ANALYSIS: Ethics and Accountability at the United Nations

By George Russell

Does the United Nations accept the rule of law?

That question has been hanging over the world organization for nearly a year, ever since the U.N.’s first ethics commissioner, Robert Benson, tried to take up the case of a whistleblower who drew attention to the rule-breaking practices of the United Nations Development Program.

Among other things, the whistleblower charged that UNDP had funneled millions in hard-currency to the regime of North Korean dictator Kim Jong Il and allowed North Korean government employees to run key aspects of its development program there. Then, he claimed, UNDP retaliated by firing him.

Now the same issue confronts the U.N. again. This time, the question is whether UNDP would pay restitution for the harm done to the same whistleblower who brought the organization’s misbehavior to light, and whose reputation was blackened by UNDP’s hand-picked investigators when they issued a weighty report earlier this month that confirmed most of the whistleblower accusations, and added a few more.

Judging from events of the past week, the answer to the question is still very far from clear. UNDP’s top managers have told FOX News through a spokesman that “no decision has been made” on the restitution issue.

Restitution for character-blackening is the initiative of chief U.N. ethics officer Benson, the man who is supposed to foster a “culture of ethics, transparency and accountability” across the entire U.N. system, and give the world — and thousands of U.N. employees worldwide — confidence that the organization is following its own rules. Benson had been mandated by UNDP itself to review the investigative report on North Korea for violations of whistleblower protection. Benson’s role was a compromise engineered in part by diplomatic pressure from the Bush Administration.

• Click here to read Benson's Review.

A refusal to follow the recommendation would be a direct slap at the U.N.’s top ethics official — and it would again expose the world organization to charges of double standards that were exposed — in part by FOX News — in the multi-billion-dollar Oil for Food scandal and a broad swath of procurement corruption cases.

Moreover, it would be a highly public blow to Benson’s boss, Secretary General Ban Ki-moon, who is standing behind his ethics chief. Ban’s spokesman told reporters yesterday that “the report of Mr. Benson stands as the position of the Secretariat.”

At the same time, the spokesman said the Secretary General was going to wait and see how UNDP reacted to the recommendation and would offer no other opinion on it.

The latest crisis point marks a second lease on life for Benson in the whistleblower case, which involves revelations brought forward by a former UNDP employee in North Korea, Artjon Shkurtaj. It is also a second chance for Ban, whose failure to back Benson strongly in the past sapped the unity of the U.N. system.

The case of the whistleblower, a former UNDP operations manager, was Benson’s initial major test in the ethics job last August — a job created in the wake of the Oil for Food and procurement scandals as a cornerstone of the U.N.’s ability to police itself and protect employees who brought wrong-doing to the attention of their superiors.

But Benson was slapped down by UNDP, which said the matter lay outside his jurisdiction and refused to let him investigate what Benson called a “prima facie case” of retaliation.

Suddenly, to the dismay of the Bush Administration and other governments,the sprawling U.N. system of some two dozen independent funds, programs and agencies around the world seemed to have the legal right to design on their own how they treated the disclosure of improper or illegal activity.

In UNDP’s case, a vivid insight into the potential for abuse was provided by the North Korean investigative report, which was made public in early June. UNDP immediately hailed the 353-page report as vindication — even though the document reiterated at great length that UNDP had systematically violated its own rules in hiring North Korean government employees to fill key UNDP jobs in the country, illegally handed over millions in hard currency to the government of Kim Jong Il, and ignored the laws of the U.S. and other countries in handing on sensitive “dual use” civilian-military technology to the Kim regime, even as North Korea was building and testing a nuclear weapon.

The report, however, took great care to avoid assigning any blame for the lapses to any specific individuals in UNDP, and blamed many of them on vague “lack of communication.”

So far as whistleblower Shkurtaj went, however, the report declared that there had been no retaliation against him, even as it offered evidence that the North Korean regime had pressured UNDP to get rid of him. (Initially offered a full-time position, Shkurtaj, a contract employee, had the offer rescinded a month later on procedural grounds, including a preference that a woman should get the job; another man was later hired instead.)

The panel report also lengthily attacked Shkurtaj’s character and credibility, without offering him the opportunity to respond.

In reviewing those results, Benson still insisted that Shkurtaj had whistleblower status — an important designation, since it offers protection for employees who bring U.N. wrongdoing to light.

But he offered UNDP a victory when he agreed that no retaliation had taken place. As the investigators did, Benson based his reasoning largely on the fact that the UNDP human resources officer who withdrew Shkurtaj’s job offer offered “unequivocal” testimony that she was unaware of any North Korean pressure to get rid of the nettlesome employee. (Neither Benson nor the investigating panel found contradictory the fact that the job was ostensibly earmarked for a woman, but later filled by a man.)

Then Benson threw a curve ball: the neglect of the panelists to let Shkurtaj respond to their concerns about his credibility was, in Benson’s nuanced phrase, a “due process failure,” which violated a U.N. employees right to respond to such findings in an investigation.

