African Development Bank Group

Date of Issuance: 28 July 2021

Sanctions Appeals Board Final Decision No. 8 Sanction Decision No. 22/ Sanction Case SN /2019/04 Urban Water Supply and Sanitation Improvement Project in Oyo and Taraba States - Loan Agreement between the Federal Republic of Nigeria and African Development Fund (ADF) No. 2100150025696 of 30 March 2012 Project No. P-NG-E00-004

Respondent SARGITTARIUS NIGERIA LIMITED

Decision of the African Development Bank Group Sanctions Appeals Board imposing a sanction of debarment with conditional release on the respondent entity in Sanctions Case No. SN-2019-04, together with any Affiliates1, with a period of ineligibility of eighteen (18) months beginning from the date of this decision. This sanction is imposed on the Respondent for fraudulent practices.

I. INTRODUCTION

1. The Sanctions Appeals Board held a virtual hearing on June 1, 2021, to review Sanctions Commissioner Sanction Decision’s No. 22/ case SN /2019/04 following an appeal lodged by SARGITTARIUS, (“the Respondent”). The Sanctions Appeals Board panel was

1 Section 2 of the Sanctions Procedures of the African Development Group defines “affiliate” as any natural or legal persons that controls, is controlled by, or is under the common control with the Respondent as determined by the Bank Group. Where such affiliate is a corporate group, this definition shall incorporate the principle outlined in the MDB Harmonized Principles on Treatments of Corporate Groups adopted on 10th September 2012 1

African Development Bank Group

composed of Oluremilekun Ademola ADEGOKE (Chair), Marie-Andrée NGWE, Julius NKAFU and Hassatou N’SELE.

2. The hearing was held in accordance with Section 8.82 of the Sanctions Procedures of the Bank Group. The Sanctions Appeals Board deliberated and reached its decision based on the written record.

3. In accordance with Section 8.2 of the Sanctions Procedures, the written record for the Sanctions Appeals Board’s consideration included the following: i. Notice of Sanctions Proceedings “Notice” issued to the Respondent ii. Response of the Respondent iii. The Sanctions Decision iv. The Appeal v. The Reply vi. The Rebuttal

4. On 30 July 2020, the Sanctions Commissioner, issued Sanction Decision No. 22 against the Respondent (“the Sanctions Decision”). The Sanctions Decision barred the Respondent for a period of three (3) years, together with any entity that is an Affiliate directly or indirectly controlled by the Respondent, from eligibility with respect to any Bank-Financed Projects. 5. The Respondent avers that the entire Sanctions Decision No. 22 issued on 30 July 2020 by the Sanctions Commissioner is materially flawed and contrary to the AfDB Sanctions Procedures, and therefore lodged an appeal on the 28 of August 2020, requesting the Sanctions Appeals Board to upturn the Sanctions Decision of the Commissioner in its entirety and be exonerated unconditionally.

2 Section 8.8 of the Sanctions Procedures of the African Development Group: Hearings. The Record for consideration by the Sanctions Appeals Board shall consist of the Notice, Response, the Sanctions Decision, the Appeal, the Reply, the Rebuttal, and any other evidence necessary to shed light on all matters in dispute before the Sanctions Appeals Board. The Sanctions Appeals Board shall make its Final Decision based on the Record and parties have no right to an oral hearing. The Sanctions Appeals Board may however, in its discretion, hold such hearing(s) as it deems appropriate upon the request of the Respondent or PIAC provided that the request for a hearing is supported by whatever the Sanctions Appeals Board deems reasonable cause for such hearing. The Sanctions Appeals Board may also request an oral hearing(s) on its own volition. The Sanctions Appeals Board shall determine the nature, length, and form of all oral hearings. Except otherwise provided, parties shall bear their own costs in relation to hearings.

2

African Development Bank Group

II. GENERAL BACKGROUND

This case arises in the context of three projects:

6. In 2012, the Federal Republic of Nigeria and the African Development Fund, administered by the African Development Bank Group (“AfDB” or “the “Bank Group”), entered into a loan agreement in respect of Project No. P-NG-E00-004 – Urban Water Supply and Sanitation Improvement Project (“the Project”). The Project principally was to improve water supply and introduce sanitation reforms, facilities, and project management capacity in (Oyo State, Nigeria) and (Taraba State, Nigeria). The Executing Agency for the Project in Ibadan was the Water Corporation of Oyo State (“the Corporation”).

7. In 2014, the Corporation invited tenders for two bids: the Osegere Scheme for Construction of Water Distribution Network, Booster Pumping Station, Ground Level Reservoir and Elevated Water Tank – Lot 1-OYOUWSSIP/AfDB/Wks/ICB/2014/01 (“Lot 1 Bid”); and the Rehabilitation and Extension of Water Distribution Network, Rehabilitation of Booster Pumping Station in Oke-Are and Oke-Itunu Reservoirs, Construction of Ososami Elevated Reservoir – Lot 2-OYOUWSSIP/AfDB/Wks/ICB/2014/02 (“Lot 2 Bid”).

