Notice of Uncontested Sanctions Proceedings

January 29, 2015

Sanctions Case No. 317 IDA Credit Number 4150-VN

(Vietnam Third Rural Transport Project) IDA Grant Number TF 056320

(Vietnam Third Rural Transport Project) IDA Credit Number 4402-VN

(Vietnam Da Ning Priority Infrastructure Investment Project)

Respondent: Louis Berger Group, Inc.

Controlling Affiliate: Berger Group Holdings, Inc.

1. On October 8, 2014, the World Bank' s Suspension and Debarment Officer (the "SDO") issued a Notice of Sanctions Proceedings (the "Notice") to Louis Berger Group, Inc. ("LBG") and its controlling Affiliate Berger Group Holdings, Inc. ("Berger Holdings") pursuant to Section 4.0l(a) of the World Bank Sanctions Procedures, as adopted by the World Bank as of April15, 2012 (the "Sanctions Procedures").

2. The Statement of Accusations and Evidence ("SAE") prepared by the Bank's Integrity Vice Presidency ("INT") and appended to the Notice contained INT's accusations that LBG engaged in sanctionable practices in connection with the above-named projects (the "Projects") and that Berger Holdings failed to exercise supervisory control over LBG. The SAE also contained the evidence gathered by INT in support of these accusations.

3. The specific accusations made by INT in the SAE were (a) that LBG engaged in corrupt practices by making payments to Vietnamese public officials in relation to the Projects and (b) that Berger Holdings, which owns and controls LBG, should be sanctioned pursuant to Section 9.04(b) of the Sanctions Procedures for its failure to exercise supervisory control over LBG.

4. Based ort a review ofiNT's SAE conducted in accordance with Section 4.01(a) of the Sanctions Procedures, and pursuant to Section 4.01(c), Section 9.01 and Section 9.04 of the Sanctions Procedures, with due consideration of the factors set forth in Section 9.02 ofthe Sanctions Procedures and in the World Bank Sanctioning Guidelines, the SDO recommended in the Notice that LBG and Berger Holdings, together with certain Affiliates of each (as defined in the Sanctions Procedures) where so specified, be sanctioned as follows:

Louis Berger Group, Inc. ("LBG")

It is recommended that LBG (together with any entity that is an Affiliate directly or indirectly controlled by LBG) be declared ineligible (i) to be awarded or otherwise benefit from a Bank-financed contract, financially or in any other manner, 1 (ii) to be a nominated2 sub-contractor, consultant, manufacturer or supplier, or service provider of an otherwise eligible firm being awarded a Bank-financed contract, and (iii) to receive the proceeds of any loan made by the Bank or otherwise to participate further in the preparation or implementation of any project or program financed by the Bank and governed by the Bank's Procurement Guidelines, Consultant Guidelines or Anti-Corruption Guidelines; provided, however, that after a minimum period of ineligibility of three (3) years, LBG may be released from ineligibility only if LBG has, in accordance with Section 9. 03 of the Sanctions Procedures, demonstrated to the Bank Group's Integrity Compliance Officer that LBG has complied with the following conditions:

(a) LBG has taken appropriate remedial measures to address the sanctionable practices for which LBG has been sanctioned; and

(b) LBG has adopted and implemented an effective integrity compliance program in a manner satisfactOJy to the Bank.

In determining this recommended sanction, the SDO took into account, as aggravating factors, the involvement ofLBG management in the misconduct and the fact that LBG engaged in a repeated pattern of misconduct. The SDO took into account, as mitigating factors, the fact that LBG terminated the employment of individuals responsible for the misconduct and that LBG has implemented a compliance program, although the record did not include evidence as to the extent of such implementation. The SDO also took into account INT's representations as to the extent of LBG 's cooperation during the course of the investigation, noting in particular that LBG (a) undertook a robust internal investigation of misconduct at the company, (b) voluntarily refrained from bidding on

For the avoidance of doubt, the declaration of inelig ibility to be awarded a contract will include, without limitation, (i) applying for pre-qualification, expressing interest in a consultancy, and bidding, either directly or as a nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider, in respect of such contract, and (ii) entering into an addendum or amendment introducing a material modification to any existing contract.

A nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider (different names are used depending on the particular bidding document) is one which has been: (i) included by the bidder in its pre­qualification application or bid because it brings specific and critical experience and know-how that allow the bidder to meet the qualification requirements for the particular bid; or (ii) appointed by the borrower.

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Bank-financed projects and (c) provided !NT with extensive documentary evidence.