The right to such a response is deeply embedded in customary U.N. procedure for internal investigations. Benson, however, cited as the basis for his own conclusion about the lack of due process the example set by the U.N.’s $35 million investigation of the Oil for Food scandal, presumably because it was also carried out by outside investigators.

The “failure,” Benson noted, was on the part of the investigative panel, and not UNDP itself — a fact also underlined by UNDP spokesmen. But since the damage was done, Benson noted “there is no means by which to address this matter other than by means of restitution,” and recommended UNDP pay Shkurtaj 14 months’ salary to salve the damage.

Benson’s effort was clearly a compromise aimed at preserving unified standards of fairness across the U.N. system to employees who dare to testify to their organization’s lapses. And Ban’s current support for his ethics chief — though still equivocal — showed a desire to undo some of the damage done by his earlier flinching at UNDP intransigence. (Ban first signaled his new resolve to unify ethical standards at a confidential meeting of U.N. top managers in May, in Switzerland; copies of his talking points at the session were obtained by FOX News.)

But if UNDP does not accept the ethics officer’s ruling, what then? Neither Ban, nor anyone else, seemed inclined to answer — at least not yet.

George Russell is executive editor of FOX News.

Report Shows U.N. Development Program Violated U.N. Law, Routinely Passed on Millions to North Korean Regime

By George Russell

After more than two years of accusations and probes into the operations of the United Nations Development Program in North Korea, a weighty report finally reveals how routinely, and systematically, the agency disregarded U.N. regulations on how it conducted itself in Kim Jong-Il’s brutal dictatorship, passing on millions of dollars to the regime in the process.

The 353-page report, by a three-member “External Independent Investigative Review Panel” appointed by UNDP to investigate itself, was published with much fanfare last week after nine months of political maneuvering and research.

• Click here to read the full report (pdf).

The report depicts an organization that for years apparently considered itself immune from its own rules of procedure as well as the laws and regulations of countries that were trying to keep weapons of mass destruction out of Kim’s hands.

It also shows that UNDP apparently considered itself above the decisions of the United Nations Security Council itself when that organization tried — as it is still trying — to bar Kim from gaining the means to create more weapons of mass destruction.

That is the same Security Council whose decisions, U.N. officials argue, have the weight of international law when applied to the United States and the rest of the world.

Yet despite those rules, and in the midst of a growing international storm of concern over Kim’s behavior, UNDP’s North Korea office, as well as other UNDP offices, continued to hand over millions in hard currency to the Kim regime and to transfer sensitive equipment with potential for terrorist use or for use in creating weapons of mass destruction.

“What this report shows is that UNDP has operated lawlessly for far too long,” said Mark Wallace, the former U.S. ambassador to the United Nations who brought many of the original accusations against the U.N. anti-poverty agency to light in January 2007 after examining confidential UNDP internal audits of its North Korean operation.

“U.N. Secretary-General Ban Ki-moon has indicated that integrity is a high U.N. priority," Wallace said. "It is now up to UNDP to follow that direction.”

The latest panel report initially was passed on to reporters on June 2 by UNDP boss Kemal Dervis at an unusual press conference where he hailed the report’s conclusions, saying that “we finally have some closure on the allegations made against UNDP.”

The actual authors of the report were not available for questioning or comment, Dervis said, until they presented the document to a meeting of UNDP’s supervisory executive board in Geneva. The meeting begins June 16.

But a close reading of the long and dense document, replete with mind-numbing footnotes, shows that Dervis is wrong.

Among other things, the report confirms that UNDP hired North Korean government employees to fill sensitive core staff posts, in violation of its own regulations, and that the Kim regime picked the staffers.

Previously this had been revealed by a report done by the United Nations Board of Auditors in May 2007 in the wake of Wallace’s concern. The 2007 report noted that the same violations had been reported in internal UNDP audits going back to 2001.

The UNDP office in North Korea paid the salaries of these staff directly to the government in hard currency — another forbidden practice. The report dryly notes, in a footnote on page 96, “It was not clear how much of these amounts were paid to the National Staff, if any.”

In an effort that may have been aimed at keeping at least some staffers from starving, UNDP gave them all hard-currency supplements in cash — another violation of its own rules.

The regime employees filled such critical jobs as UNDP finance officer; program officer slots that helped to design and oversee UNDP projects in the country; technology officer, who maintained all of UNDP’s internal and external communications and servers; and even the assistant to the head of the UNDP office, who presumably was in a position to see much, if not all, of the boss’ paperwork.

• Click here to see who was staffing UNDP's office in North Korea.

Those violations already were known, although only in the barest detail. But the latest report reveals a fact that makes matters much worse: The regime-appointed finance officer — the person who wrote UNDP’s checks for 10 years — also was responsible for reconciling UNDP’s bank statements with the checkbook.