8. In 2016, the Corporation invited tenders for the Construction of Sludge Treatment Facilities at Asejire, Osegere and Eleyele Water Treatment Plants – Lot 4- OYOUWSSIP/AfDB/Wks/NCB/2016/01 (“Lot 4 Bid”). The Lot 1 Bid, Lot 2 Bid and Lot 4 Bid are referred to collectively below as the “Bids”.

9. The Respondent’s unsuccessful joint bids with Henan Water Conservancy Engineering Bureau Limited (“Henan”) for the Bids (the “Bids Submission”) led to the Sanctions Case.

10. The Sanctions Case was based on the allegations of Sanctionable Practices (“the Allegations”) contained in the Findings of Sanctionable Practices (“FoSP” or the “Findings”) submitted to the Commissioner by the Integrity and Anti-Corruption Department (PIAC) on November 25, 2019. PIAC alleged that, in respect of the Bids Submission, the Respondent engaged in the following sanctionable practices for all three Bids: 1. Misrepresentations and forgery of the Joint Venture Agreements executed by the Respondent and Henan dated October 31, 2014 (the “JVAs”) establishing a joint venture between Sargittarius and Henan (“Sargittarius/Henan JV”). 2. Misrepresentations of a prior contract used as a reference; and 3. Misrepresentation on Sargittarius’ historical financial position.

3

African Development Bank Group

11. The Commissioner reviewed the FoSP and formally determined that a prima facie case was established by PIAC against the Respondent. Therefore, on March 09, 2020, the Commissioner issued a Notice of Sanctions Proceedings against the Respondent, directing the Respondent to respond to the Allegations. On June 11, 2020, the Respondent submitted its response dated June 11, 2020 to the Notice (“Sargittarius’s Response”). After considering the FoSP and Sargittarius’s Response, the Commissioner determined that the Respondent was culpable on all the counts. The Commissioner considered some aggravating factors as well as a singular mitigating factor, and thereafter imposed a three- year debarment with conditional release on the Respondent.

12. The Respondent, aggrieved by the Sanctions Commissioner Sanctions Decision’s, submitted an appeal against the Sanctions Decision to the Sanctions Appeals Board on August 28, 2020 (the “Appeal”). On October 9, 2020, the Sanctions Appeals Board sent to the Respondent, PIAC’s reply to the appeal (the “Reply”) dated 6 October 2020. The Respondent submitted its Rebuttal on 23 October 2020. The Respondent respectfully urges the Sanctions Appeals Board to overrule the Sanctions Decision of the Commissioner and exonerate the Respondent unconditionally.

III. APPLICABLE STANDARDS OF REVIEW

13. Standard of proof: Pursuant to Section 13.1 of the Sanctions Procedures, the preponderance of the evidence is determined by whether upon consideration of relevant facts and materials before the body considering such facts and materials, that it is more likely than not that the Respondent has engaged in a Sanctionable Practice.

14. Burden of proof: Under Section 13.2 of the Sanctions Procedures, (PIAC) bears the initial burden of proof to present evidence sufficient to establish that it is more likely than not that the Respondent engaged in a Sanctionable Practice. The burden of proof shall subsequently shift to the Respondent to demonstrate that it is more likely than not that the Respondent’s conduct did not amount to Sanctionable Practice.

15. Admissibility and Weighing of Evidence: As set forth in Section 13.3 of the Sanctions Procedures, formal rules of evidence do not apply; and the Sanctions Appeals Board has discretion to determine the relevance, materiality, weight, and sufficiency of all evidence offered.

16. Inference of Knowledge. The Sanctions Appeals Board have the discretion to infer purpose, intent and/or knowledge on the part of the Respondent, or any other party, from circumstantial evidence. Formal rules of evidence shall not apply. 4

African Development Bank Group

17. Rules and Procedures for Procurement of Goods and Works of the ADF, dated May 2008 (hereinafter referred to as the "Procurement Rules") and under Article 3.1 of the Bidding Documents for Lots 1, 2 and 4.

IV. PRINCIPAL CONTENTIONS OF THE PARTIES

18. PIAC submits that Respondent engaged in several counts of fraudulent practices during three tenders for the construction of water infrastructure, by submitting a forged Joint Venture Agreement, a forged contract reference and an altered financial information, to qualify for the award of the contracts and thereby benefit financially from the Project.

A. PIAC’s Contention in the Misrepresentations on the Joint Venture Agreement (Allegations of Sanctionable Practice I; II; and III)

19. PIAC contends that the Respondent submitted a forged Joint Venture Agreement purportedly executed with Henan Ltd., dated 31 October 2014, for Lots 1 and 2 Bids and dated 6 September 2016 for Lot 4 Bid. In support of the forgery allegations, PIAC tendered as evidence a letter dated 15 February 2019 from Henan Ltd. denying any business relationship with Sargittarius, and any employee relationship with Mr. Liu Taotao. Henan Ltd. also stated that the signature in the Power of Attorney attributed to its former employee Mr. Ma Quanli, was “unknown”.

