World Bank clamps fraud bar on LandT

Washington, March 8 (PTI): The World Bank has barred Larsen and Toubro (LandT) from doing any business with it or the projects funded by it for six months, after finding that a senior executive of the Indian conglomerate has indulged in fraud.

The debarment will continue till September 6, making LandT ineligible for contracts for any World Bank-funded projects and loans.

The sanction order, dated March 7, said LandT's ineligibility would continue across the entire World Bank group and has been imposed on LandT "for fraudulent practices" under the agency's Procurement Guidelines against Fraud and Corruption.

During the debarment period, LandT as well as any of the entities controlled directly or indirectly by it can't be nominated even as subcontractor, consultant, manufacturer, supplier or even service provider to an otherwise eligible firm being awarded a World Bank-financed project.

The debarment relates to a bid submitted by LandT through the regional business head of its medical equipment and systems unit for a Bank-financed project in Tamil Nadu.

In January 2005, the World Bank Group had entered into a development credit agreement with the Indian government to provide $ 110.83 million of International Development Association credit for the Tamil Nadu Health Systems Project.

It was set up to improve the effectiveness of the health system in the state by increasing access to critical health services for the poor, disadvantaged and tribal groups.

In July 2008, bidding documents were issued by Tamil Nadu Medical Service Corporation for a contract to supply 130 ultrasound scanners under the project, following which LandT submitted a bid on September 3, 2008, through the said regional business head.

Upon technical and financial evaluation, LandT's bid was found to be the lowest-priced, but a complaint was received later that some of the certificates submitted with the bid might have been forged.

The bid contained 115 performance certificates purportedly issued by medical facilities stating that the ultrasound scanners supplied by LandT were working well.

After the company was asked for an explanation, the regional business head said that some medical facilities may have mistakenly denied issuing the certificates and requested that LandT "not be viewed as (having) indulged in fraudulent practice".

In December 2008, LandT was informed that the tender has been cancelled and the contract was awarded to another firm through a new bidding process.

After looking into the matter, the World Bank's integrity vice-presidency (INT) alleged that LandT "engaged in fraudulent practices by submitting forged performance certificates with its bid".

In its 24-page order, the World Bank sanctions board said LandT was given an opportunity to present its case, wherein the company said it should not be held liable for the fraudulent act of the regional business head.

The company argued that the said employee had acted on his own and "without management's awareness, approval or instructions".

It also asserted that there was no precedent of adjudicated misconduct before the World Bank or any other bilateral or multilateral development bank or organisation, and it has no history of indictment or convictions for fraud or corruption, including by its employees and officers.

The bank, however, held that the company's "rogue employee" defence lacked merit.

"Nothing in the record suggests he acted out of any motive other than to serve the company; to the contrary, his interview statements support a finding that he submitted the bid with the forged certificates with the intention of carrying out his duties to the Respondent," the bank added.

"The submission of performance certificates is well within the course and scope of his employment and was carried out on behalf of Respondent (LandT)," the order said.

The Bank's sanction board concluded that the person was an individual with decision-making authority "who played a central role in the misconduct".