Chinese Firms’ Alleged Contract Fraud and World Bank’s Blacklist

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Xi Jinping
President of China, Xi Jinping

With reputation for dominance in the continent’s manufacturing, construction and mining resource sectors by way of fraud, deceptive tactics, illicit trade, extortion, Greek gifts, and corruption proclivities, China infiltrate Nigeria and African businesses, perpetuating all colourations of exploitation and neo-colonialism. Again, over six Chinese firms operating in Nigeria in a recent widely circulated report published, have been slapped with sanctions and blacklisted on grounds of contract fraud and corruption, writes Adedayo Adejobi

Awave of utter shock and pandemonium ruled the landscape amongst Nigerian interests, the government and business community when the World Bank and the African Development Bank (AfDB) last Monday issued sanctions and blacklisted six and counting Chinese companies and consultants operating in Nigeria. They were sanctioned on grounds of various breaches of their contracting processes considered ham-fisted, fraudulent and corrupt. It is noteworthy that similar sanctions were issued to several contracting firms and individual consultants in other jurisdictions around the world.

Those blacklisted by the World Bank for fraud and corruption in Nigeria include China Railway Construction (International) Nigeria Company Limited, China Railway 18th Bureau Nigeria Engineering Company Limited, CCECC Nigeria Lekki (FTA) Company Limited, CCECC Nigeria Railway Company Limited, CRCC Petroleum & Gas Company Limited, and CCECC Nigeria Company Limited. CCC , which is China’s largest port construction firm listed in Hong Kong and CSCEC, China’s largest building contractor listed in Shanghai are amongst some of the sanctioned firms.

China Railway Construction (International) Nigeria Company Limited has registration No: N1000201600386. Its corporate office address is at No.34, Amazon Street, Maitama, Abuja. Also, it is the subsidiary of the China Railway Construction Corporation Limited (CRCC) established in November 2007 in Beijing, China.

At the moment, the company is involved in the construction of the 186 kilometres single standard gauge tracks of the Abuja-Kaduna Railway. The CRCC also won the $1.53 billion contract for the rehabilitation of the 312 kilometres double-track standard gauge Lagos-Ibadan rail line.

All the contracts were to be funded under a financing deal involving concessionary loans facilitated by the China export-import (EXIM) bank and the Nigerian government.

China Railway 18th Bureau Nigeria Engineering Company Limited, with Registration No: N1000201800131), has its corporate office at Plot 60, Cadastral Zone B09, Kado District, Abuja. Also, China Railway 18th Bureau Nigeria Company Limited, with Registration No: 2008-001998, is a subsidiary of China Railway 18th Bureau Group Company Limited. It specialises in the provision of heavy construction services. In August 2016, the company, along with China Railway Construction Electrification Bureau Group Company Limited, was awarded the contract for the construction, housing and transportation Ministry of Railways to the Kano City Light Rail (1,2,3,4 line).

The other companies sanctioned by the World Bank include CCECC Nigeria Lekki FTA Company Limited with registration No: 0241 at the Lekki Free Zone, Ibeju Lekki, Lagos. It is involved with the on-going development of infrastructure at the Lekki FTA in Lagos.
The World Bank also named CCECC Nigeria Railway Company Limited among the affected companies.

The company with registration No: 679271 has its operation base at Plot 215 Cadastral Zone C00, Institute and Research District, Km10, Airport Road, Abuja.

CRCC Petroleum & Gas Company Limited, with registration No: 1000201300324 and operational office NO.10A, Usuma Crescent, Maitama A5, Abuja is the oil and gas subsidiary of the CRCC.

CCECC Nigeria Company Limited with Registration No: 1000201200017 has its office as Plot 215 Cadastral Zone C00, Institute & Research District, Km10, Airport Road, Abuja.

In 2018, CCECC was enmeshed in a scholarship award scandal in which senior government officials, including ministers, shared among themselves opportunities offered young Nigerians to study abroad.

