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Former Top Cyber Official at Center of World Bank Scandal

In 1997, Mohamed Vazir Muhsin, a Sri Lankan accountant, was chosen by then-World Bank President James Wolfensohn as the first chief information officer in the institution's history. Eight years later, Muhsin was unceremoniously thrown out the door, and the bank's information security headaches reached migraine stage.

Early on in his tenure, Muhsin selected Satyam Computer Services, one of India's largest and fastest-growing technology firms, to create and maintain the software programs that would make the bank's information infrastructure into one of the world's most important data bases. Both sides found the deal highly beneficial.

By late 2005, when he was accused of improper ties with Satyam and ousted from the bank, "Mohamed was arguably the most powerful person in the bank," one insider who worked closely with Muhsin told FOX News.

So powerful, in fact, that he was able to conceive and arrange a bank loan in 2003 to his native Sri Lanka — bypassing the department that would normally have approved it. The project, known as "e-Sri Lanka," involved a no-interest, $53 million bank loan to Sri Lanka's government to help wire up that nation's communications infrastructure.

The loan was highly controversial. At one stage, bank officials suspended the project after complaints that the World Bank's information technology department had no business arranging loans to any government — let alone to one of "the world's most unstable countries," as the World Bank labeled strife-torn Sri Lanka in 2004. But after a Muhsin protege took charge of the bank's South Asia department, the project moved ahead that same year without any further delays.

That was not Muhsin's only controversial venture. In 1999, he and bank president Wolfensohn created a non-profit IT venture initially financed by the bank that they subsequently spun off from the institution, called the Development Gateway Foundation. Among the foundation's purposes was to create and run a database of all procurement tenders by almost every anti-poverty agency in the world, in the interest of greater economic transparency. Wolfensohn and Muhsin took two of the foundation's three board seats, while Muhsin served as its chief financial officer.

Last year, a World Bank evaluation unit blasted the foundation's governance as plagued by "conflicts of interest" for both men, as well as a vehicle that Muhsin had used for hiring large numbers of his IT department's staff without going through the normal bank budget process. By then, Wolfensohn had been gone from the bank for two years. (He did not respond to questions from FOX News for this story.) And Muhsin had gotten himself into much deeper trouble. (He also did not respond to questions from FOX News.)

By 2005, the bank had become suspicious about Muhsin's lifestyle, and there were increasing suspicions about his dealings with Satyam. A secret investigation was ordered. FOX News has obtained an investigative memo that planned "background reviews of all WB procurement and disbursement records for all contracts to Satyam." A leading corporate intelligence agency — Diligence LLC — was retained to do a net worth analysis of Muhsin and his family. A second investigative company was retained to do accounting and forensic examination of his computer hard drives.

Yet the case against Muhsin was on the verge of being swept under the bank's carpet until June 2005, when Paul Wolfowitz became the bank's president. Wolfowitz, who arrived from the Pentagon with a mandate to tackle bank corruption head-on, lit a fire under the Muhsin investigation, a former bank investigator tells FOX News. Muhsin was finally grilled for two days by bank investigators in September 2005, just weeks before he was set to retire. In early October, he was given two hours to vacate the building. (Wolfowitz himself left the bank in a cloud of controversy in May 2007.)

Muhsin is gone from the World Bank today, but his economic interests linger. He is a large shareholder and, since 2005, one of 10 directors of a Sri Lankan company, John Keells Holdings, that in February 2008 received a $75 million loan from the International Finance Corporation, the World Bank's private-sector lending arm. The loan is the bank's single-largest investment to date in the manufacturing and services sectors in Sri Lanka.

Click here to read about cyber security questions at World Bank.