These two functions are supposed to be separated as protection against fraud. The importance of that separation is strongly underlined in UNDP’s basic guidelines called the “Internal Control Framework for UNDP Offices.”

The potential for fraud by a North Korean government employee, however, is discussed in the report only in dry bureaucratic language.

Despite that the review panel brought documents showing millions of UNDP financial transactions out of North Korea, the report shows — in a footnote buried on page 53 — that the panelists never saw any of some roughly $16.6 million worth of cancelled checks that were signed by UNDP. The reason: Kim’s bankers won’t release the originals or copies.

Without the checks, it is impossible to see if the finance officer made them out to cash or if the names on them match UNDP payment records and bank statements.

The North Korean regime also refused to let the panelists interview the finance officer.

The potential fraud risks are huge. The report notes that in 78 percent of a transaction sample of UNDP payment records that they reviewed, the signature on payment receipts could not be verified. For all the rest there was no sign of a receipt at all.

The report declares, with great understatement, that “it is difficult to determine the ultimate beneficiaries of payments made by UNDP-DPRK on behalf of itself.”

The panel sharply hikes — by millions of dollars — the amount of hard currency that previous probes indicated UNDP had passed on to the nuclear-arming Kim regime from 1997 to 2007, as Kim was ramping up his nuclear weapons program and ultimately setting off a nuclear explosion.

Hard currency transfers to Kim of any kind supposedly were forbidden, but the 2007 investigation already had shown that the rule was violated not only by UNDP but other U.N. agencies in the country.

The latest report says that UNDP spent $23.8 million on behalf of itself and other U.N. entities in North Korea, almost all in hard currency that never was supposed to reach Kim. The panel estimates that 38 percent of this, or $9.12 million, went directly to the North Korean government.

But that is not all. The report also notes for the first time that other UNDP offices and agencies outside the country chipped in anywhere from $9.5 million to $27.4 million more in hard currency to the Kim regime over the same period, on behalf of the North Korean office.

Using the 38 percent yardstick that the panel applied to in-country spending, anywhere from $3.6 million to $10.4 million of those totals might have been directly passed on to the government.

In addition, the report makes passing mention of an even bigger flood of cash: $381 million that flowed into North Korea from non-U.N. donors through an arrangement called the Agriculture Recovery and Environmental Protection, or AREP, Cooperation Framework. UNDP projects in North Korea formed part of that framework and, more importantly, helped to support the entire arrangement. But the report goes no further in tracing those funds.

Unauthorized hard currency by no means was the only support UNDP was offering Kim. The report greatly raises the number of sensitive “dual use” items — good for civilian use and for terrorist purposes or helping to create weapons of mass destruction — that UNDP handed over to North Korea. These included computers, software, satellite-receiving equipment, spectrometers and other sensitive measuring devices: 95 items in all.

The policy of unquestioned transfer of dual use items continued even as the Kim regime in 2006 conducted ballistic missile tests and exploded a low-yield nuclear device to the outrage and dismay of the rest of the world; moreover, UNDP acquired at least some of the items in misleading fashion.

The report notes that when some items were purchased, “it was not explicitly stated … that the equipment would be utilized by DPRK nationals working under the auspices of UNDP projects in DPRK.”

In at least one instance, the report says, an employee with a UNDP sister agency even supplied false information to a Dutch manufacturer nervous about end-users in North Korea, telling him that the equipment would be used by the UNDP office in Pyongyang when it really was intended for a faraway rural location.

The report also shows that UNDP itself rarely asked its suppliers about any possible limits on the use of sensitive export goods and, even when it was explicitly informed, made little, if any, effort to keep records of dual use limitations on equipment.

(The report does not say so, but with North Korean government employees operating as program officers, the lack of conscientious record keeping might not come as much of a surprise.)

The report then dismisses any notion of holding anyone at UNDP accountable for these spectacular lapses by invoking a concept of blanket immunity.

UNDP and its officials, the report notes, are immune from the enforcement of U.S. and other national export control laws imposed for anti-terrorist or national security reasons, under an international U.N. Convention on Privileges and Immunities.

The document notes that despite that free pass, a U.N. legal opinion has held that the world organization can be bound by at least some export license limitations when it is retransferring those sensitive goods.

But the people really exposed to penalties for most of the transfers are UNDP vendors who supplied the goods, because they lack U.N. immunity. The panel notes that in many cases, lack of knowledge of the true use of the equipment is not considered a legal defense by many nations, including the U.S.

Having said that, the report tries to sweep under the rug the explosive topic of UNDP’s obligations to the U.N. itself when the U.N.’s chief executive body, the Security Council, calls — as it did twice in 2006 — for bans of sensitive technologies to Kim. Those bans are known as U.N. Resolution 1695, passed on April 15, 2006, after Kim sent test ballistic missiles in the direction of Japan; and Resolution 1718, passed on Oct. 14, 2006, five days after Kim’s low-yield nuclear blast.

