by 2004, the Yerevan Water & Sewerage Company had registered 289,000 water customers. The YWSC General Director confirmed that the average number of water meters per customer is 1.5, which extrapolates to 433,500 domestic water meters installed, with a total sales value of more than $6,500,000. Nowhere in the 2003 YWSC Financial Statements provided to the Commission were profits or cash flow income forecast resulting from the sale of water meters mentioned.
This shift in operations was not simply a fraud perpetrated to benefit specific individuals, but it damaged the overall plan to repair the water system of
In reviewing the shift in project objectives, the CGHA Commission and Mr. Tasker also found that the shift from pipeline replacement and renovation to meter installation did not comply with the original objectives and targets in the Management Contract. As a result, the Operator could not meet performance targets and stood to lose an Incentive Compensation. In order to avoid the loss, an amendment to the contract was signed, dramatically lowering the performance standard the Operator had to meet to qualify for the bonus.
At about the same time, the CGHA Commission found that another activity, also completed under the Municipal Development Project, used sub-standard materials. Under review it became evident that a local company, under local procurement terms, installed used pipes in the construction of a 4,000 cubic meter water reservoir in
To address this issue, Mr. Walkling presented a ledger of more than 100 contracts and work orders to the CGHA Commission, providing details of what had been done with the pipes that were bought for the Municipal Development Project. The Head of Commission invited the Parliament’s lawyer to give his opinion on the documents submitted, and the lawyer confirmed that they were all falsified and/or counterfeit. The ledger has been filed in the archives of the National Assembly, together with other original documents gathered for the study.
On June 16th, 2004, the CGHA Commission began a study of YWSC finances and found questionable circumstances surrounding the transfer of an energy debt from YSWC to Haigasart and other aspects of the Government of Armenia’s Integrated Finance Rehabilitation Plan (IFRP). The IFRP was formulated in collaboration with the World Bank and the International Monetary Fund (IMF). On the same day, Mr. Tasker wrote a letter to the accounting office of KPMG, with responsibility for auditing the financial statements of the MDP, requesting information about irregularities in the statement filed 2002. The letter requested a meeting with Mr. A. Kuchukyan, Managing Director at KPMG, but Mr. Kuchukyan neither responded to the letter nor attended the requested meeting.
The Commission obtained procurement plans, works orders and consultancy schedules from the YWSC, which detailed the works which should have been carried out under the MDP, materials purchased and the use of consultants, which were contracted to supplement those included in the Operators staff rosters. A site trip to the Garni pumping station revealed that, although the Garni-Yerevan water supply system transfer had apparently been modified from a pumped to a gravity system, involving very costly materials, project engineering by contracted consultants and construction works; the works had not been carried out and the pumps continued to operate.
Additional irregularities were subsequently found, including manipulation of the stated value of the company’s assets and personnel rosters that included employees who did not exist.
In summary, through his work on the CGHA Commission, Mr. Tasker found that:
- The PMU Director falsely represented the registration of the PMU;
- A conflict of interests had been created in the person of Mr. Richard Walkling;
- Project objectives had been improperly altered;
- Project targets had been improperly altered;
- Project works had been accounted for and not implemented;
- Deficient material had been used in the construction of a reservoir;
- Water meters had been purchased with project funds yet the revenues went unrecorded;
- “Ghost” consultants had been extensively used;
- Company accounts had been manipulated in annually audited financial statements, resulting in the embezzlement of public funds – through
- The transfer of an electricity debt to a public utility under the IFRP;
- Incorrectly stated and revalued company assets;
- Incorrectly stated and inflated increase of company charter capital.
