Combating corruption was a signature issue for Paul Wolfowitz in his two stormy years as bank president. Last year he hailed the belated blacklisting of the firms on the Lesotho project as helping to ensure "that precious public resources go to help the poor, for whom they are intended."
But the corruption issue was also been a source of anger at the bank that contributed to Wolfowitz's forced resignation last month amid charges favoritism. Some bank officials fear, and others hope, that with his departure the issue would fade.
All indications are, however, that his successor, Robert Zoellick - who won the unanimous approval of the World Bank's board on Monday - would not let that happen...
"Corruption is a cancer that steals from the poor, eats away at governance and moral fiber and destroys trust," Zoellick said. "The challenge is how best to clean corruption out. That's what the World Bank must diagnose, determine and execute in concert with developing and developed countries."
Zoellick has vowed in private meetings to press an anti-corruption agenda but also avoid Wolfowitz's mistakes, like cutting off money and punishing poor people dependent on bank programs in countries that happen to be poorly governed, bank officials say.
Zoellick, a former top trade envoy and deputy secretary of state under President George W. Bush, said he realized that much of the controversy under Wolfowitz had occurred because corruption was sometimes identified by him as more important than fighting poverty.
In addition, the head of the department of institutional integrity, Suzanne Rich Folsom, a Wolfowitz appointee and a Republican, has drawn fire for her management style.
Under Folsom's leadership, the department has gotten a 50 percent increase in funding and an expanded mandate to investigate corruption cases. Folsom's defenders say that it was inevitable that she would be unpopular, while critics say she has trampled on employee rights and been selective in her inquiries.
"There are definitely tensions in the system," Zoellick said. "What I've found is a high degree of distrust over the real purpose of the anti-corruption campaign. Our challenge now is to find real guidelines that can restore everyone's trust and assure governments that the bank is not wasting money."
How much corruption exists is a matter of conjecture. A former top official, requesting anonymity because of the sensitivity of the subject, estimated that it might affect, at least in small ways, as many as 40 percent of bank projects. Others say the money lost to graft may not be more than a few percentage points of bank lending.
No one disputes that in its six decades of existence, the bank did not do much about corruption until a decade ago, when its then president, James Wolfensohn, declared that something must be done to combat it.
The department of institutional integrity was established only seven years ago. It has barred 148 individuals and 190 firms from doing business with the bank. In an institution that employs 10,000 workers, 74 employees have been cited for cases of fraud and corruption...
But however grounded in realities, the institutional integrity reviews have left a legacy of tension between the department of institutional integrity and the rest of the bank. Many officials at the bank say that some of their colleagues believe that minor graft is a small price to pay to speed vitally needed programs for the poor.
"Relations between the bank staff and the department have really soured in the last two years," said a former top official of the institutional integrity unit. "There is a lot of pushback from everyone at the bank, because of the us-against-them attitude created by Wolfowitz."
Christopher Burnham, a former United Nations under secretary general in charge of financial management, said that Zoellick must figure out how to enlist suspicious bank officials in his agenda. "International bodies operate by consensus," Burnham said. "He has to bring everybody along with him."
Zoellick has not signaled his intentions about Folsom's office, other than to say that he has learned of the distrust between her and others, according to bank officials. For example, the bank's staff association, which represents the bulk of its employees, has charged that her office has trampled on employees' rights and targeted some unfairly...
Folsom said that, on the contrary, the department had moved in the last two years to "a new level of processing cases" and establishing a series of reforms to expedite cases, including a program under which companies and individuals may voluntarily disclose cases of graft.
"This department has been unpopular since its creation seven years ago," she said. "This type of department is always going to be unpopular. There are going to be some people who just don't want to be bothered."
Is Zoellick a "Wolfowitz Lite"?
A few moons ago, I described how incoming World Bank President Robert Zoellick has pretty impressive "neocon" credentials. Now, it seems that Zoellick will retain Wolfowitz's strong rhetoric on anti-corruption. If you will recall, Wolfowitz brought two longtime cronies to the World Bank, Kevin Kellems (the "keeper of the comb") and Suzanne Rich Folsom who heads the "Department of Institutional Integrity" [nice title, eh?] Kellems resigned before his boss's early departure, but Folsom is still there, presumably to the chagrin of World Bank veterans. One of the things World Bank watchers will be awaiting is what sort of role Folsom will have under Zoellick. As the International Herald Tribune notes, she's not terribly well-liked. Zoellick needs to rebuild a semblance of trust with World Bank staffers that was put under stress by Wolfowitz. How he deals with Folsom will be interesting to watch: