Notes From Hairenik
August 9, 2007
There has finally been an allegation printed in online media outlets about overly bureaucratic international organizations working in some capacity in Armenia being involved in corruption. The first break in the news of the scandal appeared on Onnik’s blog over a week ago. And Hetq Online is apparently the only the online news source that published an article in Armenian about the issue this week—it may appear in English soon.

The scandal involves the World Bank unsurprisingly as I have been suspecting that the organization’s representatives in Armenia have been involved in corrupt practices. The whistleblower, Bruce Tasker, a British citizen, was appointed in 2004 by Deputy Speaker of the National Assembly Vahan Hovannisian to examine how efficiently tens of millions of dollars in funds issued by the World Bank were being spent since 1991 in Armenia. He began his investigation with the waterworks overhaul project. On his blog he writes:
In 2004 an Armenian Parliamentary Commission study into the World Bank funded Municipal Development Project found that the Authorized Representative of the project’s International Operator, was involved in a wide range Fraud, Corruption and Embezzlement, totalling tens of millions of dollars. The ‘Individual’ who managed the study for the Commission, reported the problems to the World Bank Armenia Country Manager and to the Bank’s Department of Institutional Integrity. But the problems continued – and escalated.

The Authorized Representative at the ‘Center of Corruption’ in the Municipal Development Project continued to provide consultancy services to the Yerevan water company, later to Veolia, a newly appointed World Bank Operator, and in January 2007 he was called upon to manage a new water project, financed by the World Bank.

The ‘Individual’ who had managed the study however found that he had become the subject of reprisals and that his wellbeing was at risk, because of responding to the World Bank call to report Fraud and Corruption, and his problems continued.

The ‘Individual’ who had taken the risk in 2004, and who had become the subject of Serious Pressures by Reporting Tens of Millions of Dollars worth of Fraud and Corruption to the World Bank, found that it was necessary to remind the Bank’s Department of Institutional Integrity that neither the World Bank’s problems nor his problems had been resolved.
He goes on to explain the meat of the issue:
When the Parliamentary Commission Study of the Municipal Development Project was eventually completed, it concluded that the Comprehensive Program of Fraud, Corruption and Embezzlement of Public funds was planned even before project implementation formally started.

The problems were reported to the World Bank Armenia Country Manager and the World Bank’s Watchdog organization in Washington, the Department of Institutional Integrity (INT), but:
  • The Authorized Representative of the International Operator (subsidiary of ACEA), who was at the center of the Fraud, Corruption and Embezzlement, continued to provide Consultancy services under World Bank funded Projects
  • The World Bank did little to resolve the problems, so they continued and escalated
  • The World Bank imposed ‘Whistleblower’ Reprisals against The Foreign Public Official, who managed the Study for the Parliamentary Commission [Bruce Tasker]
  • The Head of Commission did not report the full results of the study to the Armenian Public
The study started with a close look at administrative documents, and it was seen that the Municipal Development Project had been Fundamentally Re-Structured. The International Operator’s Authorized Representative had been Appointed General Director of the Yerevan Water & Sewerage Company, the Beneficiary of the World Bank Credit and the company to which the International Operator was Obligated under the Municipal Development Project Management Contract.

The study found Major Shortcomings and Irregularities in the Commercial and Technical Aspects of the Project, and the Head of Commission explained some of those in a Presentation to the National Assembly. But the full implications of the ‘Conflict-of-Interests’ were only later fully understood when the Yerevan Water & Sewerage Company finances were studied. Mr. Richard Walkling, the Authorized Representative of the International Operator, in his capacity as General Director of the Yerevan Water & Sewerage Company, had Manipulated Company Finances in an Attempt to Embezzle Tens of Millions of Dollars from the Armenian State Budget. Moreover, it became apparent that the Auditing firm KPMG, which had audited the Yerevan Water & Sewerage Company accounts for Five Consecutive Years, was Compliant in the Affair.