The foregoing declaration of ineligibility will extend across the operations of the World Bank Group, including IFC, MIGA and the guarantee operations of the Bank. 3 The Bank will also provide notice of this declaration of ineligibility to the other multilateral development banks ("MDBs '') that are party to the Agreement for Mutual Enforcement of Debarment Decisions (the "MDB Cross-Debarment Agreement") so that they may determine whether to enforce the declarations of ineligibility with respect to their own operations in accordance with the MDB Cross­Debarment Agreement and their own policies and procedures. 4

Controlling A (filiate o(LBG Berger Group Holdings, Inc. ("Berger Holdings ")

Pursuant to Section 9. 04(b) of the Sanctions Procedures,' it is further recommended that Berger Holdings (together with any entity that is an Affiliate directly or indirectly controlled by Berger Holdings, subject to the operation of any sanction imposed on LBG and the directly and indirectly controlled Affiliates thereof) be required, as a condition to avoid debarment, to demonstrate to the Bank Group's Integrity Compliance Officer, in accordance with Section 9.03 ofthe Sanctions Procedures, that Berger Holdings has, by the expiration of a period of two (2) years from the date of imposition of such requirement, complied with the following conditions for non-debarment:

(a) Berger Holdings has taken appropriate remedial measures to address the sanctionable practices in connection with which Berger Holdings has been sanctioned; and

[World Bank Sanctions Procedures], at 23-24 (Section 9.0/(c)). For the avoidance of doubt, the declaration of ineligibility also extends to activities financed through trustfimds administered by the Bank to the extent governed by the Bank's Procurement Guidelines, Consultant Guidelines or Anti-Corruption Guidelines. ld at 2 (Section I.Ol(c)(i)). ·

" At present, the MDBs that are party to the MDB Cross-Debarment Agreement are the Bank Group, the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development and the inter-American Development Bank Group. The MDB Cross-Debarment Agreement provides that, subject to the prerequisite conditions set forth in the MDB Cross-Debarment Agreement, unless a participating MDB (i) believes that any of the prerequisite conditions set forth in the MDB Cross-Debarment Agreement have not been met or (ii) decides to exercise its rights under the "opt out" clause set forth in the MDB Cross-Debarment Agreement, each participating MDB will promptly enforce the debarment decisions of the other participating MDBs. More information about the MDB Cross-Debarment Agreement is available on the Bank 's external website (http://go. worldbank.org!B699B73QOO).

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(b) Berger Holdings has adopted and implemented an effective integrity compliance program in a manner satisfactory to the Bank.

In the case of a determination by the Bank Group's Integrity Compliance Officer of non-compliance with the foregoing conditions for non­debarment, Berger Holdings (together with any entity that is an Affiliate directly or indirectly controlled by Berger Holdings, subject to the operation of any sanction imposed on LBG and the directly and indirectly controlled Affiliates thereof) will automatically be declared ineligible (i) to be awarded or otherwise benefit from a Bank-financed contract, financially or in any other manner, 5 (ii) to be a nominatecf sub­contractor, consultant, manufacturer or supplier, or service provider of an otherwise eligible firm being awarded a Bank-financed contract, and (iii) to receive the proceeds of any loan made by the Bank or otherwise to participate further in the preparation or implementation of any project or program financed by the Bank and governed by the Bank's Procurement Guidelines, Consultant Guidelines or Anti-Corruption Guidelines,· provided, however, that after a minimum period of ineligibility of six (6) months, Berger Holdings may be released from ineligibility only if Berger Holdings has, in accordance with Section 9. 03 of the Sanctions Procedures, demonstrated to the Bank Group's Integrity Compliance Officer that Berger Holdings has complied with the conditions originally stipulated for non-debarment above. Any such declaration of ineligibility will extend across the operations of the World Bank Group, including IFC, MIGA and the guarantee operations of the Bank. 7

In determining this recommended sanction, the SIJ.O took into account that, while the evidence did not support a finding that Berger Holdings was directly involved in the corrupt practices at issue, the evidence did support a finding that Berger Holdings bore a degree of responsibility for

5 For the avoidance of doubt, the declaration of ineligibility to be awarded a contract will include, without/imitation, (i) applying for pre-qualification, expressing interest in a consultancy, and bidding, either directly or as a nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider, in respect of such contract, and (ii) entering into an addendum or amendment introducing a material modification to any existing contract. 6 A nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider (different names are used depending on the particular bidding document) is one which has been: (i) included by the bidder in its pre­qualification application or bid because it brings specific and critical experience and know-how that allow the bidder to meet the qualification requirements for the particular bid; or (ii) appointed by the borrower.

{World Bank Sanctions Procedures}, at 23-24 (Section 9.0/(c)). For the avoidance of doubt, the declaration of ineligibility also extends to activities financed through trust funds administered by the Bank to the extent governed by the Bank's Procurement Guidelines, Consultant Guidelines or Anti-Corruption Guidelines. !d. at 2 (Section 1.0/ (c)(i)).