Chronology of Disclosure to the World Bank
It is important to note, that throughout these interactions with the ARIO, the YWSC and KPMG, the CGHA Commission and Mr. Tasker maintained an ongoing communication with Mr. Roger Robinson, the WBCM in
The Department of Institutional Integrity directs Bank staff and the public to report fraud and corruption in Bank operations. INT defines this as “…[S]uspected contract irregularities and violations of the Bank's procurement guidelines; bid manipulation; bid collusion; coercive practices; fraudulent bids; fraud in contract performance; fraud in an audit inquiry; product substitution; price manipulation; substandard or inferior parts or materials; cost or labor mischarges; kickbacks, bribery or acceptance of gratuities; abuse of authority; misuse of Bank Group funds or funds entrusted to the Bank Group…”[1]
Mr. Tasker’s disclosures cover virtually all of these categories of wrongdoing, but in a meeting held February 13th, 2004, Mr. Robinson had not been cooperative. He advised Mr. Tasker that the MDP 6-month reviews prepared for the World Bank would not be provided by the Country Office to the Commission, which would have to apply to the PMU for them. At that point, Mr. Tasker informed him that the PMU was itself fraudulent, and it was only then that he agreed to cooperate with the Commission. Mr. Robinson then agreed to provide the project documents requested for by the Commission, but informed Mr. Tasker that neither he nor the Commission should communicate directly with Bank headquarters in
As cited above, Mr. Tasker documents that, on February13, 2004, he met with Mr. Robinson to discuss the initial findings of the CGHA Commission. He explained that the MDPMU, designed to oversee the Development Credit Agreement, was not registered as a legal entity. Because the PMU should represent the Bank in the loan agreement with the Ministry of Finance (now Finance & Economy) and the water utility (YWSE – now YWSC), the finding was especially significant.[2]
Additionally, Mr. Tasker found a serious conflict of interests in the position of Mr. Richard Walkling and drew Mr. Robinson’s attention to this circumstance. Mr. Tasker’s report of the meeting documents this disclosure (Annex 1). In effect, Mr. Robinson was frequently informed via meetings, letters, and reports of Mr. Tasker’s findings.
It was at a meeting on the 24th of February, that Mr. Tasker and the CGHA Commission supplied the WBCM with a summary of the irregularities in the MDP (Annex 2).
On April 1st, Mr. Robinson notified Mr. Hovhanessyan, the Head of the CGHA Commission, that the appropriate technical and legal authorities at the World Bank had been informed of the problems with the MDP (Annex 3). Mr. Tasker, however, is not aware that the CGHA Commission has ever been contacted by these Bank teams
Approximately two months later, Mr. Hovhanessyan wrote to Mr. Robinson explaining that the CGHA Commission was broadening the scope of its review of the MDP as a consequence of what appeared to be a widening range of corrupt activities associated with the Project. Mr. Hovhanessyan wrote, “We have found what we believe to be several serious irregularities related to funds received by YWSC from the Government and the transfer of funds between the YWSC and other state organizations” (Annex 4). This letter to Mr. Robinson was especially important as it emphasized to the responsible World Bank official that “[T]he improprieties could be part of a long established and ongoing process…”
In May and June, 2004, Mr. Tasker and the CGHA Commission attempted to work with the WBCM and officials from KPMG to clarify the financial statements provided by YWSC for the years 1996 to 2002. These statements showed substantial discrepancies in the amounts paid by YWSC for electricity and for water meters. The review, however, raised more questions than it answered, and Mr. Tasker set out these issues in a letter to KPMG dated June 23rd. From KPMG, no further information was forthcoming and on July 27th, Mr. Tasker contacted the World Bank hot line for reporting fraud and corruption, established as part of the Bank’s Department of Institutional Integrity (INT).
According to the Bank’s website:
The World Bank's Department of Institutional Integrity is mandated by the World Bank Group to investigate allegations of fraud and corruption in Bank Group operations as well as allegations of staff misconduct. The Integrity Department
reports its findings to senior management, who in turn decide what measures should be taken. In addition, the Integrity Department assists in preventative efforts to protect Bank Group funds, and those funds entrusted to it, from misuse and to deter fraud and corruption in its operations. The work of an investigative unit aids the World Bank in ensuring that funds are used for their intended purposes, thereby contributing to the organization's core mission of promoting development and reducing poverty.
