World Bank debars Alstom subsidiaries

By Helen Wright24 February 2012

The World Bank

The World Bank

Alstom subsidiaries Alstom Hydro France and Alstom Network Schweiz have been barred from working on World Bank-financed projects for three years and must repay US$ 9.5 million after acknowledging misconduct in a project in Zambia, Africa.

The World Bank's investigative arm, the Integrity Vice Presidency (INT), said the sanctions were part of a negotiated resolution between Alstom and the World Bank which could see the debarment reduced to 21 months if the company complies with all conditions.

The misconduct related to a World Bank-financed hydropower project. The INT said Alstom made an improper payment of € 110000 (US$ 147342) in 2002 to an entity controlled by a former senior Zambian government official for consultancy services.

World Bank integrity vice president Leonard McCarthy said the case demonstrated its commitment to ensuring development funds reached their intended beneficiaries.

"Alstom's settlement with the Bank is a wake-up call to global companies that are involved in development business that need to ensure their operations with the World Bank are clean. Alstom is a major player in the hydropower sector and their commitment under this agreement is a significant step in deterring the risks of fraud and corruption," Mr McCarthy added.

The Alstom case is the latest in a string of moves by the World Bank to impose penalties on companies that commit fraud or misrepresentations on projects that it finances.

In December last year, US contractor Kellogg, Brown & Root (KBR) was banned for two years for misrepresentation, while Social and Environmental Development Joint-Stock Company (SECO) and its managing director were debarred for five years over fraud allegations, and PT Amythas Experts & Associates faces a three year ban, also for fraudulent practices.

This action followed the World Bank's decision to impose three-year bans China first Metallurgical Construction Corporation (CFMCC) for fraud and Turkey's Oztas Insaat for collusion in October 2011.

The INT said that Alstom and its other affiliates would remain conditionally non-debarred during the three-year ban of Alstom Hydro France and Alstom Network Schweiz. However, the two sanctioned subsidiaries are liable for cross-debarment by other international development banks, such as the Asian Development Bank and Inter-American Development Bank, under the 2010 mutual debarment agreement.

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