Global Fund Takes Action to Prevent Wrongful Conduct

The Global Fund to Fight AIDS, Tuberculosis and Malaria announced today that as part of its broad program to prevent abuse of any kind, it suspended contracts with two international suppliers of mosquito nets after uncovering evidence that they committed serious financial wrongdoing in Cambodia.

The Global Fund has zero tolerance for wrongful conduct. It actively investigates and uncovers fraud, takes swift action against wrongdoers, and pursues recovery of misused funds. Committed to an exceptional degree of transparency, the Global Fund openly publishes its investigation reports.

The Global Fund’s Office of the Inspector General today published an investigation report that found that between 2006 and 2011, two international suppliers paid commissions to two Cambodian officials totaling approximately US$410,000 in return for awarding contracts for insecticide-treated nets that prevent the spread of malaria. Based on recommendations of its Sanctions Panel, the Global Fund has suspended contracts with the two suppliers, Vestergaard Frandsen and Sumitomo Chemical Singapore, pending a full review.

Vestergaard and Sumitomo both fully cooperated with the investigation, have taken action against the employees involved, and have taken preventative steps to deter wrongful conduct in the future, agreeing that stronger measures will better serve the common goal of preventing the spread of malaria, particularly in high-risk countries.   

“We cannot tolerate unethical conduct anywhere,” said Mark Dybul, Executive Director of the Global Fund. “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 Global Fund has supported programs in Cambodia fighting AIDS, TB and malaria with US$331 million disbursed since 2003, achieving striking success and playing a key role in Cambodia’s achievement of an 80 percent decline in malaria deaths, a 45 percent fall in TB cases and a 50 percent decline in cases of HIV.

Over the past two years, the Global Fund has taken multiple actions to protect its investments by significantly strengthening deterrence and minimizing the risk of abuse.

Strong financial oversight, paired with heightened risk mitigation, is now built into the implementation process for each grant, no matter how big or small, and a governance and execution mechanism has been established to recover misused funds.

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. Over the past year, the Global Fund has tripled the value of products covered by safer pooled procurement practices. In 55 countries identified as high-risk for procurement, 83 percent of products are now in pooled procurement, just above the benchmark 80 percent used in the private sector. 

The investigation found that, while a Global Fund grant in Cambodia was compromised by the commission payments, all the mosquito nets procured by that grant were provided as intended.

The investigation report identified wrongful conduct in three entities in Cambodia disbursing funds from the Global Fund. In addition to the two Cambodian officials who accepted financial inducements from suppliers of nets, the report also cites improper charges and manipulation of procurement practices at two other organizations. The wrongful conduct identified in the report involves a total of approximately US$431,000.

The Global Fund Sanctions Panel, with both internal and independent experts, evaluates cases where sanctions may be warranted. The Sanctions Panel recommended that the two suppliers named in the Cambodia report be suspended pending a full review of the case.

Other steps were taken in Cambodia. The Principal Recipient for a malaria grant was replaced, after the evidence identified two officials of the National Centre for Parasitology, Entomology and Malaria Control (CNM) who accepted commissions in exchange for awarding contracts. Fiduciary and procurement agents were appointed to work within another implementer, the National Centre for HIV/AIDS, Dermatology and STD Control (NCHADS) and fiduciary controls are being strengthened at key higher-risk sub-recipients.

The Global Fund’s investigation began in 2011, and the report took two and a half years to complete. It involved analysis of a wide scope of data and a complex investigation of multiple entities. In addition, to be fair and to follow due process, those affected by the report and their legal counsel were provided with multiple opportunities to assess the findings and to respond appropriately, at various stages of the investigation.

The Global Fund’s systematic work on risk management and controls, and its effective use of audits and investigations, reflect a strong commitment to preventive measures and are expected to lead to fewer cases of wrongdoing in the future.