Global Fund halts contracts over bribes for mosquito bednets in Cambodia

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A family rest under a bednet treated with insecticide in Prey Mong kol village in Pailin province, Cambodia. Photograph: Paula Bronstein/Getty Images

The Global Fund to Fight Aids, Tuberculosis and Malaria has suspended contracts with two international firms that supplied mosquito bednets over "serious financial wrongdoing" in Cambodia.

Contracts with Vestergaard Frandsen and Sumitomo Chemical Singapore were suspended on Thursday pending a full review after a two-and-a-half-year investigation.

A report published by the Global Fund's office of the inspector general found that between 2006 and 2011, the suppliers paid commisions to two Cambodian officials from the National Centre for Parasitology, Entomology and Malaria Control (CNM), totalling $410,000 (£304,534), in return for awarding contracts for insecticide-treated bednets, which help prevent the spread of malaria.

The report also cited "improper charges and manipulation of procurement practices" at two other organisations, which brought the total amount involved to about $431,000.

The Global Fund's sanctions panel, which includes internal and independent experts to evaluate cases of wrongdoing, recommended that the two suppliers named in the report be suspended pending a full review of the case. The investigation found that all the mosquito nets procured by the grant had been provided.

"We cannot tolerate unethical conduct anywhere," said Mark Dybul, the Global Fund's executive director. "Although this case had no direct impact on Cambodia's fight against malaria, taking commissions in exchange for contracts violates our mission of public service. We remain fully committed to pursuing fraud and taking action when we find it."

The fund, which is due to hold a replenishment event in December, said Vestergaard and Sumitomo had "both fully co-operated with the investigation", and had taken action against the employees involved, as well as steps to prevent similar incidents in future.

At the time of publication, neither company was available to comment.

The Global Fund has disbursed $331m to support HIV, TB and malaria programmes in Cambodia since 2003. Since then, Cambodia has seen an 80% drop in malaria deaths, a 45% fall in TB cases and a 50% decline in HIV infections.

Over the past few years, the fund has sharpened its procedures to investigate allegations of corruption and fraud among recipient countries. Serious allegations of financial mismanagement prompted Germany to suspend its donations to the fund at the beginning of 2011, sparking concerns that other donors may follow suit.

In a statement published on Thursday, the fund said that over the past two years, it had taken "multiple actions to protect its investments by significantly strengthening deterrence and minimising the risk of abuse".

"A new framework for procurement was established, with a comprehensive approach to ensure all bulk purchasing is consistently undertaken in a fair, transparent, lawful and ethical manner," it added.

The organisation has also faced a gaping hole in funding, which led to the cancellation of its 2011 to 2013 round of grant-making.

In December, the fund will hold its fourth replenishment round, where it hopes that donors will pledge the $15bn (£9.3bn) it needs between 2014 and 2016. In September, the UK promised £1bn over three years on condition that other donors step up. The US has promised $1.65bn in its 2014 budget; Sweden, Norway, Finland, Denmark and Iceland have already pledged $750m.

Over the past year, the fund has held several meetings with donors to highlight its value for money. The organisation was set up in 2002 as a public-private partnership to focus on tackling three of the world's major diseases.

Liz Ford
theguardian.com, Friday 15 November 2013 15.24 GMT

source: http://www.theguardian.com/global-development/2013/nov/15/global-fund-suspends-contracts-bribes-mosquito-nets

[Sheryl]

That report came out a year ago or so and as a result the MoH Malaria Center (which had issued the dodgy contracts) was removed as "prime recipient" and all funds now flow through UNDP.

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OIG investigation in Cambodia prompts suspension of two top LLIN suppliers over $410,712 in kickbacks

Lauren Gelfand

18 Nov 2013

Two suppliers responsible for nearly 50% of all long-lasting insecticide-treated nets (LLINs) purchased by the Global Fund on behalf of malaria projects worldwide have been suspended following an investigation in Cambodia into widespread fraud and kickbacks paid to government officials.

The report on the investigation, the first report released under new Inspector General Martin O’Malley, was the result of a two years of investigative work by his predecessors. The report recommended that Vestergaard Frandsen and Sumitomo Chemical Singapore be sanctioned. Acting on a recommendation of the Sanctions Panel, the Global Fund Secretariat took the decision to suspend both companies from further tendering pending review.

