Scandal at UNDP Tests Ban

June 4, 2007

Scandal at UNDP Tests Ban

BY BENNY AVNI - Staff Reporter of the Sun
June 4, 2007
URL: http://www.nysun.com/article/55774


Secretary-General Ban is facing a growing scandal that may prove his leadership's Waterloo. Will he, from now on, dedicate his energies to fixing Turtle Bay's shortcomings, or will he shrug and chase diplomatic glory instead?

On Friday, a panel of auditors, charged by Mr. Ban with examining American allegations that several U.N. agencies broke their own rules while operating in North Korea, released its preliminary report. The findings were incomplete, as the auditors' access to documentation was lacking, but the report basically confirmed the original American allegations.

Here is a summary of an 11-page written response Friday by one of the agencies, the U.N. Development Program: a. we did no wrong; b. everybody does it; c. our predecessors did it (including the previously unassailable former administrator Mark Malloch Brown), and d. we already fixed what needs fixing.

So, is this a serious scandal, requiring significant portions of Mr. Ban's valuable time, or can he trust the agencies to self-correct?

"This is just the beginning of the beginning," America's former ambassador at the United Nations, John Bolton, told me over the weekend, referring to the preliminary audit results. "The burden is now on the Secretary-General to carry the investigation forward. How he handles these deeply troubling revelations, even as incomplete as they are, will indelibly mark his tenure."

Mr. Bolton is being courted by several of the Republican front-runners but is not yet backing any of the presidential candidates.
The American U.N. mission, led by Mr. Bolton and one of his deputies, Mark Wallace, last year exposed the cozy relations between the UNDP and the country known in U.N. parlance as DPRK. The development agency's interests became so indistinguishable from those of the totalitarian Communists that the partnership earned the dubious nickname UNDPRK.

To his credit, and unlike UNDP spokesmen, Mr. Ban was cautious Friday. A widely quoted excerpt from a statement issued by his spokeswoman, Michel Montas, sounded like an attempt at exoneration, but it also stressed that the audit indeed found that the agencies have violated the U.N. rules, and that auditors should now dig deeper — including with so-far denied visits to North Korea.

As in the debacles that beseiged Mr. Ban's predecessor, Kofi Annan, some aspects of the North Korea scandal may — and should — end up as criminal investigations. The U.N. auditors wrote that they did not dig deeply into the mystery of the 35 counterfeit $100 bills stashed for 12 years in a safe of the UNDP Pyongyang office, which was beyond the scope of their audit.

But in his official response to the audit, handed Friday, UNDP associate director Ad Melkert disclosed several new details about the funny money scandal — including the fact that the UNDP has contacted the North's dictators in an attempt to get the agency's money back (in real currency this time), arguing that the embassies of Nigeria and Indonesia were reimbursed after they were similarly paid in phony bills.

Why were the American authorities, who are the rightful owners of the currency, not notified for 12 years? Why weren't they told either of the UNDP possession of fake U.S. currency or of the fact that Pyongyang also used counterfeit bills to pay other foreign entities? Washington's assertions that North Korea widely engaged in undermining American currency, after all, were often met with skepticism around the world. Did the UNDP try to sweep its own proof of a counterfeit printing operation under the rug?

In his response, Mr. Melkert punts. His predecessors, from former administrator Mr. Malloch Brown backwards, did not address numerous reports from their Pyongyang underlings about the fake currency. "The matter was brought to the attention of the current senior management in New York in February 2007," Mr. Melkert writes. And by March the fake bills were dutifully transferred to the American possession.

Well, not exactly. One knowledgeable source tells me that since the August 2005 appointment of the current UNDP administrator, Kemal Dervis, the agency's Pyongyang office had filed several reports asking headquarters what to do with the fake bills.

The audit, conducted by three officials of the U.N.'s own external board of auditors, examined UNDP activities in North Korea, as well as those of the food agency UNFPA, and the children fund UNICEF. It also looked into a support unit, UNOPS. The North Korean expenditures of all these bodies during the years audited, 2002-2006, added up to $72,527,834.

"UNDP made some payments to local suppliers and staff in foreign currency," violating the agency's agreement with North Korea and its own rules without receiving an exemption from its board of directors, according to Friday's report.

The agencies also hired local workers who were in fact regime employees or, in the audit's language, "seconded" by the government. Only a few visits were made by the agencies to the projects they financed. And though projects were designed to help the population, the report found that U.N. access to them "only occurred in a coordinated way with the authorization and supervision" of the Pyongyang's tyrants.

"No complete set of financial statements" of the agencies' Pyongyang's activities were "submitted for audit," the report adds.
Mr. Melkert claimed in his response that the UNDP did not violate rules relating to foreign currency payments. None of the agencies' local staff were "seconded" by the government, he argues (to the surprise of anyone familiar with Pyongyang's ways.) He maintains that "all documentation requested by the audit team was provided," and claims the UNDP has already corrected its ways.

Mr. Ban now must decide between the competing versions. He may also want to wonder aloud whether helping the dictatorial regime north of his homeland under these conditions is worth it.
bavni@nysun.com