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its failure to adequately supervise its subsidiary, particularly given the direction to Berger Holdings "members " to assist in Berger Holdings subsidiaries' compliance efforts, as well as the apparent involvement of Berger Holdings executives in directing LBG efforts in Vietnam. In addition, the SDO noted that, while Berger Holdings 'failure of oversight might otherwise be seen as an isolated incident, the evidence relating to the history of fraudulent activity by Berger Holdings subsidiaries identified in the I990 and 2000 World Bank sanctions cases against Louis Berger International, Inc. , the 2006 Asian Development Bank sanctions case against LBG and LBG 's 2010 Deferred Prosecution Agreement with the United States Department of Justice indicates a systemic deficiency of corporate controls, warranting the recommendation of a conditional non­debarment.

5. In accordance with Section 4.02(b) of the Sanctions Procedures, LBG and Berger Holdings submitted a written Explanation (as defined in the Sanctions Procedures) on November 10, 2014. After consideration of the arguments and evidence presented by INT in the SAE appended to the Notice and the arguments and evidence presented in the Explanation, the SDO determined that there was no basis for a withdrawal of the Notice pursuant to Section 4.03(a)(i) of the Sanctions Procedures. The SDO also determined that the arguments and evidence presented in the Explanation supported a conclusion that there were additional mitigating factors that warranted a revision of the recommended sanctions for both LBG and Berger Holdings pursuant to Section 4.03(a)(ii) of the Sanctions Procedures. The SDO revised the recommended sanctions as follows:

Louis Berger Group, Inc. ("LBG")

It is recommended that LBG (together with any entity that is an Affiliate directly or indirectly controlled by LBG) be declared ineligible (i) to be awarded or otherwise benefit from a Bank-financed contract, financially or in any other manner, 8 (ii) to be a nominatecf sub-contractor, consultant, manufacturer or supplier, or service provider of an otherwise eligible firm being awarded a Bank-financed contract, and (iii) to receive the proceeds of any loan made by the Bank or otherwise to participate

8 For the avoidance of doubt, the declaration of ineligibility to be awarded a contract will include, without limitation, (i) applying for pre-qualification, expressing interest in a Consultancy, and bidding, either directly or as a nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider, in respect of such contract, and (ii) entering into an addendum or amendment introducing a material modification to any existing contract. 9 A nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider (different names are used depending on the particular bidding document) is one which has been: (i) included by the bidder in its pre­qualification application or bid because it brings specific and critical experience and know-how that allow the bidder to meet the qualification requirements for the particular bid; or (ii) appointed by the borrower.

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further in the preparation or implementation of any project or program financed by the Bank and governed by the Bank's Procurement Guidelines, Consultant Guidelines or Anti-C01;ruption Guidelines; provided, however, that after a minimum period of ineligibility of one (I) year, LBG may be released from ineligibility only if LBG has, in accordance with Section 9. 03 of the Sanctions Procedures, demonstrated to the Bank Group 's Integrity Compliance Officer that LBG has complied with the following conditions:

(a) LBG has taken appropriate remedial measures to address the sanctionable practices for which LBG has been sanctioned; and

(b) LBG has adopted and implemented an effective integrity compliance program in a manner satisfactory to the Bank.

In determining this recommended sanction, the SDO took into account, as aggravating factors, the involvement of LBG management in the misconduct and the fact that LBG engaged in a repeated pattern of misconduct. The SDO took into account, as mitigating factors, the fact that LBG terminated the employment of individuals responsible for the misconduct and the fact that LBG has implemented an effective compliance program, without prejudice to any future assessment that the World Bank Group 's Integrity Compliance Officer may conduct to more fully evaluate the adequacy and implementation of LBG 's integrity compliance measures. The SDO also took into account INT's representations as to the extent of LBG 's cooperation during the course of the investigation, noting in particular that LBG (a) undertook a robust internal investigation of misconduct at the company, (b) voluntarily refrained from bidding on Bank-financed projects and (c) provided !NT with extensive documentary evidence.

The foregoing declaration of ineligibility will extend across the operations of the World Bank Group, including IFC, MIGA and the guarantee operations ofthe Bank. 10

Controlling Affiliate o[LBG Berger Group Holdings, Inc. ("Berger Holdings")

Pursuant to Section 9. 04 (b) of the Sanctions Procedures, it is further recommended that Berger Holdings (together with any entity that is an Affiliate directly or indirectly controlled by Berger Holdings, subject to

10 [World Bank Sanctions Procedures], at 23-24 (Section 9.0 I (c)). For the avoidance of doubt, the declaration of ineligibility also extends to activities financed through trust funds administered by the Bank to the extent governed by the Bank's Procurement Guidelines, Consultant Guidelines or Anti-Corruption Guidelines. !d. at 2 (Section 1.0/(c)(i)).

