Saturday, January 24, 2009

'India's Enron' Blitzes U.N. Procurement Divisions

Friday , January 23, 2009

By George Russell


What kind of special relationship has Satyam Computer Services Ltd., the Indian-based computer giant at the center of a $1 billion fraud scandal, been trying to cultivate with the United Nations?

The full extent of the company's relationship to the world body is not publicly known. But, U.N. documents obtained by FOX News strongly indicate that it continued to deepen even as Satyam slid into trouble.

The relationship is special enough, apparently, that in the days and months after the World Bank, a U.N. institution, suspended Satyam as a supplier last February for financial improprieties involving a top World Bank official, other U.N. agencies simultaneously accepted different branches of Satyam as suppliers.

The World Bank suspension, upgraded to a complete ban on Sept. 22, 2008, brought an end to a strategic partnership that had sent hundreds of millions of dollars to the Indian computer firm since 2003. But as FOX News subsequently reported, the World Bank sanctions were not conveyed by the institution to other agencies in the sprawling U.N. system.

According to internal U.N. procurement documents obtained by FOX News, no fewer than four major U.N. agencies — the United Nations Development Program (UNDP), the United Nations High Commissioner for Refugees (UNHCR), the International Labor Organization (ILO), and the World Intellectual Property Organization (WIPO) — suddenly adopted a Geneva, Switzerland-based branch of Satyam as a provisional supplier on March 3, 2008 — the same day that the company applied for acceptance.

• Click here to see the Swiss branch's registration.

The extraordinary salvo of lightning-fast U.N. acceptances, at a time when Satyam itself knew it had been suspended by the World Bank, did not end there.

Same-day approval was also given to the Swiss branch of Satyam by the U.N.'s International Fund for Agricultural Development (IFAD), based in Rome, on Aug. 6, 2008, according to the same documentation from the United Nations Global Marketplace (UNGM), a central registry of U.N. suppliers based on information from the separate agencies.

That was roughly a month before the World Bank converted its February suspension of India-based Satyam into a formal ban — a fact that the public only learned on Dec. 22, via FOX News.

And again on Oct. 3, 2008 — after the World Bank's formal ban had taken effect — yet another branch of Satyam, this time based in Parsippany, New Jersey, emitted a flood of requests to be accepted as a U.N. vendor, and got same-day approval from UNICEF.

The Parsippany branch's Oct. 3 request was also approved by IFAD, but at a more leisurely pace — on Dec. 18, 2008. That was four days before FOX News revealed the months-long World Bank suspension and ban.

A number of other U.N. agencies also received the Oct. 3 request from Satyam USA, but apparently did nothing, according to the UNGM records.

• Click here to see the Parsippany branch's registration.

What exactly was going on?

For one thing, as FOX News pointed out earlier this month {link here}, Satyam was continuing to make money from contracts with the U.N., in part because the World Bank did not make its suspension and subsequent banning of Satyam known to other U.N. agencies. One of those contracts was a $6 million service agreement with the U.N. Secretariat to customize and manage its sensitive human relations software around the world.

But the latest documentation to see daylight reveals something else — a blitzkrieg effort by Satyam to install different parts of itself in the U.N. system, even as it sank into the swamp of financial fraud and sanctions imposed by the World Bank.

The significance of at least one part of the re-registration effort seemed clear from the records examined by FOX News: each time Satyam applied for a new vendor registration, it received a new ID number, known as its "UNGM Number," in the Global Marketplace system, which allowed it to be recorded as a separate supplier.

The different registrations allowed the respective Satyam branches to remain in the Global Marketplace as separate entries alongside the original India-based main company (UNGM Number 108808).

• Click here to see the main company registration.

The Swiss-based branch of Satyam was issued UNGM Number 149527, and the Parsippaney-based branch got Number 145821.

These separate identities were maintained even though all of the different companies offered up the same Web address at UNGM — — .Whether each of the distinct companies may have played some role in Satyam's final financial implosion, which may not be fully entangled by Indian investigators for months, or even years, is also not known.

The same separate identities also allowed different branches of Satyam to continue to try to offer services to the U.N. — which it was already, in some cases, doing. Among the U.N. contracts underway even after the Indian company imploded were a $6,035,000 contract to customize and manage sensitive human resources software for the U.N. Secretariat, made public by FOX News on Jan. 12.

As soon as FOX News began questioning that contract, U.N. officials began scrambling to suspend Satyam's status — but only as the existence of each separate branch of the company was made known to them by FOX News.

Thus, the Indian branch of Satyam (Number 108808) was officially suspended by the U.N. Global Marketplace, through the sites manager, known as the U.N. Office for Project Services, or UNOPS, on Jan. 14 after the FOX News article on its human relations software contract appeared.

• Click here to see the suspension announcement.

But the Parsippany and Geneva branches of Satyam were only marked as suspended on some views of the UNGM website on Jan. 22, the day after FOX News asked all of the U.N. agencies that had suddenly embraced the firm to account for its status with them.

