R. Zachary Torres-Fowler
On June 12, 2019, the World Bank announced that China-based Dongfang Electronics Co. Ltd. (“Dongfang”) would be debarred for fifteen (15) months for fraudulently bidding on a $60 million electrical expansion project in Liberia. The debarment renders Dongfang, a state-owned enterprise specializing in manufacturing and installing electrical equipment in connection with energy and infrastructure projects, ineligible to participate in any projects financed by the World Bank. Dongfang’s debarment by the World Bank highlights the compliance risks contractors and subcontractors face when pursuing contracts associated with foreign projects financed by institutions such as the World Bank.According to the settlement, Dongfang engaged in bidding for the Liberia Accelerated Electricity Expansion Project, intended to increase stability throughout Liberia’s electricity sector and connect approximately 46,000 additional households and businesses to Liberia’s electrical grid. Dongfang allegedly falsified two letters during the process, claiming that an equipment manufacturer had authorized Dongfang to supply and install certain electrical equipment.
While the settlement agreement with the World Bank provides for a reduced debarment period as a result of Dongfang’ s cooperation and remedial actions, the company must meet several conditions before the debarment is lifted. Most notably, Dongfang must develop a compliance program consistent with the World Bank Group Integrity Compliance Guidelines, including enhanced monitoring of all financial reporting, annual anti-corruption certification for all employees, and an internal whistleblower hotline.
Dongfang is by no means unique, however, and joins hundreds of engineering and construction firms currently debarred by the World Bank for one of the Bank’s five sanctionable practices – fraud, corruption, collusion, coercion or obstruction – while participating in a Bank Group-funded project.
In the world of public and private projects compliance may get pushed to the wayside in an effort to secure lucrative opportunities. In the United States, many familiar with federal government contracting are well aware of the risks associated with running afoul of statutes such as the False Claims Act. For entities involved in international projects, multiple governments impose added layers of compliance complexities through various anti-corruption laws and sanctions regimes. While recent commentary in the international construction projects sector has focused significant attention on the compliance risks posed by laws like the U.S. Foreign Corrupt Practices Act, Dongfang is a reminder that international financing institutions can give rise to yet another layer of added complexity of which those operating on international projects must be aware.