Resolution 1695 applied to equipment that might be used in Kim’s ballistic missile program. Resolution 1718, however, was much more sweeping and called for bans on any equipment that might be used in any kind of weapons of mass destruction, as well as travel bans for officials associated with the weapons program.

The panel report tries to take as little note of these sanctions as possible. Resolution 1718, for example, is mentioned in a footnote on page 195 of the report. The footnote calls its applicability to UNDP programs “relatively minimal,” and adds, “a significant majority of the equipment bought in connection with the UNDP-DPRK program was purchased before the passage of this resolution such that [it] was inapplicable.”

Since the report also notes that the records were badly kept or non-existent, this is a hard assertion to contradict. But it is a highly questionable assumption, at best. The report earlier notes that any UNDP-purchased equipment in North Korea belonged to UNDP until it was officially transferred to a host government. That happened to all the items of dual use equipment in North Korea at the same time — in March 2007.

At that time, UNDP shut down its programs after the hue and cry over UNDP practices in North Korea caused the agency to amend some of its practices — changes that the regime refused to accept.

UNDP officials have argued, and the report tacitly echoes their view, that the transfer of equipment when agency projects are closed down is normal practice.

Hardly normal are Security Council calls for the world, presumably including the U.N. itself, to stop transfers of exactly the kinds of equipment UNDP gave to Kim. There is no sign, for example, that the agency gave any thought to finding another method of asserting its property rights until the sanctions were lifted or of asking other U.N. agencies in North Korea to try to keep tabs on the gear.

UNDP “normal practice” apparently trumped world peace and security. The report passes over that complication, involving a rogue regime that had conducted illegal atomic blasts, and that the U.N. itself had declared an outlaw, without comment.

With the same effect of sheltering UNDP from charges that it aided in endangering the peace and security of the world, the panel report declares that any charges that UNDP inadequately supervised the projects in North Korea under its care are untenable.

It based that conclusion on voluminous paperwork provided by UNDP that proved, the panelists said, that site visits to the project took place frequently and were unimpeded.

But the report fails to put those inspections in the context of the fact that four of UNDP’s program and liaison officers, who manage and help to create programs and perform liaison with institutions and vendors involved in the projects — also were North Korean government employees.

(The report is equally silent on the role of the Kim regime employee who served as UNDP technology officer, who was in charge of all of the UNDP offices' internal and external communications and its computer servers. UNDP communications and computers are supposed to be sacrosanct in terms of host country snooping. Instead, in North Korea, the potential snoops were in charge of the equipment. The potential implications of that fact are completely unexplored.)

Overall, one of the most striking aspects of the report is its lack of curiosity about whether individual members of the UNDP staff should be held accountable for egregious, longstanding and dangerous violations of UNDP rules and international law, not to mention common sense.

This applied notably to the presence in UNDP’s North Korean safe for more than a decade of $3,500 in defaced U.S. counterfeit $100 bills — “Super-Note” fakes that the Kim regime famously passed around the world. Possession of counterfeit U.S. bills is a crime. Even given U.N. legal immunities, it might seem an important matter to bring to the attention of one of the organization's biggest donors.

Yet no-one informed U.S. authorities and senior UNDP officials claimed no knowledge of the fake funds, even though the bogus money was listed on annual reports of the safe contents for years.

The report’s assessment: “There is no evidence that anyone acted in bad faith or in a fraudulent or deceptive manner. Instead, the Panel finds that there was a clear lack of attentiveness at the [office] and Headquarters levels and that communications between the Country Office and UNDP headquarters were inadequate.

“Inadequate communications” is the explanation often given in the report for failures that allowed rule-breaking to continue, even as Kim openly brandished his nuclear weapon. The report notes that in August 2006 — four months after the passage of U.N. sanctions Resolution 1695 — the UNDP office in North Korea asked headquarters for guidance on dual use equipment transmissions to North Korea. It never got any. The project, which was based in part on receiving satellite imagery, had equipment that the report says already had been purchased.

Then, on Oct. 11, 2006 — two days after the Korean nuclear blast — a UNDP regional supervisor in Thailand answered the guidance request. He ordered UNDP not to purchase any equipment and “to close down the project immediately.” In the same message, according to the panel, the supervisor, Romulo Garcia, said he had received clearance from his bosses to close down the project in late 2005.

As it happens, U.N. Resolution 1718, imposing more drastic sanctions on North Korea, went into effect three days after Garcia’s sudden desire to follow up on a two-month-old guidance request.

The panel report’s conclusion? The 2005 decision to shut down the project “does not seem to have been communicated to the UNDP-DPRK office, as equipment purchases continued throughout 2006, including some dual use items.”

That Garcia apparently did not double-check on whether this highly sensitive order was carried out until a nuclear device exploded and another U.N. sanctions resolution loomed is never discussed in the report.

But the lack of discussion speaks volumes, both about UNDP bureaucratic efficiency and about the apparent level of UNDP concern and internal discussion of Kim’s dangerous nuclear plans.

