World Bank President Orders Investigation of Project That Destroyed Powerless Albanian Village

The president of the World Bank has ordered investigators to find out who was responsible for the cover-up of a $39 million World Bank sponsored development project that led to the razing of an Albanian coastal village in 2007.

Robert Zoellick made the decision to probe the scandal — the World Bank management's third attempt to get to the bottom of the Albanian debacle — last December, but only went public with his decision on Feb. 9, hours after a FOX News story on the subject appeared.

In the story, FOX revealed that managers at the World Bank, the world's largest and most influential anti-poverty agency, had provided false information in order to get a go-ahead for financing of the project from the bank's board of directors in 2005 — and then spent additional years trying to cover up its actions.

Bank insiders, FOX News also reported, misled and stonewalled a confidential "Inspection Panel" of the bank that was commissioned by the board in late 2007 to investigate the scandal.

Click here to see the FOX News story.

The panel's report was released to the directors on Dec. 1, 2008.

In a statement to FOX News, a World Bank spokesman wrote that Zoellick said in a Dec. 1 letter to the bank's 24-member board that he was "troubled by the problems uncovered in the panel's report" (posted in its entirety on FOX's website on Feb. 9) and would take "immediate steps ... to learn what exactly occurred and why."

The bank's board of directors is scheduled to meet in Washington on Feb. 17 to address the case. Well-placed bank sources tell FOX News that Zoellick is deeply embarrassed and angry over the debacle, and serious about determining, as a source puts it, "whose heads are going to roll."

Zoellick has set up a task force of senior-level officials at the bank to manage the scandal, according to bank insiders, and has sent a detailed "response" to the board fully accepting the Investigation Panel's harsh findings, which included evidence of the role of an Albanian government official in the demolition and expropriation of the villagers, as part of a "coastal cleanup" project.

That official, as FOX News disclosed on Feb. 9, is Jamarber Malltezi, son-in-law of Albania's Prime Minister Sali Berisha.

There have been suspicions in Albania that the destruction of the village was linked to the construction in the same area of a private luxury beachfront resort.

Both Berisha and Malltezi have denied any wrongdoing.

According to the World Bank spokesman, Zoellick said he had been informed of the Albania issue "some weeks" before his Dec. 1 letter ordering a deeper investigation. The spokesman declined to release a full copy of the letter to FOX News.

"On first hearing of this issue some weeks ago, I asked the Acting General Counsel to examine the failure to properly inform the Board, and he has shared that report with me and with Executive Directors," wrote Zoellick to the board, according to excerpts. "Based on the Inspection Panel report, I will now ask him to extend his inquiry to learn what exactly occurred and why."

"I am particularly troubled," he added, "by the [Investigation] Panel's concern that this case might involve a 'sequence of misinformation.' Such misrepresentation to the Panel or to the Board is unacceptable..."

The bank spokesman also told FOX News that Zoellick asked the World Bank's anti-corruption unit, the Department of Institutional Integrity, to launch its own separate probe of the affair.

The two new investigations will bring to five the total number of World Bank probes into the matter since the hamlet of Jale was demolished in 2007, and it remains unclear what more can be uncovered — or whether the results will ever be publicly shared.

Zoellick declined to respond to a list of two dozen questions from FOX News, sent in an effort to have him elaborate on his spokesman's vague statement. Those questions ranged from when exactly Zoellick first learned about the scandal, to whether his general counsel's new inquiry will consider the possibility that important information provided to the bank's board was deliberately suppressed in order to get the project approved.

FOX News also asked the bank to provide more details about a new $20 million loan for Albania — this one ostensibly aimed at improving governance and public services — that is expected to go before the agency's board for approval in mid-March. The only details publicly available so far are contained in a vaguely-worded "project information document" (PID) found buried on the bank's website last month.

That document summarizes solutions to Albania's problems in foggy language — from a need for "strengthening accountability mechanisms" and "reforms in the area of public financial management" to "improving the business environment" — but never once mentions one of the country's biggest issues: corruption.

In fact, Albania has consistently ranked in study after study as one of the world's most corrupt countries. In late 2006, under then bank president Paul Wolfowitz, a World Bank survey of Albanian government ministers, members of parliament, officials, donors and journalists noted the following problems: endemic corruption, a lack of law enforcement, bribery in public procurement, a lack of government transparency, many politicians with business links, and a lack of effective systems for guaranteeing property rights.

Through its spokesman, the bank declined to offer more specifics about the new loan in advance of its next board meeting.