World bankruptcy, we fear

World bankruptcy, we fear

When the World Bank staff staged a coup against then president Paul Wolfowitz earlier this year, we argued that one motivation was his work fighting corruption. Now the staff is showing how right we were by attempting another backroom putsch, this time against Suzanne Rich Folsom, the head of the bank’s anticorruption unit (INT, or department of institutional integrity).

Folsom—an American brought to the bank by former president (and Bill Clinton’s appointee) James Wolfensohn—has made herself unpopular by relentlessly exposing corruption in bank projects. Among the more eye-popping revelations have been tens of millions of dollars lost to corruption in a “reproductive and child health" project in India; unbuilt or ramshackle “development" projects in Cambodia; and whistleblowers killed in connection to a $630 million roads project in the Philippines. No less disturbing have been the bank bureaucracy’s amply documented attempts to gloss over these INT revelations with the usual promises about “good governance" and “action plans".

For this thankless work, Folsom ought to be a bank hero. But on Monday she was hauled before bank managing director Ngozi Okonjo-Iweala to respond to charges made in an anonymous email addressed by “concerned INT staff members" to bank president Robert Zoellick.

The letter alleges various forms of “gross mismanagement" by Folsom, foremost of which seems to be that she handed out unflattering performance reviews to some of her staff. The letter also accuses Folsom of “exerting political pressure on (Paul) Volcker", who earlier this year led an independent panel to review INT’s work.

That last accusation is almost hilarious, given its implicit suggestion that the former chairman of the US Federal Reserve lacks personal integrity or could be easily arm-twisted by Folsom. All the more so since Volcker publicly awarded Folsom “high marks" for her conduct at INT. At the same time, Volcker’s report pointed to “resistance among important parts of the bank’s staff and some of its leadership to the work of INT".

When the Volcker report was released in September, it managed to shield Folsom from an invidious, unofficial report on INT by the government accountability project (GAP), a left-wing group that had been in cahoots with the bank’s bureaucracy to bring down Wolfowitz. As we reported at the time, there is strong evidence that the GAP was being fed confidential bank documents by managing director Graeme Wheeler (a charge Wheeler denies). An investigation was supposed to have been launched into that leak, and we wonder what became of it.

By contrast, Folsom is being rung up less than 48 hours after the anonymous email was sent (including, against bank rules, to the head of the bank’s staff association). Not so coincidentally, the attack on her is happening just prior to the scheduled release of what we hear is a major INT report on corruption in India, a portfolio over which Wheeler previously presided. And all this has happened while Zoellick is out of town, somewhere between Bali and Berlin.

By this point, nothing surprises us about a World Bank staff that is out of control and fears accountability above all. But we assume Zoellick has enough fortitude to block this attempt to railroad Folsom based on an anonymous email from bureaucrats with things to hide and axes to grind.