The two suppliers were found to have paid kickbacks worth $410,712 to two Cambodian officials working at the National Centre for Parasitology, Entomology and Malaria Control (CNM): at the time, the principal recipient of malaria grants worth $11.8 million from 2006-2011. Cambodia has received some $431 million in grants since 2003 for its fight against AIDS, TB and malaria.

In emails responding to GFO’s requests for comments, both companies said they had reviewed operations in the region and taken action. Sumitomo’s spokesperson said “Sumitomo Chemical Singapore takes a serious stand against employee misconduct of any kind and has taken appropriate remedial measures.”

Vestergaard's spokeswoman Meryl Rader said: "Vestergaard has reviewed the report of the investigation... into certain business transactions that occurred out of Vestergaard Frandsen India from 2007 - 2011.

“The matter under investigation by the Global Fund related to improper activities by two employees in Vestergaard Frandsen India. This was not known or approved by our management in Switzerland. Nonetheless, Vestergaard is ultimately responsible for the company and actions in any of its subsidiaries. We have implemented corrective actions that include improved controls and procedures in all our operations. We’re committed to operating under the highest ethical and business practices. Vestergaard will cooperate fully with the Global Fund on this matter as we have done to date."

Additionally, among two sub-recipients of Fund grants, two staff positions at an entity called MEDiCAM were improperly charged to the Fund in 2009 and a procurement officer manipulated procurements at the National Centre for HIV/AIDS, Dermatology and STD Control (NCHADS), according to the 216-page report released by the OIG. Those manipulations were worth an additional $20,000.

Cambodia contracts for nets for the two suppliers were themselves valued at $10.7 million for Sumitomo and $7.1 million for Vestergaard over the five-year period. Overall, around 50% of all nets supplied through Global Fund-funded projects in 2012 and 2013 were the purview of the two multinationals; in 2011, that figure was 80%.

Out of a total $17.8 million in contracts under the CNM, the OIG only found evidence of wrongdoing amongst contracts worth $11.8 million. Also the investigation found that all nets procured through the grants were provided as intended through the programmes.

In what Global Fund Executive Director Mark Dybul called the Fund’s full commitment to “pursuing fraud and taking action when we find it,” the CNM has also been replaced as the PR. Fidcuiary and procurement agents have been appointed to work with NCHADS, and it is anticipated that under the new funding model (NFM) that fiduciary controls for higher-risk sub-recipients will be strengthened.

Since September 2013, where Cambodia had previously been responsible for its own procurement through a direct procurement mechanism, UNICEF, has, following a Fund request, begun procuring all health products paid for by Global Fund grants.

The challenges in Cambodia reflect a need within the Fund to strengthen its procurement process to avoid the potential for abuse of an open tendering system. Prior to 2013, within procurement for LLINs alone, there were more than 220 specifications reflecting country- or supplier-specific requirements that carried with them the allure and possibility of improper procurement and graft.

As it begins to implement its NFM, the Fund will be moving to a new framework for procurement of health commodities, which could eventually cover all countries receiving Global Fund money. In 2012, sourcing and procurement together were valued at $2 billion of the $3 billion in disbursements by the Fund.

Already 83% of products in 55 high-risk countries are being supplied under a pooled procurement process (see GFO commentary) organised by the Secretariat and distributed based on needs identified at the country level.

LLINs are among the primary commodities to be covered by this new framework; as reported in GFO on 6 November, seven manufacturers have signed contracts for the largest-ever bulk purchase of LLINs, generating a projected savings of $140 million over two years and making possible the purchase of 190 million nets by the end of 2014.

A plan to recover the misused funds is already under way. Aidspan understands that recoveries are being sought from the responsible recipient entities. Any sanctions against the companies will be recommended by the Sanctions Panel, which operates separately from the recoveries process. There is no firm timetable for the recoveries, however.

The high-profile investigation was initiated in 2011 and it comes at a critical moment for the Global Fund as it heads into its Fourth replenishment conference in December, at which it is seeking $15 billion for the 2014-2016 cycle.

source

http://www.aidspan.org/gfo_article/oig-investigation-cambodia-prompts-suspension-two-top-llin-suppliers-over-410712-kickbac