One of the options open to the World Bank’s Integrity Vice Presidency (INT) when investigating sanctionable practices of fraud and corruption is the issuance of a ‘show-cause’ letter to the suspected company. The ‘show-cause’ letter may be the first the company knows of the interest of INT, the World Bank’s policeman, in the company’s dealings within a World Bank funded project and may come as something of a bolt from the blue.
The consequences of the ‘show cause’ letter can be profound and need handling with real care to avoid any inadvertent prejudice being caused. High on the list of responses to be avoided is to ignore the letter altogether since silence or non response is treated by INT as acceptance of the allegation and the described facts contained in the letter which may be misleading or wrong.
A ‘show cause’ letter is most likely to arise in cases where INT believes that it already has sufficient evidence in hand without the need to conduct further investigation of the company’s books and records. This may very well arise where evidence has been given up by a third party such as a joint venture partner, competitor or a national prosecution authority. The letter will ordinarily describe the evidence in INTs possession and make out the alleged sanctionable practice(s) committed but not serve the copies of the actual evidence relied upon. The letter will have a time limit for response and generally indicates a willingness of INT to enter into the option of a negotiated settlement. Any response to the letter should set out fully where it is disputed and articulate why it is in error. However, whenever it is appropriate a prompt admission to the ‘show-cause’ letter would undoubtedly be treated as mitigation and reduce the length of debarment or otherwise limit the penalty facing the company.
A recent review of the World Bank’s Sanctions Board Decisions and Notices of Uncontested Sanctions Proceedings issued by the Bank’s Evaluations Officer has revealed a consistent reliance on ‘show-cause’ letters by INT over the past three years. Neil Macaulay of Bretton Woods Law believes the use of show cause letters is likely to be even more widespread than just those referred to in these reports since the recently released Report of the World Bank Office of Suspension and Debarment reveals that 39 out of 224 debarments were the result of negotiated settlement agreements with INT which by their very nature are more likely to be cases which the evidence of wrongdoing is strongest and most amenable to the ‘show cause’ route.
In those cases where INT believes it is ‘highly likely to be successful’ it may also request Early Temporary Suspension and continue its investigation for up to one year before referring the investigation to the Office of Suspension and Debarment otherwise the suspension will subside. If you have received a show cause letter or notice of Early Temporary Suspension and would like advice on the steps you need to take please contact Neil Macaulay for urgent assistance.