B. PIAC’s Contention in the Misrepresentations of Contract Reference (Allegations of Sanctionable Practice IV; V & VI)

20. PIAC submits that the Respondent knowingly and recklessly provided false information in FORM EXP that it had successfully completed the rehabilitation of the Mokwa- Road, for the Sargittarius/Henan JV to qualify for the award of the Lot 1, 2 and 4 Bid contracts. This was in response to Criterion 2.4.2 of the Bid Documents for Lots 1, 2 and 4, which required joint bidders to demonstrate combined experience of participating as contractor or managing contractor in at least three contracts valued at US$20 million that were successfully completed within the five years immediately preceding the bids.

C. PIAC’s Contention in the Misrepresentations on Respondent’s Financial Historical Position (Sanctionable Practice VII)

21. PIAC asserts that Sargittarius/Henan JV submitted with its bids for Lots 1, 2 and 4, altered figures for the 2013 aggregate financial turnovers. In Form FIN 3.1 for Lots 1 and 2 Bids, 5

African Development Bank Group

the figures for 2013 are identical, but the figures presented for Lot 4 Bid, for the same year show significant discrepancies. (Exhibits 5, 6 and 7). In support of the forgery allegations, PIAC submits that historical financial figures for a specific year are not supposed to change from one bid to the other and the differences in numbers in these cases could only be explained by an alteration of the figures presented either for the Lots 1 and 2 Bids or for Lot 4 Bids.

22. PIAC contends that the above-mentioned manipulations of the figures were made knowingly by Respondent Sargittarius to deceive the Water Corporation of Oyo State (WCOS) that the JV had met the average annual turnover of USD$ 30,000,000 for Lots 1 and 2; and USD$ 10,000,000 for Lot 4 required by Clauses 2.3.1 and 2.3.2 of the respective Bidding Documents.

D. The Respondent’s Principal Contentions in the Explanation and Response i) Misrepresentation on the Joint Venture Agreement

23. The Respondent denies having misrepresented its relationship with Henan Ltd. In support of this position, the Respondent makes the following principal arguments. First, that it was Henan Ltd. (through Mr. Cai Cummin, Mr. Liu Taotao and Mr. Ma Quanli) that requested that the Respondent and Henan Ltd. should do business together by jointly bidding for the projects and that Mr. Liu Taotao of Henan Ltd. was chosen to represent Sargittarius/Henan JV in relation to the Project. The Respondent offers as evidence a Power of Attorney appointing Mr. Liu Taotao of Henan Ltd. as the representative of Sargittarius/Henan JV that was submitted as part of the supporting documents for the Bids. Second, the Respondent maintains that it would have been totally impossible for the Respondent, acting solely and without help from Henan Ltd., to have accurately accessed, identified, organized, and utilized the numerous sensitive commercial documents belonging to Henan Ltd. that were used in the preparation of the Sargittarius/Henan JV and the JVAs. Third, for the Respondent, the letter by Henan Ltd. to PIAC denying any cooperation with the Respondent is unfounded and an afterthought. The Respondent thinks it may well be that (A) there is a new management team at Henan Ltd. whose members are unknown to or unfamiliar with the Respondent, or (B) whose members for internal, "corporate politics" reasons within Henan Ltd. may be anxious to distance themselves from the former managers who had interacted with the Respondent's personnel.

ii) Misrepresentations on the Rehabilitation of the Mokwa-Bida Road Contract

24. The Respondent disputes the allegation of misrepresentation on rehabilitation of the Mokwa-Bida Road Contract. The Respondent maintains that it erroneously included the 6

African Development Bank Group

completion of the rehabilitation of the Mokwa-Bida Road project in its Bid Submission. However, the Respondent disagrees that the error was "knowingly or recklessly made and an attempt to mislead a party". The error was an honest error, and there was no intention or grand objective to mislead any party. The Respondent also contends that the error was not intended to obtain a financial benefit. The Respondent maintains that the Mokwa-Bida Road project was listed only under the General Experience section in the Bids Submission which assesses the general experience of the contractor- bidder and that it was insignificant and did not in any way improve the bid of the Respondent. The Respondent submits that at the end of the day, it was not awarded the contract, and so it did not obtain the alleged financial benefit.

iii) Misrepresentation on Sargittarius Historical Financial Position

25. The Respondent acknowledges that the mistakes were made in the computation and presentation of its Historical Financial Performance and Average Annual Turnover (“the "Financial Situation") presented in Forms FIN 3.1 for the Lots 1, 2 and 4 Bids. However, the Respondent disagrees that in making the error the Respondent either "knowingly or recklessly attempted to mislead a party". The error was an honest error, and there was no intention or objective to mislead any party. The Respondent also contends that the error was innocent and not intended to obtain a financial benefit.

iv) Sanctioning Factors

26. The Respondent opposes any aggravation and requests mitigation on its asserted cooperation with PIAC’s investigation: apologetic stance, speed of its response, internal action against responsible individuals and absence of history of misconduct.

V. PIAC’s Principal Contentions in the Reply

27. In its Reply, PIAC argues that the Respondent has failed to meet the shifted burden of proof to show its conduct did not amount to sanctionable practices. PIAC submits that the Response fails to rebut PIAC’s allegations, arguing that the proceedings before the Sanctions Commissioner were not criminal in nature and the standard of proof was not “proof beyond reasonable doubt”. Similarly, the proceedings are not civil proceedings before a civil court where formal rules of evidence apply.

28. PIAC submits that Sargittarius Ltd is responsible for at least recklessly deceiving WCOS by not conducting due diligence on its JV partner, not properly supervising the work of its employees, and not reviewing the three bids it submitted for the Lots 1, 2 and 4 tenders. Even if in its defense, Sargittarius Ltd. believed, that it did not intentionally commit any of 7

African Development Bank Group

the Fraudulent Practices attributed to it; there is overwhelming evidence that Sargittarius Ltd. was reckless, by abdicating the fiduciary responsibility imposed on it in section 3.1 of the three Bidding Documents.

29. In addition, PIAC submits that it has conducted additional investigation on the relationship between Sargittarius Ltd. and Henan Ltd through the online search portal of the Corporate Affairs Commission (“CAC”) of Nigeria and found the existence of another company registered with the CAC on 19 March 2019, with registration name “Sargittarius Henan Water Conservancy Engineering Ltd.” with registration number 1569424. The finding was confirmed by CAC in a letter dated 29 September 2020. It appears that the registered address of Sargittarius Henan Water Conservancy Engineering Ltd is the same as the Sargittarius Henan Water JV and the shareholders of the company are “Amosu Soloman Sofela Oyemi” and “DurunWan Jianqiang. Also, it is more likely than not that the shareholder of Sargittarius Henan Water Conservancy Engineering Ltd. named as “Amosu Soloman Sofela Oyemi” is the same person as “Amosu Soloman Sofela” named as a shareholder of Sargittarius Ltd. and the same person who signed the Appeal Brief as “Managing Director/Chief Executive Officer” of Sargittarius Ltd.

30. Therefore, PIAC also urges the Sanctions Appeals Board to apply the debarment of Sargittarius Ltd. to Sargittarius Henan Water Conservancy Engineering Ltd., in line with Article A (4) the MDB Harmonized Principles on Treatment of Corporate Groups 2012.

VI. THE APPEAL

31. In its appeal, the Respondent requested the Sanctions Appeals Board to overrule the Sanctions Decision of the Commissioner and exonerate the Respondent unconditionally on the following grounds:

1. PIAC failed to lead sufficient evidence to show that it is more likely than not that the Respondent engaged in sanctionable practices as required by Section 13.2 of the Sanctions Procedures, and instead wrongly placed the burden of proof on the Respondent.

2. Improper evaluation of evidence by the Commissioner and his misapplication of settled legal principles.

3. Absence of Proof of fraudulent intent: The Respondent admitted making errors in the Bids Submission. However, these misstatements were not knowingly or recklessly

8

African Development Bank Group

misleading or designed or calculated or attempted to mislead, and the Respondent did not obtain any financial or other benefit or avoid any obligation.

VII. THE SANCTIONS BOARD’S ANALYSIS AND CONCLUSIONS

The Sanctions Appeals Board will first consider whether the investigation was marred with procedural unfairness and whether the record supports a finding that it is more likely than not that the Respondents engaged in fraudulent practices. The Sanctions Board will then consider what sanctions, if any, should be imposed on the Respondent. A. Evidence of Sanctionable practices

32. The Respondent submits that PIAC failed to lead sufficient evidence to show that it is more likely than not that it engaged in sanctionable practices as required by Section 13.2 of the Sanctions Procedures, and instead wrongly placed the burden of proof on the Respondent.

33. Section 13.23 of the Bank’s Sanction Procedures provides that, PIAC shall have the burden of proof to present evidence sufficient to establish that a preponderance of the evidence shows that the Respondent engaged in a Sanctionable Practice. Section 13.1 of the Sanctions Procedures on standard of proof, provides that for the purpose of these procedures, the preponderance of the evidence is determined by whether upon consideration of relevant facts and materials before the body considering such facts and materials, that it is more likely than not that the Respondent has engaged in a Sanctionable Practice. PIAC conducted its investigation and concluded that there were multiple misrepresentations in connection with the tenders and on 19 June 2019, sent a Show-Cause Letter to the Respondent. Section 13.2 provides further, that once PIAC presents evidence sufficient to establish that a preponderance of the evidence shows that the Respondent engaged in a Sanctionable Practice, then the burden of proof shall subsequently shift to the Respondent to demonstrate that it is more likely than not that the Respondent’s conduct did not amount to a Sanctionable Practice.

34. In accordance with Section 13.2 of the Sanctions Procedures, PIAC bears the initial burden to show that it is more likely than not that the Respondent: (i) engaged in any act or omission, including a misrepresentation, (ii) that knowingly or recklessly misled, or attempted to mislead, a party

3 Section 13.2 of the Sanctions Procedures - Burden of Proof. PIAC shall have the burden of proof to present evidence sufficient to establish that a preponderance of the evidence shows that the Respondent engaged in a Sanctionable Practice. The burden of proof shall subsequently shift to the Respondent to demonstrate that it is more likely than not that the Respondent’s conduct did not amount to a Sanctionable Practice. 9

African Development Bank Group

(iii) to obtain a financial or other benefit or to avoid an obligation. Fraudulent Practice is defined by paragraph 4.2 (b) of the African Development Bank’s Sanctions Procedures and by Section 1.14 (a)(ii) of its Rules and Procedures for Procurement of Goods and work, excerpt May 2008 Edition and revised in 2012 as: “any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation”. Because the Respondent agrees with PIAC that the allegations of fraudulent practices in I - III of PIAC's Findings are similar, and, to avoid duplication, the Sanctions Appeals Board will analyze the three Allegations at the same time. i) Fraudulent Practices (I-III): Misrepresentation of Facts on the Joint Venture Agreement

a. The misrepresentation

35. PIAC submits that Respondent submitted Joint Venture Agreement purportedly executed with Henan Ltd., dated 31 October 2014, for Lots 1 and 2 Bids (Exhibit 18 A/B) and 6 September 2016 for Lot 4 Bid (Exhibit 19). In support of the forgery allegations, PIAC has tendered as evidence a letter dated 15 February 20194 from Henan Ltd., denying any business relationship with Sargittarius, and any employee relationship with Mr. Liu Taotao. Henan Ltd. also stated in the same letter that the signature in the Power of Attorney attributed to its former employee Mr. Ma Quanli, is not true and that they cannot certify as to the authenticity of Mr. Liu Taotao’s signature because it was unknown to them.

36. The Respondent submits that PIAC did not provide sufficient evidence to demonstrate that the Respondent misrepresented its partnership with Henan. To be sure, the only evidence provided by the PIAC was the unsigned letter dated February 15, 2019 allegedly written by Henan denying any business relationship with Sargittarius and disowning the signature of its ex-employee, Mr. Ma Quanli.

37. In general, and consistent with Section 13.3 relating to Admissibility and Weighing of Evidence of the Sanctions Procedures, the Sanctions Appeals Board shall have discretion to determine admissibility, relevance, materiality, weight, and sufficiency of evidence. Formal rules of evidence shall not apply. In support to the Misrepresentation of Facts on the Joint Venture Agreement, PIAC provided as evidence, the unsigned letter dated February 15, 2019 allegedly written by Henan denying any business relationship with

4 Henan’s letter to PIAC denying any business relationship with Sargittarius. 10

African Development Bank Group

Sargittarius and disowning the signature of its ex-employee, Mr. Ma Quanli, without providing any genuine signature for comparison.

38. Considering the totality of the evidence presented, the Sanctions Appeals Board finds that PIAC has not met its burden of proof to show that it is more likely than not that the JV agreement was forged. Accordingly, the burden does not shift to Respondent to demonstrate that it is more likely than not that Respondent did not use a forged JV agreement.

b. That knowingly or recklessly misled, or attempted to mislead, a party

39. In view of its findings above, the Sanctions Appeals Board need not consider whether Respondent acted knowingly or recklessly, or to influence the procurement process to qualify for the award of lots 1, 2 and 4 bid contracts.

ii) Fraudulent Practices (IV – VI) Misrepresentation on the Rehabilitation of the Mokwa – Bida Road Contract.

a. The misrepresentation

40. Criterion 2.4.1., of the Lots 1, 2 and 4 bidding documents required bidders to demonstrate general experience of participating in the role of a contractor, for at least the last ten (10) years prior to the bid submission deadlines. PIAC submits that in response to Criterion 2.4.1., Respondent submitted to the Water Corporation of Oyo State (WCOS), three completed Forms EXP 2.4., and listed the completion of the rehabilitation of the Mokwa- Bida Road project as its own. Verification with the Ministry of Power, Works and Housing (formerly Ministry of Works, Nigeria) by a letter dated 14 December 2018, informed that the rehabilitation of the Mokwa-Bida Road was awarded to M/S Triacta Nigeria Limited and not to the Respondent as alleged.

41. In past decisions, finding that the Respondent submitted forged documents, the Sanctions Appeals Board has relied primarily on written statements from the parties named in or supposedly issuing these documents, as well as the respondent’s own admissions5. In this case, the Respondent acknowledges including the completion of the rehabilitation of the Mokwa-Bida Road project in its Bid Submission that it was done in error. However, disagrees that the error was "knowingly or recklessly made in an attempt to mislead a party". The Respondent submits that the error was an honest error, and there was no intention or grand objective to mislead any party. The Respondent also contends that the

5 Sanctions Appeals Board decision No. 7 at para 51 11

African Development Bank Group

error was not intended to obtain a financial benefit. The Sanctions Appeals Board finds the evidence sufficient to support misrepresentation.

b. That knowingly or recklessly misled, or attempted to mislead, a party

42. Section 4.2(b) of the Sanctions Procedures defines fraudulent practice as any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation. In assessing recklessness, the Sanctions Appeals Board may consider whether circumstantial evidence indicates that the Respondent was aware of, but disregarded, a substantial risk - such as harm to the integrity of the procurement process due to false or misleading bid documents.

43. In its response dated 11 June 20206, to PIAC’s findings, the Respondent provides that all the projects it selected for inclusion in the Bids were already part of the general project records, apparently during compilation, the Mokwa-Bida Road project bid was erroneously included by the employee that prepared the Bids. In the context of Bank-Financed Projects, the standard of care as articulated by the Bank’s procurement policies must be observed. Section I (3.1) Instructions to Bidders7 requires borrowers as well as bidders to observe the highest standard of ethics during the procurement and execution of bank –financed contracts. The record here supports a finding that the Respondent’s Project Manager (Liu TaoTao) breached that duty of care in signing and submitting the bidding documents for Lot 48. The Sanctions Appeals Board finds the Respondent’s own description of events to support the allegation of recklessly misleading the Project Manager who accepted the documents as true and authentic.

c. To obtain a financial or other benefit or to avoid an obligation

44. The Respondent submits that it was not awarded the contract, and so it did not obtain the alleged financial benefit. As there has been no form of financial benefit to the Respondent, this third element is not established and should fail. The Sanctions Board of the World Bank has consistently held that, where the record demonstrates that a misrepresentation was made in response to a tender requirement, the intent to obtain a benefit or avoid an obligation may be inferred9. Under Section 13.4 of Sanctions Procedures, the Sanctions Appeals Board has the discretion to infer purpose, intent and /or knowledge on the part of

6 Sargittarius response dated 11 June 2020 at para 2.6 -2.7 7 Exhibit 3. Instructions to Bidders – Section I (3.1) 8 Certification of bid package for lot 4 signed 7 October 2016 9 Sanctions Board Decision No. 74 (2014) at para. 29 12

African Development Bank Group

the Respondent from circumstantial evidence. Because the rehabilitation of the Mokwa- Bida contract was submitted by the Respondent in response to a tender, the Sanctions Appeals Board infers the intent to obtain a financial or other benefit.

iii) Fraudulent Practice VII: Misrepresentation on Sargittarius Financial Position

45. PIAC submits that the Respondent knowingly or recklessly provided false information in three Forms FIN 3.1., submitted as part of each of the Sargittarius/Henan JV bids submitted for the Lots 1, 2 and 4 Bids, with the intention to deceive WCOS on the historical financial position of Sargittarius Ltd.

a. The Misrepresentation

46. Sections 2.3.1 and 2.3.2 of the bidding documents for the Lots 1, 2 and 4 Bids require all bidders to provide either Form FIN 3.1 and demonstrate the sound financial standing of their companies or if not required by the law of the bidder’s country, other financial statements acceptable to the Employer, for the five (5) years preceding the submission, showing an average annual turnover of USD$30,000,000 in bids for the Lot 1 and 2 Bids and three (3) years preceding submission, showing an average annual turnover of USD$ 10,000,000 in bids for the Lot 4 Bid.

47. In response to the requirement of Clause 2.3.1., of the bidding documents, the Respondent submitted three completed Forms FIN 3.1 as part of the Sargittarius/Henan JV bids for the Lots 1, 2 and 4 Bids respectively. The forms had summaries of the annual aggregate financial turnover for the years required by the bidding documents, including the year 2013. Upon conducting, a comparative analysis of the three Forms FIN 3.1 submitted by Respondent, PIAC discovered discrepancies in the aggregate turnover for the year 2013.

48. Here again, the Respondent acknowledged that mistakes were made in the computation and presentation of its Historical Financial Performance and Average Annual Turnover presented in Forms FIN 3.1 for the Lots 1, 2 and 4 Bids. However, the Respondent disagrees that in making the error the Respondent either "knowingly or recklessly attempted to mislead a party". The error was an honest error, and there was no intention or objective to mislead any party.

49. Considering the Respondent’s admission of the discrepancies in the computation and presentation of its historical financial performance, the Sanctions Appeals Board finds it more likely than not that, the Forms FIN 3.1 were manipulated and therefore constituted misrepresentations in the Bids.

13

African Development Bank Group

b. Knowingly or Recklessly Attempted to Mislead a Party

50. PIAC submits that Respondent made at least seven fraudulent misstatements on its annual aggregate turnover in the comparative analysis table below. While the numbers presented for Lots 1 and 2 are the same, they are higher than the numbers presented for Lot 4 that required a lower average annual turnover. The Respondent acknowledges the discrepancies and attributes them to simple errors.

Year 2013

Financial Information in US$ Lots 1 Lot 2 Lot 4 equivalent (Submitted (Submitted (Submitted December 2014) December 2014) October 2016)

1. Total Assets (TA) 126,021,014.04 126,021,014.04 15,607,436.37 2. Total Liabilities (TL) 105,197,213.88 105,197,213.88 604,136.21 3. Net Worth (NW) 20,823,800.16 20,823,800.16 319,612,499.38 4. Current Assets (CA) 109,327,600.54 109,327,600.54 9,974,645.29 5. Current Liabilities (CL) 102,050,355.89 102,050,355.89 92,325,562.50 6. Total Revenue (TR) 131,925,500.5 131,925,500.5 39,445,439.58 7. Profits Before Taxes 966,071.67 966,071.67 4,854,710.53

51. Forms FIN 3.1 require that Financial Statements be audited by a certified accountant. The Forms create an obligation for a bidder to verify, certify and confirm its financial statements prior to submission. The Respondent failed to apply any scrutiny to key documents of the bids. By failing to scrutinize the documents prior to submitting them for the bids, the Respondent avoided an obligation. The Respondent committed a fraudulent practice as defined in Section 4.2 (b) of the Sanctions Procedures10. The Sanctions Appeals Board finds the Respondent’s own description of events to support the allegation of recklessly misleading the Project Manager who accepted the documents as true and authentic.

c. To obtain a financial or other benefit or to avoid an obligation

52. The Sanctions Appeals Board finds that it is more likely than not that the misrepresentations were made to obtain a benefit. The Sanctions Appeal Board has previously found that, where the record showed that a respondent's submission of forged

10 Fraudulent practice: Any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation. 14

African Development Bank Group

or misleading documents was made in response to a bid requirement, the respondent's use of the documents was more likely than not intended to show the respondent's qualifications and thereby help the respondent win the tender and benefit from such award11. Therefore, the Sanctions Appeals Board concludes that the submission of the falsified documents served to obtain a financial or other benefit for the Respondent or to avoid the obligation.

B. The Respondent’s Liability for the Acts of its Employees

53. In past cases, the Sanctions Appeals Board has considered that a respondent entity could be held directly and/or vicariously liable for the acts performed by its employee or authorized representative, acting in the course and scope of that individual's duties12. The World Bank Sanctions Board has also concluded that an employer could be found liable for the acts of its employees under the doctrine of Respondeat Superior13, considering whether the employees acted within the course and scope of their employment, and were motivated, at least in part, by the intent of serving their employer14.

54. While not giving sufficient information of its relationship with the purported employees who prepared the documents for the tender of Lot 1, 2 and 4, Respondent provides that it terminated the employment of all the employees who were involved in the computation or preparation of the defective bids. These internal corrective actions show the existence of a principal – agent relationship between the Respondent and the terminated employees who were acting in the course and scope of their duties and for the benefit of the Respondent. Moreover, the record does not provide any basis for, and the Respondents do not assert, a rogue employee defense. For these reasons, the Sanctions Appeals Board concludes that it is more likely than not that the Respondent engaged in each of the fraudulent practices alleged.

C. Sanctions Analysis

i) General framework for determination of sanctions

55. Where the Sanctions Appeals Board determines that it is more likely than not that a Respondent engaged in a Sanctionable Practice, Section 11 of the Sanctions Procedures requires the Sanctions Appeals Board to select and impose one or more appropriate

11 SAB decision No. 6 at para 33 12 SAB decision N0 7 at para 73 13Respondeat Superior: a doctrine that holds an employer or Principal liable for the wrongful acts of an employee or agent committed within the scope of employment or agency 14 Sanctions Board Decision No. 46 (2012) at para. 29 15

African Development Bank Group

sanctions from the range of possible sanctions identified in Section 11.2. The range of sanctions set out in Section 11.2 are: (a) letter of reprimand, (b) conditional non-debarment, (c) debarment, (d) debarment with conditional release, (e) permanent debarment (f) restitution and or remedy (g) other sanctions.

56. Where the Sanctions Appeals Board imposes a sanction on a Respondent, it may also, pursuant to Section 12.115 of the Sanctions Procedures impose appropriate sanctions on any Affiliate of the Respondent.

ii) Factors applicable in the present case

a. Procedural unfairness

57. The Sanctions Appeals Board found that PIAC did not accord the Respondent fair and proper opportunity to prove its case concerning the forged joint venture (JV) agreement. The process of investigation was not fair. At some point, PIAC refuses to follow through with the investigation. Some key persons mentioned in the investigation were not interviewed. Every impartial tribunal ought to demonstrate impartiality by according all parties fair opportunity to present their cases. In addition, the Sanctions Appeals Board believes that the Sanctions Commissioner did not help the matter even though he was skeptical about PIAC’s evidence and investigation. Yet, he went ahead and apportioned liability on the Respondent. PIAC failed to provide proper response to the Request for clarification made by the Sanctions Commissioner.

b. Admission/acceptance of guilt/responsibility

58. Section 11.4(i) of the Sanctioning Guidelines recognizes cooperation in the form of a Respondent's admission or acceptance of guilt or responsibility, with the condition that early admissions or acceptance should be given more weight than admissions or acceptance coming later in the investigation or sanctions proceedings. Although the record includes several statements by the Respondent acknowledging the listing of the Rehabilitation of the Mokwa – Bida Road Contract and use of forged financial statements by in error, such acknowledgments do not extend to admissions or acceptance of the Respondents' own

15 If accountability is determined, sanctions may be imposed on an associated party such as the principals of a firm, owners, directors, officers, or shareholders, and other related parties (‘Associated Parties’) for the commission of a Sanctionable Practice. In determining association or other relationships, consideration shall be given to the Bank Group’s policies on the treatment of corporate groups or such other policy, as well as to familial relationships; the ability to directly or indirectly control or significantly influence another party; common or related ownership, management, or control, whether or not related to a specific percentage of ownership or rights; and an agreement or dependency, such as a joint venture or consortium, with another party. 16