On July 30th, 2004, Mr. Tasker received a reply to the concerns he had raised. In this communication, Mr. Yannick Stephant, the INT officer responsible for matters relating to Eastern Europe and
Despite the improbability of obtaining documentation from any of these sources, Mr. Tasker nonetheless contacted them. When no further documentation was forthcoming, Mr. Tasker simply summarized the concerns the Commission had identified with respect to the awaited YWSC financial statement for 2003 and forwarded them to Mr. Walkling in a letter dated August 6th. The letter was copied to Mr. Robinson (Annex 6). There was no reply, and the CGHA Commission filed its Final Report in the National Assembly Archives.
The website for INT states that:
INT is responsible for ensuring a fair, prompt and thorough review of the facts and circumstances regarding reports of misconduct, and also for ensuring that the whistleblower is informed of the outcome of the Bank Group’s review or investigation into the matter, including whether misconduct has been substantiated and whether disciplinary measures, sanctions, or other remedial measures have been taken.
Mr. Tasker’s repeated attempts to address and correct fraud in the MDP in
Chronology of Retaliation
The Final Report of the CGHA Commission study into the Municipal Development Project, submitted by Mr. Tasker to Mr Hovhanessyan in September 2004, was never presented to the National Assembly of Armenia, even though the term of the Commission was extended from October to December 2004, especially to facilitate completion of the study. We contend that the report was suppressed. Further, Mr. Tasker’s efforts to correct corrupt practices detailed in the report have resulted in professional difficulties for him in
The World Bank maintains that its policies protect those who expose fraud and corruption in Bank operations from retaliation: “[T]the Bank expressly prohibits retaliation by a Bank staff member against any person, who, in good faith, reports suspected misconduct and will, as a consequence, take appropriate disciplinary action under Staff Rule 8.01.”
Mr. Tasker has not enjoyed such protection. He worked as a Foreign Public Official for a Parliamentary Commission, in response to a request from the Deputy Speaker of Parliament, who was Head of Commission. On the understanding that the Head of Commission wanted to take a stance against corruption, which has been escalating in
Wide-ranging corruption very soon became apparent and was reported to the various parties involved. The Commission included 9 members of parliament, including two from the majority Republican Party, one of whom, Mr. Melikyan, was the Deputy Head of Commission. These parliamentarians, when faced with the documents indicating corruption, pressured the Head of Commission to terminate the study. The Head of Commission is a senior member of a minority faction of the Government coalition, and was obliged to succumb to their demands.
By the time this occurred, Mr. Tasker was involved in what had become a very unpleasant process. During the course of this process, the reluctance of the WBCM to correct obvious shortcomings in project implementation despite continuous expressions of support was clear. Moreover, it is apparent now that Mr. Tasker has been “blacklisted” by the World Bank.
On December 8th, 2006, the Deputy Minister of Finance and Economy confirmed to Ms. Yelizaveta Sahakian, one of Mr. Tasker’s associates, that Mr. Tasker had been blacklisted by the Bank. This warning followed a World-Bank financed workshop where Mr. Tasker was to have presented a water project. Ms. Sahakian was told that no World Bank funded project involving Mr. Tasker would be considered for approval.
According to INT, “Retaliation by a manager or other staff member against any person who reports suspected misconduct, or cooperates or provides information during an ensuing review or investigation, shall subject the manager or other staff member to disciplinary action under Staff Rule 8.01.”
Mr. Tasker must therefore be extended the requisite protections under Staff Rule 8.01. This rule ensures he will not suffer retaliation when bidding on future projects as a consequence of bringing to light claims of corruption.
He is pursuing this action and claim because of the reprisal directed at him by the World Bank. During the years 2005 and 2006, the retaliation has virtually eliminated Mr. Tasker’s possibilities for the development of a project to which he and his associates have already committed considerable funds.