On June 7, 2018, the Permanent Secretary, Federal Ministry of Transportation, Sabiu Zakari, wrote to the immediate former Minister of Industry, Trade & Investment, Dr. Okechukwu Enelamah, about the offer by the Chinese firm to send 40 young Nigerians abroad for training under a “railway engineering scholarships”

Rather than throw open the offer to all qualified Nigerians, the Chinese firm allegedly allowed privileged government officials to hijack it for their wards and cronies.

Some of the government officials allegedly involved were the then Minister of State for Education, Minister of Youth and Sports Development, Minister of State for Power, Works and Housing, Jigawa State Governor, Minister of Transportation, and the Deputy Chief of Staff at the Presidential Villa.

In May this year, BudgIT, a civic group focused on issues of government budget, raised issues about the light rail project awarded to CRCC by the Lagos State Government. According to BudgIT, discrepancies exist between the $182 million contract reported in the 2010 annual report of the company to its shareholders and the $1.2 billion claimed by the Lagos State Government.

The reprobate Chinese firms and culprits play big in various sectors of the Nigerian economy and are at the fore of handling huge on-going, nearly completed or completed railway projects as well as highways, housing estates, airport terminals, municipal engineering, water resources, and hydro-power engineering projects for the federal and state governments.

Upon the declaration by the World Bank and the African Development Bank (AfDB) last Monday, these Chinese firms have been debarred and declared ineligible to be awarded any World Bank-financed contracts between June 4, 2019 and March 3, 2020.

The recent list of more sanctioned companies and individual consultants are among those in the August 16 updated publication by the World Bank on its website of companies and individuals found to have violated the bank’s policy. Some of the companies and consultants were accused of violating the provisions of the guidelines for the selection and employment of consultants under International Bank for Reconstruction and Development (IBRD) loans and the International Development Association (IDA) credits and grants by World Bank borrowers. Others were sanctioned for infractions of the policy as clearly spelt out in the Procurement Guidelines and the World Bank Procurement Regulations for Investment Project Financing Borrowers for projects after July 1, 2016.
The firms and individuals on sanctions list, which is part of efforts to promote greater transparency and accountability in business, are not eligible for World Bank-financed contracts. The bank has taken a major step towards greater transparency and accountability by authorising the publication of decisions in new sanctions cases.

Those said to have violated procurement guidelines 1.16a(i) are those accused of engaging in “corrupt practice” by either offering, giving, receiving, or soliciting, directly or indirectly, anything of value to improperly influence the actions of another party.

Those accused of “collusive practice” are those found to have colluded between two or more parties to achieve an improper purpose, including to influence improperly the actions of another party.

Those sanctioned for violating Paragraph 1.22(A)(V) (Aa) of the October 2006 and May 2010 Consultant Guidelines are those whose request for proposals and the proposals were prepared in languages other than the national language of the borrower approved by the bank.

Those affected include Victor Dike (debarred for two years between April 23, 2018 and November 22, 2020), Best Scan Solutions Limited (January 24, 2017 and January 23, 2021), Iyke Ambrose (January 24, 2017 and January 23, 2021), and Quick Projects Limited (April 23, 2018 and November 22, 2021).

Violators of Procurement Guidelines 1.14(a)(i) are companies accused of “mis-procurement”, by providing services for which the contract was not awarded in accordance with the agreed provisions of the Loan Agreement with the bank.
For consultants that violated the Procurement Guidelines 1.23(a)(i), the World Bank said they were engaged in “corrupt practices” earlier defined in this report.

Besides, violators of Guidelines 1.15(a)(i) & (ii) were accused of issuing references to the bank considered not in line stipulated standard, which suggested suspicious intentions towards fraud and corruption.

The World Bank report listed the culprits to include Snc-Lavalin International (Nigeria) Limited debarred for 10 years (April 17, 2013 and April 17, 2023). For Gurpreet Singh Malik, Kamal Sharda, Karitex Limited, Sharda Impex (U.K.) Limited and Karitex Limited, they all received permanent debarments from the World Bank since February 2000.