There is one prominent exception to the report’s attitude of sympathetic understanding toward UNDP lapses: the whistleblower who brought most of them to outside attention and inspired U.S. diplomats to call for multiple investigations, including the panel report.

The report concludes that the whistleblower, a former UNDP-DPRK operations manager named Artjon Shkurtaj did, in fact, perform a service when he brought the situation in the UNDP’s North Korea office to light. But the report emphatically denied there was any retaliation against Shkurtaj when a promotion he already had been given was withdrawn and other short-term contracts he held expired.

Such claims, the panel concluded, were “without merit,” as it also made attacks on Shkurtaj’s personal integrity.

At the same time, the report offers evidence that the North Korean regime may have been pressuring UNDP to keep Shkurtaj out of the job and reveals the alarming fact that the regime apparently had veto power over UNDP’s ability to fund the position.

For his part, Shkurtaj has declared that the authors of the report violated customary U.N. practice when they failed to show their conclusions to him prior to publication. He has appealed to the U.N. chief ethics officer, Robert Benson, to investigate.

So it may well be that the ultimate message of the report is that passing on potentially dangerous equipment to a ruthless dictator who threatened his neighbors and defied the U.N. itself apparently was regrettable but otherwise a lapse in communication. Talking about such things outside UNDP apparently was something else.

Rather than bringing “closure on the allegations against UNDP,” as the organization’s boss, Dervis, hopes, the North Korean investigative report ought to raise bigger and more urgent questions about UNDP operations around the world.

If Kim Jong Il’s despotic government was able to twist UNDP’s rules and its adherence to international law with such ease, what is going on in UNDP offices in dictatorships such as Zimbabwe and Syria?

Most urgently of all, as the U.N. wobbles toward further sanctions on the nuclear-ambitious Islamic regime in Iran, what is going on in UNDP offices in Tehran?

George Russell is executive editor of FOX News.

UNDP Accused of Cover-Up in North Korea Cash Funneling Scandal

By George Russell

What’s happened to the trove of documents that the United Nations Development Programme (UNDP) promised to hand over to prove—or disprove— its innocence in funneling millions of dollars in hard currency to the North Korean dictatorship of Kim Jong Il?

Are they under UNDP safekeeping in North Korea? Or are they being picked over in a UNDP safe house in Beijing, before a sanitized version is offered up for inspection? And is that just part of a wider destruction of evidence?

[Editor's note: See correction at the bottom of this article.]

Those questions became the subject of a storm of Internet accusations over the past week, as an anonymous blog associated with UNDP dissidents charged coverup, and then offered up photos of UNDP documents that it claimed were proof.

To see the accusations, go to undpwatch.blogspot.com.

For its part, UNDP has flatly denied the accusations.

The documents lie at the heart of a controversy that has reached boiling point several times since last January, when a U.S. Ambassador to the U.N., Mark Wallace, used the conclusions of a series of UNDP audits to charge that the U.N.’s flagship development agency had funneled the hard currency to Kim regime officials in March in violation of its own rules, along with a variety of other major infractions. UNDP subsequently announced it had closed its office in March. A preliminary audit by the U.N. panel, without benefit of the documents, validated many of the U.S. charges last June.

The U.N. auditors were ordered at the end of June to make another attempt to investigate—and are still stymied. On Sept. 28, the chairman of the auditing board formally advised the U.N. that the Kim government had refused visas for his inspectors to examine the papers. He declared that the panel of auditors had been disbanded and returned to other duties.

To see the Board of Auditor’s letter, click here.

In response to Fox News questions a month later, UNDP spokesman David Morrison declared that his organization was "initiating steps" to bring the documents out of Pyongyang—something UNDP had long promised.

After that came silence—until the anonymous bloggers began posting their accusations. The first charge came on Nov. 21, when they claimed that Beijing staffers of UNDP said boxes of Pyongyang papers were "now located in the private residence of the UNDP Resident Representative in Beijing." (The Resident Representative is the highest-ranking U.N. official in a nation’s capital.)

The blog also claimed that a team of UNDP officials, as well as officials from the South Korean government, were on their way to vet the trove before any auditors saw it.

All of those charges were forcefully denied by UNDP spokesman Morrison in response to Fox News queries.

"No documents have arrived in Beijing or anywhere else," he declared. "We expect to be in a position to be in a position shortly to make all documentation available outside [North Korea]."

Over the weekend, however, the bloggers struck again, this time offering up cell-phone photos that claimed to show the contents of a small fraction of 59 boxes of UNDP papers in Beijing.

Only two photos were displayed. In one is a fragment labeled "Files Packing List Control Sheet," which carries a summary of monthly accounts from April 1999 to October, 2000. The control sheet carries the acronym for UNDP’s Regional Bureau for Asia and the Pacific, and is dated April 13, 2007.

The other snapshot shows the edges of a variety of files, and pieces of paper showing various stamps, signatures and an address label for the Resident Representative in North Korea, along with letterhead of what appears to be a Korean trading company.

Nothing in the photographs, however, directly linked them to a location in China.

But in the meantime, hints at an even broader UNDP coverup appeared on Sunday in the blog of respected independent journalist (and Fox News consultant) Claudia Rosett. She offered up internal UNDP documents dating from Sept. 24 that recommended the disposal of 11 email and other servers, for reasons of obsolescence or wear and tear. Purchase of two of the "obsolete" servers dated from 1998 and 1999, but all of the others were undated.

To see the documents, go to http://pajamasmedia.com/xpress/claudiarosett

"We don’t know what’s on these 11 servers," Rosett declared. "But surely it’s worth finding out?"

UNDP spokesman Morrison issued yet another rebuttal. The equipment, he said in a written response to Fox News followup questions, had been used to host "UNDP’s virtual directory (phone book). They contained no sensitive information and nothing to do with UNDP’s operations in DPRK [the acronym for Democratic People’s Republic of Korea]."

In any case, he added, "All data is backed up before the hardware is destroyed."

A spokesman for the U.S. mission to the U.N. said officials there would look into the issue.

George Russell is executive editor of FOX News.

___

Correction: UNDP gave incorrect information to Fox News regarding the contents of 11 computer servers that critics have said are being disposed of as part of the alleged coverup. UNDP spokesman David Morrison told FOX News that the servers, which UNDP has declared obsolete, had been used to host the organizations’s “virtual directory" (phone book) and “contained no sensitive information.”

After follow-up questions from FOX News, Morrison said that only one of the 11 servers hosted the directory. The others “were a combination of file/print servers and UNDP’s old intranet.” All information contained in the servers, he declared, “was migrated to other equipment to ensure that no information was lost.” The incorrect information, he told FOX News, had been provided inadvertently.

U.N. Workers Call on Ban Ki-Moon to Reinstate Whistleblower

By George Russell

The United Nations' five staff associations sent a stinging message to Secretary-General Ban Ki-moon Wednesday, demanding reinstatement of a whistleblower who lost his job after reporting financial and other irregularities in the program of the United Nations Development Program (UNDP) in North Korea.

The resolution also condemned a “culture of impunity permeating the higher levels of the organization, complemented by a dysfunctional internal justice system.”

Click here to read the staff resolution (pdf).

It called on Ban to implement justice system reforms that have already been presented by an independent panel, and, most dramatically, asked the secretary-general to order the head of UNDP, Kemal Dervis, to submit his organization to the jurisdiction of the U.N.’s recently established ethics office. That office has already declared that it found “prima facie” evidence of retaliation against the whistleblower, a 13-year U.N. veteran named Artjon Shkurtaj.

The staff resolution was the latest step in a bizarre standoff that has developed at the U.N. over the Shkurtaj case, in which the UNDP has declared that the ethics office, created by the General Assembly to establish system-wide standards of employee protection and conduct, does not have jurisdiction because UNDP is not part of the U.N. Secretariat.

For its part, the U.S. mission to the U.N. has declared that the ethics office, the capstone of efforts so far to reform the U.N., already has the jurisdiction it requires. Even while holding that position, U.S. diplomats have been fighting to make sure that an ostensibly independent inquiry into the matter, ordered up by UNDP as a substitute for an ethics office investigation, is more than a whitewash.

But the staff resolution is also a reflection of the deep unrest among ordinary U.N. employees at the lack of legal protection and other rights for them at the U.N., which enjoys immunity from the laws of nations including the host United States.

Staffers complain — always anonymously — about retaliation by their superiors when they report abuses and the powerlessness of quasi-judicial tribunals set up on their behalf. Their complaints were confirmed by a special panel set up by Ban’s predecessor, Kofi Annan, that called for a complete overhaul of the U.N. justice system. That overhaul so far has not taken place.

The Shkurtaj case has thrown the same issue into a much more explosive arena. The operations manager of UNDP in North Korea from 2004 to 2006, Shkurtaj told his superiors about a variety of unauthorized activities there, including the funneling of hard currency to the regime of dictator Kim Jong-Il, the presence of many North Korean government employees in staff UNDP positions, and the presence of $3,500 in counterfeit U.S. currency in a UNDP office safe.

Shkurtaj says he was told to keep quiet about his findings, and was fired after he took the information to the U.S. mission at the U.N. UNDP says that he was merely a temporary UNDP employee whose contract was not renewed, and press leaks that could only have come from UNDP sources have hinted that Shkurtaj may have falsified documents.

The entire issue, which has been brewing since Shkurtaj left UNDP several months ago, hit a new level of tension with the ethics office finding in his favor and the subsequent assertion — including by the secretary-general himself — that his own office lacks jurisdiction in the case. At a press conference last week, Ban declared he would go to the General Assembly to get clearer guidelines for the office, but that is viewed in staff association circles as a ploy to further bury the issue in bureaucratic procedure.

