EBRD chief laments corruption after director fired

LONDON, Jan 21 (Reuters) - Suspected misconduct by officials at the European Bank for Reconstruction and Development highlights the need to tackle endemic corruption in the bank’s area of operations, the bank’s head said on Friday.

The EBRD this week lifted the immunity of four Russian officials, including Yelena Kotova, Moscow’s representative on the bank’s board, to facilitate criminal probes by British police and the Russian authorities.

Kotova was dismissed by Prime Minister Vladimir Putin in December, a day after the EBRD handed over the findings of an internal probe launched last July that found strong indications of a breach of the bank’s code of conduct.

“It remains an unfortunate truth that corruption remains an endemic problem across the area where the EBRD is active,” EBRD President Thomas Mirow said in a speech to a delegation from the Council of Europe.

“Making significant progress in matters of integrity is essential to improve the attractiveness of the region for investors.”

The EBRD was set up in 1991 to help the countries of the former communist bloc make the transition to the free market. It invested a record 9 billion euros in the region last year, including 2.3 billion euros in Russia.

The bank has declined to comment on the substance of its investigation, saying that disclosing details may be prejudicial to investigations in Russia and by the City of London Police’s foreign corruption unit and any prosecutions that may result.

But Mirow, a German former deputy finance minister, made his views on the matter crystal clear, describing the case as “very serious”.

Speaking more generally about the development prospects of eastern Europe and the former Soviet Union, Mirow said: “Corruption, let us be clear, is the cancer eating away at the foundation of every sound economy.”

Kotova’s whereabouts were not clear, and she has not commented publicly on the case against her. The identity of the other three Russian suspects has not been disclosed.

All were appointed by the Russian government and were not subject to the EBRD’s usual internal screening procedures. (Reporting by Sujata Rao, Editing by Douglas Busvine)