Two of the companies, Lutoyilex Construct Limited and Oceanic Construction & Engineering Nigeria Limited as well as a consultant, Bamidele Obiniyi, received cross debarment sanctions from the World Bank and the African Development Bank (AfDB) between July 31, 2019 and May 13, 2022.

Cross-Debarment is a practice where firms and individuals debarred by one multilateral development bank (MDB) may be sanctioned, for the same misconduct, by other MDBs participating in the regime.
The World Bank said the period of ineligibility imposed on each of the defaulting companies and individual consultants extends to any legal entity they may control directly or indirectly.

According to the World Bank, the minimum period of ineligibility covers about three-years, provided the companies and individuals demonstrate to the bank group’s integrity compliance officer’s sufficient readiness to take remedial measures to address offences as well as establish effective integrity compliance programme acceptable to the Bank.

Speaking on the import of the blacklist, compliance expert, Managing Director, DataPro Limited, Mr. Abimbola Adeseyoju, said ,‘‘This is a significant red flag for Nigeria as a country to begin to put into more scrutiny all business dealings with Chinese companies. It’s also a pointer for Nigerian businesses dealing with Chinese companies to consider conducting greater due diligence in all their dealings . A blacklist is generally a product of failed expectations in contractual or business dealings . It is a mechanism to ensure that cases of noncompliance, unethical or professional misconducts are met with some form of sanctions.”
“This is to act as a form of deterrent so all companies do business in line with contractual agreement and best practice. So the blacklisting is a wake-up call to the Nigerian government and all those who deal with these Chinese companies to be very careful and conduct enhanced due diligence before dealing with those companies,’’ Adesoyoju added.

Lending a voice to Chinese companies blacklisted by World Bank, a Research Assistant with the Asia-Pacific Security Programme at the Center for a New American Security (CNAS) in Washington DC, Mr.Joshua Fitt, told THISDAY that, ‘‘While the details of the fraud were not released publicly, opaque contract bidding processes are a well-documented hallmark of overseas Chinese infrastructure projects, particularly with projects that are a part of China’s Belt and Road.”

Fitt noted that, “Transparency is essential, not only as an anti-corruption measure, but also to ensure that the most qualified firm is awarded the contract. While the blacklist only bars the Chinese companies from bidding on World Bank projects, other entities in Nigeria and elsewhere would be prudent to consider enforcing similar standards.”

Harping on the reason why the ban is in good faith, he said, ‘‘It is important to note that the Chinese companies will only be blacklisted for a relatively short 10 months, which demonstrates that the ban was implemented in good faith. The companies will presumably be free to resume bidding for projects after they have a chance to change their practices. Since the blacklist was issued by the World Bank, China is unlikely to blame the Nigerian government and Chinese businesses that do not engage in corrupt practices in Nigeria should not be affected.’’ Speaking on the lessons for Nigerian banks and financial institutions, Adesoyoju noted: “For us compliance experts, these new spates of blacklisting of companies by multilateral organisations is a new twist to sanctions compliance. Compliance professionals will now have to ensure that their businesses focus on these pronouncements and ensure that they scan through their customer data base to identify any name mentioned in the blacklist that currently do business with.”

“Also, they’ll need to carry out enhanced due diligence on the names they do business with by obtaining from their management commitment that whatever the issues they have with the multilateral bodies are explained and that they have taken appropriate me measures to mitigate future recurrence,” he added

“Note however, that depending on the outcomes of the EDD, the compliance officer should advise his/ her management on additional measures to put in place if they will continue to deal with the customers and if it was expedient to even completely severe relationship with the blacklisted customer.

“It is important to note that the effect of such blackmail by one multilateral body applies to all other such bodies. So AfDB blacklisted company cannot be availed of funds provided by the World Bank and vice versa. Therefore the compliance officer will ensure that his/her company does not apply any funds from any multilateral bodies to these blacklisted customers. He/she will ensure that these names are added to the internal watchlist for tracking,” Adesoyoju pointed out.

Pix: David Malpass.jpg and Xi Jinping.jpg