• Click here to see the amended suspension announcement.

When it came to answering questions about their registration of Satyam and their contractual relations with the firm, the U.N. agencies offered varying and sometimes contradictory explanations.

The United Nations Development Program told FOX News that it had contracted for one year with Satyam, branch unspecified , to the tune of $1.7 million starting in December 2007, and was currently "evaluating" phase-out of the contract — apparently still in force after the one-year term had expired. (A check of other U.N. data bases revealed that most of the UNDP contracts were with a British-based branch of Satyam that did not show up in the Global Marketplace listing at all.)

Geneva-based IFAD, a relatively little-known U.N. agency that finances agricultural development in poor countries, told FOX News that it has a three-year "Long Term Agreement" with the Parsippany branch of Satyam, which went into effect last June. Such long-term agreements are typically open-ended, but in IFAD's case, a spokesman said, it has so far involved two consultancy contracts, with a value of about $100,000.

IFAD did not say what the consultancies involved, or whether the agreement would be terminated in light of the fraud charges engulfing Satyam's parent company. Nor did it explain why the Global Marketplace website only listed the Parsippany branch of Satyam as being "evaluated" as a supplier in December, 2008, months after the consultancies were contracted.

The Geneva-based United Nations High Commissioner for Refugees (UNHCR) said that it had never formally registered Satyam's Swiss branch at all, and any record of that registration on the Global Marketplace was apparently mistaken. "In Satyam Geneva's case they were never pre-qualified, approved or registered by UNHCR in our vendor database because we never received the required follow-up documents from them" a UNHCR spokesman maintained, basing his reply on answers he got from UNHCR procurement in Budapest. "The UNGM platform you read is only used by UNHCR as an entry portal for potential vendors to communicate to us their interest in being registered with us or as a platform for us to advertise tenders that are open to all."

According to a spokesman for the managers of the U.N. Global Marketplace, however, any status of the companies noted on the website only got there because the solicited U.N. entity approved. As one of them put it, each U.N. entity "manages its own set of potential suppliers in UNGM and independently approves, rejects, and suspends suppliers, which actions appear in the database via the website"

And in the UNGM database, Satyam Switzerland is clearly listed as approved for UNHCR. In the case of some other agencies approached in the Swiss company's registration blitz, requests for registration are noted, but approval is not indicated.

UNHCR officials insisted, however, that "we have never entered into any contract with any of the Satyam companies, and although they may have submitted tenders in open tender procedures, they were never successful with those."

According to UNICEF, Satyam's request for registration involved nothing more than an on-line form. "Any company can list the particular services that it claims to sell, and indicate it wants to sell them to UNICEF," a spokesman for the children's fund said. "UNICEF's only role at that point is to confirm that the supplies/services in question are ones we buy. If so, the company is "registered" with the UNGM. Registration in one day is not uncommon."

A subsequent further review of Satyam within UNICEF, the spokesman added, confirmed its eligibility — "including (among other things) a review of its financials." Satyam received a stamp of approval from UNICEF's own purchasing organization on October 16, the spokesman said — an approval that was rescinded this month after revelation of the World Bank's ban. UNICEF, the spokesman emphasized, "has not done any business with them."

According to the World Intellectual Property Association (WIPO), its own vendor registration policy "does not require any pre-qualification or vetting of the companies that wish to register as potential suppliers." Companies are only thoroughly vetted when they respond to contract tenders. A WIPO spokesman said that acceptance of a company through UNGM would be "automatic."

Yet despite the fact that the Swiss branch of Satyam's acceptance at WIPO dates from March 12, 2008, the spokesman also reported that the same branch "won a WIPO open international tender in 2007 for the provision of a range of IT consulting services." The spokesman did not specify the value of the contract. That ongoing contract with Satyam had been "evaluated" since the revelations concerning the parent company's misdeeds, but only, it seemed, from the viewpoint of whether the Swiss branch might run out of money as a result of the financial scandal.

That risk, the spokesman reported, had been deemed "negligible." No other reason for a change in the supplier had apparently been contemplated.

One of the broader issues raised by the Satyam case is whether any public source of information about U.N. contracting actually reveals the true state of its dealing with companies that, as in the case of Satyam, have engaged both in financial fraud and in unacceptable financial dealings with U.N. officials.

But the same issue has been true, of course, in regard to the U.N.'s internal and non-public information systems.

Last May, for example, FOX News revealed that United Nations Development Program auditors had reported that the agency's multibillion-dollar procurement business was a shambles, rife with shoddy paperwork and faulty or non-existent bidding practices, full of unqualified personnel, and with no sure way of knowing whether its vendors even had been registered with the rest of the U.N. as maintaining terrorist ties.

The case of Satyam may well raise the issue of whether a similar audit is needed across the entire U.N. system.

1 comment:

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