Recommended Remedies
Prior to working on the Commission, Mr. Tasker had experienced excellent relations with many Government Ministers and other senior officials. He also had good working relations with the Country Manager and numerous specialists at the World Bank, all of whom knew of his interest in a major project to re-establish the Armenian sugar industry.[3] In 2000, in response to a request by the Minister of Trade and Industry, and with support letters from a number of other Ministers, as well as from the Armenian President, Mr. Tasker managed a study of the issues related to the re-establishment of the Armenian sugar industry. Subsequently he attracted a USTDA grant to partially finance a feasibility study.
Ethanol development is becoming a high priority for the Government of Armenia,[4] as supported by the World Bank, and Mr. Tasker’s team of specialists is well-placed to bid on agro-based renewable fuel and biogas-related Bank projects and contracts. The group is well known for expertise in the effort to re-establish the Armenian sugar industry, and is ideally qualified for any project developed to promote ethanol production, based on the cultivation of sugar beets. Mr. Tasker’s group has submitted a comprehensive proposal to a World Bank financed fund, under the auspices of the office of the Prime Minister, which has been favorably received. The international team involved in the sugar project since 2002 includes international leaders in the latest ethanol and biogas technologies and their participation can be enormously beneficial to the Armenian economy in these spheres of activity.
- To rectify the harm caused Mr. Tasker as a result of World Bank inaction with respect to his disclosures of corruption, he respectfully demands that an external monitor be named for the tender on the pending project, financed by the World Bank, to develop an alternative fuel industry in Armenia to ensure that Mr. Tasker and his associates’ bid is reviewed fairlyand alleviate concerns regarding blacklisting.
In addition, through 2005 and 2006, Mr. Tasker developed a critically important water project, based on information he gained through the study into the Municipal Development Project. A Pilot Project was approved and has been implemented by the Spitak Development Association, a local fund for which Mr. Tasker is Project Director. The General Director of the Yerevan Water & Sewerage Company, successor to Mr. Walkling, has sent the excellent results of the pilot project to the Head of the Armenian State Water Committee, who wrote to his Minister and recommended full project implementation.
Through the year 2006 Mr Tasker sent a number of letters and messages to the World Bank in
Mr. Walkling continues today to work as a consultant for Veolia, the Operator of the current World Bank water project for
- We are therefore requesting an immediate and independent investigation of the activities of Mr. Walkling, an investigation that INT should have carried out two years ago. We also request prompt information about the status and the findings of the investigation, in compliance with the policies set out for INT in this regard.
- In particular, we object to Mr. Walkling’s management of the booster pump project developed and piloted by Mr. Tasker. We are therefore also requesting Mr. Tasker be recognized, in his capacity of Project Director of the Spitak Development Association, as author of the Booster Pump Project. We contend that he has the right to manage project implementation, including the right to apply for grant funding, as was agreed with the Armenian State Water Committee.[5]
Finally, Mr. Tasker and his family have suffered considerable financial and psychological distress as a result of the pressures to which he was subject as a member of the CGHA Commission and the subsequent exclusion from consideration as a contractor by the Bank, the Government and foreign donors.
- We are therefore requesting compensation for Mr. Tasker for the harm suffered over the course of the period between when he left the CGHA Commission in December 2004, to the date that this claim is resolved and compensation is paid in full.
We appreciate your prompt response to this matter and look forward to hearing from you within the next ten business days.
Sincerely,
Karen Gray
General Counsel
[1] Department of Institutional Integrity, “Reporting Fraud and Corruption,” www.worldbank.org.
[2] A study into the status of the PMU revealed that it was originally registered after the signing of the Subsidiary Loan Agreement and that the PMU stamp used on that agreement was counterfeit. The MDPMU has since been re-registered and is now registered as a State Organization, a non-legal entity, under the auspices of the State Water Committee.
[3] The Armenian sugar industry was destroyed by the Spitak earthquake of 1988.
[4] A renewable fuel substitute.
[5] “In every way, we commit to support Spitak Development Association efforts to attract donor funding for the project and we will make every effort to attract the appropriate level of co-funding.” - A.S.Andreasyan, Head of State Water Committee, in letter to the Spitak Development Association – 2nd June 2005
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