Throughout the four-month process, the problems were discussed in detail with the Commission Members, and with the World Bank Armenia Country Manager. The Head of Commission Instructed the Senior Specialist to Report the Observations in writing to Mr. Roger Robinson, the World Bank Country Manager and at the end of May, the Head of Commission followed up with a Strong Letter, expressing his concerns about the Serious Problems.

After that letter, the Head of Commission’s enthusiasm for the study inexplicably faded and without explanation he Attempted to Terminate the unfinished Municipal Development Project Study. He Pressured the Senior Specialist to Initiate an Alternative Study of the Government’s ‘Integrated Finance Rehabilitation Plan’, in an attempt to draw the Specialists attention away from the Municipal Development Project. But the new study continually led back to the Municipal Development Project study, and the inter-relationship between the two projects became increasingly apparent. It was soon clear that the financial manipulations seen through the Municipal Development Project study were only a small part of a much greater Program of Corruption, built around the Integrated Finance Rehabilitation Plan.

By the end of July, the Commission term was drawing to an end and Government officials were withholding vital documents from the Commission. So, at the end of August, the Senior Specialist submitted his findings in a Report to the Head of Commission. The report detailed numerous Technical and Commercial Irregularities, involving millions of dollars. But more importantly, it alluded to a plan by the International Operator’s Authorized Representative, in his dual capacity as General Director of the Yerevan Water & Sewerage Company, to Embezzle Public Funds totaling in value more than the $35 million cost of the Municipal Development Project.

But by August the study had attracted the attention of the Speaker of Parliament, and he extended the Commission term by three months to allow the study to be completed. When the outstanding documents were eventually released to the Commission, it became apparent that the World Bank had not only been Fully Aware of the Problems, but it had Undoubtedly been a Collaborator in what was already seen to be a Major and Wide-Ranging Agenda of Corruption.
So there you have it—finally a revelation that one these international organizations that are supposed to be widely regarded as international do-gooders, especially in impoverished countries throughout Africa, is in fact behind the scenes up to no good. I am sure that this gentleman is going to have a hard time personally and professionally for his bravery, as the World Bank has apparently “blacklisted” him. The citizens of Armenia should be very thankful to him for his efforts (although many of them don’t know what he did and probably don’t care anyway, but that’s between you and me).

Tasker’s first post was made on July 18. I am somewhat surprised that no one from the World Bank or the Armenian government has commented on these findings.

He also points out some interesting statistics about the overall water allocation situation in Yerevan.
The major problem, which the World Bank passes off as a simple statistic in a single phrase, is the massive and ever-increasing proportion of water that is fed into the Yerevan water system and continually lost. [...]

According to the World Bank Implementation Completion Report of 2006, 80% of the water fed into the Yerevan water system each day is LOST. The Yerevan Water Company pours 903,750 cubic meters in to the system every day, out of which consumers use 180,750 cubic meters and a Massive 723,000 cubic meters of water is LOST EVERY DAY.

Although the Yerevan Water Company is servicing a city of about ONE Million people, it is apparently delivering enough water for FIVE Million people!!
But where is all the water actually going? We can assume that it is leaking from the pipes along the way to Yerevan from Garni and other places, but no one can say for sure how much environmental damage that water loss may be causing unless someone actually looks into it. As far as I know, no one has.

I live in central Yerevan and my building receives running water from about 7:00 am to 11:00 pm, but sometimes the water is shut off an hour early or for several hours during the day. Water was supposed to have been provided 24 hours a day by now. Supposedly in areas of Arabkir that is the case, but I know for a fact that some residents of the “Raikom” neighborhood for instance only receive water for two hours in the morning and two in the evening. Perhaps when the chaotic mess along Gomidas Avenue finally comes to an end, as they are supposedly changing the water pipes up there, the water shortage problem will no longer exist. We’ll just have to wait and see.

Photo caption: A "new" water booster pump installed in a Yerevan apartment building.


Anonymous Onnik Krikorian said...
The World Bank have responded to my request for a response here.