The World Bank said on Friday it had uncovered "serious incidents" of fraud and corruption in a review of five health projects in India and Bank President Robert Zoellick pledged he and the government would get to the bottom of it.
Evidence was uncovered in a just-released Detailed Implementation Review launched by the World Bank in 2006, with the support of the government, that looked at the five health projects that covered lending for HIV/AIDS, malaria and tuberculosis.
"The probe has revealed unacceptable indicators of fraud and corruption," Zoellick said in a statement. "The government of India and the World Bank are committed to getting to the bottom of how these problems occurred," he added.
Meanwhile, India's finance ministry said it would pursue criminal charges against anyone found guilty of wrongdoing.
"Necessary action under the relevant laws, rules and regulations would be taken against those suspected of wrongdoing and, if found guilty, they will be visited with exemplary punishment" the ministry said.
Problems in World Bank-financed health projects in India first arose in 2005 but boiled to the surface in late 2006 when former World Bank chief Paul Wolfowitz froze lending to the sector until India had taken steps to fix its procurement methods, sparking tensions with the government and donor country Britain.
The Bank last year also barred two Indian pharmaceutical firms, Nestor Pharmaceuticals Ltd. and Pure Pharma Ltd., from doing business with the bank for "collusive practices" related to a Bank-financed health project.
There was no indications that Zoellick is considering halting lending to the sector, but the World Bank chief said he had directed the bank's anti-corruption unit, the Department of Institutional Integrity, to "pursue evidence for legal action."
He said the Bank would sanction companies and act against any Bank employees if evidence of fraud or corruption was uncovered.
The review was prompted by a Bank investigation in 2005 into a Reproductive and Child Health project, which found corrupt practices by the two pharmaceutical firms.
"I appreciate the resolute commitment of the government which will be in the lead in pursuing criminal wrongdoing," Zoellick said. "On the Bank side, there were weaknesses in project design, supervision and evaluation. There are also systemic flaws. I am determined to fix these problems," he added.
Zoellick said the government of India and the Bank would tighten oversight of the Bank's nine health projects in India. New projects would be put through comprehensive audits and performance reviews by independent agents, he added.
The Bank will also examine its supervision methods, Zoellick added.