African Development Bank Group

culpability or responsibility. Given the Respondent’s' limited and inconsistent characterizations of their role, the Sanctions Appeals Board concludes that no mitigation is warranted.

c. Internal action against the responsible individual(s)

59. Section 11.4(g) of the sanctions procedures provides that “any mitigating circumstances, including the intervening implementation of programmes to prevent and detect fraud or corruption or other remedial measures by the Respondent;” may be considered by the Sanctions Appeals Board in the choice of sanctions. The Respondent asserts that the two employees involved in the preparation of the bids were dismissed as well as the revamping of its internal quality control processes before the commencement of the present investigations by the PIAC. The Sanctions Appeals Board agrees with the Sanctions Commissioner and does not find sufficient evidence to support mitigation for these asserted internal actions. The contents of the two termination letters16 do not indicate that the two employees were dismissed due to their involvement in the defective bids. On the contrary, the letters indicate that the two employees’ contracts, were terminated “as a result of the ongoing restructuring process”.

d. Cooperation with the investigation

60. Section 11.4(i) of the Sanctions Procedures provides for mitigation where a Respondent “cooperated in the investigation or resolution of the case. The Respondent cooperated with PIAC’s investigators, as evidenced by Mr. Amosu’s letter dated 2 April 2019 in which he indicated his readiness to avail himself to the investigators, but for the fact that he was due to travel out of Nigeria. In the same letter, Mr. Amosu suggested an alternative date for the interview, but PIAC did not find the said date convenient. In these circumstances, the Sanctions Appeals Board finds the record to support the finding that the Respondent’s conduct was sufficiently cooperative to merit mitigation.

e. Absence of Past Misconduct and Significant Loss

61. The Respondent puts forward the absence of past misconduct and the fact that there have been no significant losses caused to WCOS and to the Bank Group by the mistakes and the fact that the Respondent has no prior history of Sanctionable Practices. In a recent decision17, the Sanctions Appeals Board held that the absence of harm to the project is not a ground for mitigation, but a neutral fact. This is also true for the absence of past

16 Exhibit SG8 – Employment termination letter 17 SAB decision 7 at para 85 17

African Development Bank Group

misconduct. The World Bank Sanctions Board has repeatedly held that, while a record of past Sanctionable misconduct may merit treatment as an aggravating factor; its absence is considered a neutral fact18. Therefore, the Sanctions Appeals Board declines to apply any mitigating credit on this basis.

D. Determination of the Appropriate Sanction

62. Considering the full record and all the factors discussed above, the Sanctions Appeals Board determines that:

(i) The Respondent, together with any entity that is an Affiliate directly or indirectly controlled by the Respondent, and more specifically Sargittarius Henan Water Conservancy Engineering Ltd., are hereby debarred with conditional release for a period of eighteen (18) months and hereby declared ineligible to be awarded or otherwise benefit from a Bank-financed contract, financially or in any other manner; (ii) to be a nominated sub-contractor, consultant, manufacturer, 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 or governed by the Bank’s Rules and Procedure for the Procurement of Goods and Works and the Bank’s Rules and Procedure for the Use of Consultants;

(ii) Provided however, that at the end of the debarment period of eighteen months (18) months, the Respondent and all entities controlled by the Respondent including Sargittarius Henan Water Conservancy Engineering Ltd. may be released from ineligibility, subject to:

a. full adoption and implementation of an Integrity Compliance Program (hereinafter referred to as the ‘ICP”) consistent with the AfDB Compliance Guidelines, cleared by PIAC; b. full assistance and cooperation with PIAC in its review and clearance of the ICP; c. retention of a consultant as its Designated Representative to conduct the review and clearance of the ICP on behalf of PIAC. Respondent shall cooperate with PIAC’S ICP review process and bear the full cost of the ICP review; and d. cooperation with law enforcement agencies and regulatory authorities of

18 Sanctions Board Decision No. 117 (2019) at para. 44 18

African Development Bank Group

the Bank Member Countries, for the duration of the debarment period, in any investigation of the Respondent, its former or present representatives, agents, employees, subcontractors and consultants.

63. The Respondent’s ineligibility shall extend across the operations of the African Development Bank Group. The Bank will also provide notice of these declarations of ineligibility to the other Multilateral Development Banks that are party to the Agreement for Mutual Enforcement of Debarment Decisions (the “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 Cross-Debarment Agreement and their own policies and procedures19.

Mrs. Oluremilekun Ademola Adegoke (Panel Chair)

On behalf of the African Development Bank Group Sanctions Appeals Board Marie-Andrée NGWE Julius NKAFU Hassatou NSELE

19 At present, the MDBs that are party to the Cross-Debarment Agreement are the African Development Bank Group, the Asian Development Bank, the European Bank for the Reconstruction and Development, the Inter-American Development Bank Group, and the World Bank Group. The cross-Debarment provides that subject to the prerequisite conditions set forth in the Cross-Debarment Agreement, unless a participating MDB (i) believes that any of the prerequisite conditions set forth in the Cross-Debarment Agreement have not been met or (ii) decides to exercise its rights under the “opt out” clause set forth in the cross-Debarment Agreement, each participating MDB will promptly enforce the debarment decisions of the other participating MDBs.

19