As the resolution makes clear, the staff associations feel that Ban already has the authority to order UNDP and other U.N. agencies like UNICEF and the World Food Program to submit to the ethics office. Ban currently has the power to hire and fire the heads of the agencies.

In an e-mail interview after the staff association vote, Shkurtaj declared the result to be further vindication of his view that the U.N. has violated his rights.

As for Secretary-General Ban, he has left New York for Turin, Italy, to take part in a three-day retreat with top U.N. officials in advance of the next session of the U.N. General Assembly in mid-September. Among those also attending the retreat is UNDP chief Dervis.

U.N. Secretary-General Ban Ki-Moon Faces Major Test in Ethics Case

By George Russell

Faced with crises in the Middle East, Korea and Sudan, U.N. Secretary-General Ban Ki-moon now has another urgent fire to put out — in his own organization.

How he faces that challenge could well determine the tone of his five-year term of office — and whether the head of the United Nations truly controls the sprawling, decentralized and rapidly expanding multibillion-dollar bureaucracy that he is supposed to lead.

“This is a time of choosing” for Ban, declared a Western diplomat familiar with the internal crisis.

The choice: Whether Ban will support Robert Benson, newly appointed chief of the United Nations Ethics Office — itself only a year old — in the first major test case of the office’s mission of “fostering a culture of ethics, transparency and accountability” at the world organization.

Or, if not, whether the ethics office, deemed the high-water mark of U.N. reform, will become no more than a curiosity demonstrating the hollow nature of the secretary-general’s authority, after he included the setting of “the highest standards of ethics, professionalism and accountability” among his core tasks.

The test was set by Benson himself, who declared in a confidential letter dated last Friday that he had established a “prima facie case” of retaliation against an employee by the $5 billion United Nations Development Program, the flagship of UNDP aid schemes.

Click here to view Benson's confidential letter (pdf).

Protecting U.N. employees against bureaucratic retaliation for reporting wrongdoing was one of the main reasons for creating the ethics office, after the U.N. was buffeted by the multibillion-dollar Oil-for-Food scandal and the discovery of millions of dollars' worth of fraud in the U.N.’s procurement department and elsewhere.

The UNDP employee whom Benson referred to — but did not name — is Artjon Shkurtaj, a 13-year U.N. veteran who was head of UNDP’s North Korean operations in 2005-2006, and who blew the whistle on UNDP’s unauthorized funneling of perhaps tens of millions of dollars in hard currency to the North Korean dictatorship of Kim Jong-Il — quickly dubbed the Cash for Kim scandal.

Shkurtaj also disclosed that, in violation of UNDP rules, well over half of the organization’s staff in North Korea was selected and employed by the North Korean regime, and that there was no guarantee that UNDP’s aid projects in North Korea were even taking place as planned.

News of the unauthorized funding was first reported by FOX News and the Wall Street Journal last January, and confirmed in a preliminary investigation at Secretary-General Ban’s request by the U.N.’s own Board of Auditors, released in early June. A further probe by the Board of Auditors was confirmed in late June, but has not gotten off the ground.

Once the scandal erupted, with the disclosure of a series of confidential letters on the topic between U.S. Ambassador to the U.N. Mark Wallace and the UNDP’s No. 2 man, Ad Melkert, Shkurtaj lost his U.N. job and was briefly — and illegally — banned from entering U.N. headquarters grounds.

Since then, UNDP has been at pains to cast doubt on Shkurtaj’s credentials and his credibility.

A spokesman for the agency declared that Shkurtaj was not a staff member, but merely a short-term “consultant” — even though he ordered the disbursement of UNDP funds (a purely staff function under the organization's rules and regulations) and chaired multi-agency U.N. committee meetings in Pyongyang. In a letter to Shkurtaj in June, the UNDP’s own staff association declared that he was “performing the same functions as a regular UNDP staff member, and you should be entitled to the same rights, privileges and expectations of continuous employment.”

An anonymous leaker subsequently charged in the New York Times that documents provided to the U.S. by the whistleblower had been judged by UNDP to be tampered with — though the Times provided no evidence to support that charge.

“I alerted my chain of command to violations of U.N. rules, but they did nothing,” Shkurtaj told FOX News in an e-mail interview from Europe. “UNDP retaliated against me for being a whistleblower; the U.N. Ethics Office has confirmed this. UNDP must be held accountable for retaliation against me, because in accordance with the U.N. whistleblower policy, retaliation is itself misconduct.”

The challenge for Ban begins with the fact that UNDP also declared quickly that the secretary-general’s ethics office has no authority to investigate the alleged retaliation at the agency, which has its own governing executive board and is funded by international donations that are separate from general U.N. dues. (The U.S. has donated roughly $1 billion to UNDP over the past decade, one of the largest single contributions.)

In the same letter, in which he said he found evidence of illicit UNDP retaliation against Shkurtaj, Benson in effect agreed. In a remarkable plea, he urged Kemal Dervis, the head of UNDP, to allow him to continue the ethics investigation on a one-time basis, saying it would be “in the best interest of the United Nations and UNDP to do so.”