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the operation of any sanction imposed on LBG and the directly and indirectly controlled Affiliates thereof) be required, as a condition to avoid debarment, to demonstrate to the Bank Group 's Integrity Compliance Officer, in accordance with Section 9. 03 of the Sanctions Procedures, that Berger Holdings has, by the expiration of a period of one (I) year from the date of imposition of such requirement, complied with the following conditions for non-debarment:

(a) Berger Holdings has taken appropriate remedial measures to address the sanctionable practices in connection with which Berger Holdings has been sanctioned; and

(b) Berger Holdings has adopted and implemented an effective integrity compliance program in a manner satisfactory to the Bank.

In the case of a determination by the Bank Group 's Integrity Compliance Officer of non-compliance with the foregoing conditions for non­debarment, Berger Holdings (together with any entity that is an Affiliate directly or indirectly controlled by Berger Holdings, subject to the operation of any sanction imposed on LBG and the directly and indirectly controlled Affiliates thereof) will automatically be declared ineligible (i) to be awarded or otherwise benefit from a Bank-financed contract, financially or in any other manner, 11 (ii) to be a nominated12 sub-contractor, consultant, manufacturer or supplier, or service provider of an otherwise eligible firm being awarded a Bank-financed contract, and (iii) to receive the proceeds of any loan made by the Bank or otherwise to participate further in the preparation or implementation of any project or program financed by the Bank and governed by the Bank's Procurement Guidelines, Consultant Guidelines or Anti-Corruption Guidelines; provided, however, that after a minimum period of ineligibility of six (6) months, Berger Holdings may be released from ineligibility only if Berger Holdings has, in accordance with Section 9. 03 of the Sanctions Procedures, demonstrated to the Bank Group's Integrity Compliance Officer that Berger Holdings has complied with the conditions originally stipulated for non-debarment above. Any such declaration of ineligibility

11 For the avoidance of doubt, the declaration of ineligibility to be awarded a contract will include, without limitation, (i) applying for pre-qualification, expressing interest in a consu/tancy, and bidding, either directly or as a nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider, in respect of such contract, and (ii) entering into an addendum or amendment introducing a material modification to any existing contract. 12 A nominated sub-contractor, nominated consultant, nominated manufacturer or supplier, or nominated service provider (different names are used depending on the particular bidding document) is one which has been: (i) included by the bidder in its pre­qualification application or bid because it brings specific and critical experience and know-how that allow the bidder to meet/he qualification requirements for the particular bid; or (ii) appointed by the borrower.

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will extend across the operations of the World Bank Group, including IFC, MIGA and the guarantee operations ofthe Bank. 13

In determining this recommended sanction, the SDO too'k into account that, while the evidence did not support a finding that Berger Holdings was directly involved in the corrupt practices at issue, the evidence did support a finding that Berger Holdings bore a degree of responsibility for its failure to adequately supervise its subsidiary, particularly given the direction to Berger Holdings "members" to assist in Berger Holdings subsidiaries ' compliance efforts, as well as the apparent involvement of Berger Holdings executives in directing LBG efforts in Vietnam. In addition, the SDO noted that, while Berger Holdings ' failure of oversight might otherwise be seen as an isolated incident, the evidence relating to the history of fraudulent activity by Berger Holdings subsidiaries identified in 1990 and 2000 World Bank sanctions cases, a 2006 Asian Development Bank sanctions case and a 2010 Deferred Prosecution Agreement with the United States Department of Justice indicates a past systemic deficiency of corporate controls, warranting the recommendation of a conditional non-debarment.

6. Section 4.04 of the Sanctions Procedures provides that if a respondent does not contest the accusations or the sanction recommended by the SDO in a Notice of Sanctions Proceedings by submitting a Response (as defined in the Sanctions Procedures) to the World Bank Group Sanctions Board (the "Sanctions Board") within ninety (90) days after delivery of such Notice of Sanctions Proceedings, the sanction(s) recommended by the SDO shall enter immediately into force.

7. No Response having been submitted to the Sanctions Board by LBG or Berger Holdings within the specified period, INT's accusations in the SAE and the sanctions recommended by the SDO in the Notice are deemed uncontested for purposes of Section 4.04 ofthe Sanctions Procedures, and the recommended sanctions set forth in paragraph 5 above have entered into force as of the date hereof.

13 [World Bank Sanctions Procedures}, at 23-24 (Section 9.0/(c)). For the avoidance of doubt, the declaration of ineligibility also extends to activities financed through trust f unds administered by the Bank to the extent governed by the Bank 's Procurement Guidelines, Consultant Guidelines or Anti-Corruption Guidelines. /d. at 2 (Section J.OJ(c)(i)).

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.tr Pasc e elene Dubois Chi uspension and Debarment Officer Office of Suspension and Debarment (OSD) The World Bank

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