World Bank, IT cos need to come clean

World Bank, IT cos need to come clean
Comment E-mail Print Share
First Published: Thu, Jan 15 2009. 12 30 AM IST

Updated: Thu, Jan 15 2009. 09 25 PM IST
New Delhi: Gaps have emerged in Monday’s explanations by Wipro Ltd and Megasoft Ltd after the World Bank disclosed earlier that day that it had banned the two firms—in addition to Satyam Computer Services Ltd, as it had previously announced in December—from doing business with it.
A news report earlier this week in The Wall Street Journal (WSJ), an investigation and story by FoxNews.com, as well as Mint’s own reporting have raised several questions that can only be answered by the World Bank and some of its former employees involved in the cases, executives at Wipro, Megasoft and Satyam, as well as executives at Tata Consultancy Services Ltd (TCS), which inherited Satyam’s business with the World Bank last year.
Also See Seven questions for the World Bank, Wipro, Satyam, TCS and Indian Investigators (PDF)
The World Bank’s ban on business with Wipro and Megasoft is for four years starting June 2007 and December 2007, respectively, and that on Satyam for eight years starting September. The bank’s statement on the ban came in a post-Satyam moment; last week, Satyam’s founder and former chairman B. Ramalinga Raju disclosed that he had falsified the company’s books over the years to the tune of at least Rs7,136 crore.
On Monday, Girish Paranjpe, Wipro’s co-chief executive, said the “improper benefits” the bank said had been provided to its staff by Wipro were not any form of illegal inducement and were in keeping with US securities laws.
“When Wipro listed its ADRs (American depository receipts) on NYSE in 2000, we allotted shares to several people, including (some employees) of prospective clients as advised by our managers to the issue...,” he added.
“If we knew about (the World Bank’s debarment policies), we wouldn’t have done it,” Suresh Senapaty, Wipro’s chief financial officer, told WSJ.
And Megasoft’s CEO G.V. Kumar told Mint on Monday that the ban had come about because the company had set up a joint venture in China with a former World Bank employee.
Paranjpe had on Monday declined to name the three World Bank employees to whom Wipro had issued shares.
However, the WSJ report named the bank’s former chief information officer Mohamed Muhsin, who left the bank in 2005, as one of these beneficiaries, citing World Bank staffers. WSJ said Satyam was also barred because of a similar stock offer to Muhsin.
Joshua Hochberg, Muhsin’s lawyer, told WSJ that his client was not involved in making decisions on information technology contracts awarded by the bank and that he had made to the institution all “financial disclosures” he had to make.
The World Bank hasn’t provided more details than available in its sketchy Monday statement.
The Fox News investigation shows that Muhsin was a beneficiary of stock awards by both Wipro and Satyam. Citing a World Bank investigation report that has never been publicized, it says Wipro gave shares to the World Bank officials “just weeks after it began bidding for World Bank technology contracts”.
The investigation also shows that Megasoft’s founder-chairman Ravindra Sannareddy launched Satyam’s software division in the US and that in 2004, Satyam’s co-founder and Raju’s brother-in-law “Srini Raju merged one of his private Indian companies into Megasoft, which soon began receiving World Bank business”. To be sure, Srini Raju had by then distanced himself from Satyam.
The investigation says that “the company was used as a vehicle to obtain World Bank contracts after bank officials had grown concerned that Satyam already had too many such deals—and some had voiced fears that the bank was becoming too dependent on the company”.
Srini Raju stepped down as executive director at Satyam in 2000 and now runs Peepul Capital Llc., which has $325 million (Rs1,580 crore) of funds under management. He also runs news channels in several languages under the TV9 brand.
On Wipro, Fox News adds that “(in 2002) Wipro became a supplier to the World Bank’s technology department in New Delhi, which was controlled by Muhsin...” and that “in 2005, the bank awarded Wipro a $650,000 contract to provide... Sarbanes-Oxley (SOX) Compliance implementation services.”
“Following the biggest intensive investigation of an insider in its 60-year history, the bank in October 2005 quietly escorted Muhsin out of his office....” the investigation found.
Mint couldn’t independently ascertain what SOX work the World Bank might have outsourced, because the compliance requirements associated with the SOX legislation apply only to companies.
Fox News also claims that in February 2008, World Bank president Robert Zoellick, “according to inside sources”, was told that some of the company’s software vendors had implanted spyware in the bank’s networks. Spyware is software that can allow its administrators to view and control data on other machines, users of which do not know their data has been compromised.
The Fox News investigation also says that the transition from Satyam to TCS and Electronic Data Systems took “seven months”.
Mint has independently reviewed a letter from the US advocacy organization Government Accountability Project’s national office in Washington DC, dated 19 November 2008 and addressed to Zoellick. The letter saying that the organization “has received reports and reviewed news stories indicating that the information security system at the World Bank has been repeatedly breached. News reports reveal that Satyam ..., a vendor implicated in the misconduct investigation of former World Bank vice-president and chief information officer Mohamed Muhsin is at fault”. The letter goes on to say that while “Satyam’s contract ended irregularly in September, apparently as a consequence of these actions, the damage had already been done”.
Mint had also, in late December and early January, contacted TCS and asked to be put in touch with its executives who managed the transition of the World Bank projects.
Given these revelations, it is time the World Bank, Wipro, Satyam’s new team, TCS and Indian investigators answer or seek answers to the questions raised by this story.
Mint, published by HT Media Ltd has an exclusive content partnership with WSJ, part of News Corp., which also owns Fox News.
feedback@livemint.com
Comment E-mail Print Share
First Published: Thu, Jan 15 2009. 12 30 AM IST