Wipro, Megasoft join Satyam's ranks, barred by World Bank for direct contracts

The bans, the World Bank said, were imposed with respect to its corporate procurement program. All three companies were involved in different contracts and their debarments are not related, the World Bank said, adding that it would step up its fight again fraud and corruption within the institution and in projects it finances in developing countries.

The disclosures are in line with the new norms followed by the World Bank since late 2006. The World Bank has also said it will publicly list the names of companies debarred from its corporate procurement on a regular basis henceforth.

The shocking disclosures sent the stock of Wipro tumbling 9.30 percent to Rs.227.35 on the Sensex. In the broader index, Megasoft fell to an all-time low of Rs.13.80 before paring its losses and closing down 0.6 percent at Rs.15.75.

However, Wipro said the ban would have little impact on its business operations or earnings. "In 2000, as part of our initial public offering (IPO) of American Depository Shares (ADS) to our employees and clients in the US, our representatives made an offer to World Bank employees to purchase the shares at market price under the Securities and Exchange Commission approved Directed Share Programme (DSP). The World Bank, however, directed the offer to the family members and friends of its employees. Though they purchased 1750 shares for about $72,000 at the IPO price ($52.48), they signed a conflict of interest statement that purchasing the shares did not violate any ethics or conflict of interest policies. The programme objective was to involve employees and customers with the public offering to expand our recognition and brand. A majority of the shares sold under the DSP were allotted to our employees. [Later] The World Bank determined in June 2007 that Wipro would be ineligible to contest direct contracts from 2007-2011," Wipro said in a regulatory filing with the Bombay Stock Exchange on Monday, in line with the revised disclosure policies that mandate that the company must reveal its vendor status with the World Bank.

However, Wipro said that its cumulative revenues from the World Bank are less than a $1 million in the past 8 years. "Our inability to get future business from World Bank will not adversely affect our business and results of operations. To date, Wipro's revenue from the World Bank is insignificant," it added.

According to Girish S. Paranjpe, joint-CEO of Wipro's IT business, the shares offered by the company to World Bank employees were too little to amount to an inducement. "It was a goodwill gesture. We have done nothing wrong or unethical," Paranjpe said, adding that Wipro did not discuss the ban earlier as it was a World Bank policy not to discuss such investigations.