So far, UNDP has refused, saying that it will carry on an independent external review of the circumstances surrounding North Korea. But that deliberately sidesteps the retaliation issue.

Moreover, UNDP has no ethics office of its own, nor any policy similar to that creating the protections afforded to whistleblowers under that office. UNDP has pointedly refused to discuss Shkurtaj’s future status with the organization.

(Efforts by FOX News to gain interviews with Benson and Dervis so far have received no reply.)

That is where Ban’s decision comes in. He was pointedly copied by Benson on his letter to Dervis — and at a regular press briefing Monday, Ban’s spokeswoman, Michele Montas, confirmed that Ban had received the copy “and was studying it.” Ban, she added, “is concerned by the issue.”

As well he might be.

The question of whether Ban’s authority extends to ordering UNDP to allow the ethics office to continue its work was apparently not an issue last January, when the secretary-general quickly, and preemptively, announced that the U.N.’s Board of Auditors would examine the allegations of UNDP misbehavior in North Korea.

Ban’s energetic intervention was quickly watered down, however, when North Korea refused to cooperate with the auditors’ probe — and when documents that UNDP first claimed were speeding on their way to New York for audit inspection remained stuck in Asia, where the auditors complained they could not look at them. Those documents, which include check stubs for payments to North Korean staffers, have still not been inspected.

At Monday’s press briefing, Montas took a much more cautious line about Ban’s next move. She declared that the impasse between the U.N. Ethics Office and UNDP involved “intricate legal issues,” then added that Ban’s style was to “use quiet diplomacy to deal with disputes, and [he] has shown that he can obtain results that way.”

However effective Ban’s quiet diplomacy might be elsewhere, the ethics office crisis is the most important, but not the first, time that UNDP has rejected ethics-related investigations outright by Ban’s Secretariat.

In late June, investigators from the United Nations’ watchdog Office of Internal Oversight Services, or OIOS, began probing the central financial management unit of UNDP for evidence of hiring irregularities and violations of UNDP financial rules.

FOX News subsequently reported that a number of personnel in the section were actually employees of a temporary financial employment service, and several had access to functions that are only supposed to be handled by full-time UNDP staffers. There was no evidence of a competitive bid for the contract for those services.

UNDP explained that the employees had been hired under rules that allowed for no-compete contracts, but FOX News also discovered that those rules were promulgated long after UNDP began hiring such temporary help.

The OIOS investigation was abruptly ended, however, when UNDP argued that the watchdog organization had no jurisdiction and that its own investigators would do the job. There has been no subsequent announcement of whether any UNDP investigation is taking place.

Though Dervis and his deputy, Melkert, claim to support the principle of transparency, UNDP has also resisted efforts by members of its own executive board — led by the U.S. — even to obtain copies of internal UNDP audits and financial statements. Top UNDP officials declare these to be “management tools” and therefore immune to scrutiny, even by the nations that provide UNDP with its funding. The United Nations Secretariat began making its own internal audits available to member states more than a year ago.

When Ambassador Wallace obtained limited access to such UNDP internal audits — he was allowed to look at them but not take them away — he discovered that UNDP’s own auditors had long warned of the same practices that Shkurtaj finally brought to broader attention.

This apparently arcane debate over jurisdiction has many long-term effects on the U.N.’s future. At the same time that it has resisted inspection of its practices by the U.N. Secretariat and even by its governing member states, UNDP has been working energetically to expand its sway within the widely diverse array of U.N. agencies and programs that actually deliver services — and money — in the rest of the world.

It has taken the lead in an initiative to increase coordination — in many if not most cases under UNDP’s auspices — of the delivery of all U.N. funds and services in the world’s developing countries. The move, which was first endorsed in a U.N. report issued last November, called for consolidation of such agencies as UNICEFand the World Food Program at the country level, and the elimination of “unnecessary duplication and competition.”

UNDP chief Dervis, heading what is called the United Nations Development Group, speedily announced creation of an eight-country pilot project to test the idea. If the pilot project succeeds, an increasing amount of the U.N.'s discretionary spending on development, famine relief and humanitarian spending — which vastly outstrips the core U.N. budget of some $2 billion — may be further shielded from oversight of the “reformed” portions of the U.N.

Ironically enough, the initiative is known in organizational parlance as “One U.N.” — exactly the concept that Dervis and UNDP oppose when it comes to Ban’s Secretariat investigating wrong-doing on their own turf.

It now remains to be seen whether Ban will be able to invoke “One U.N.” when it comes to the high ideals of ethics and accountability that he swore to bring back to the badly tarnished organization.

George Russell is executive editor of FOX News.

Outsiders Have Access to U.N. Development Program's Financial Management System

By George Russell

The United Nations Development Program, already mired in controversy for its dealings with North Korea, now faces another scandal involving the people who spend its $5.2 billion annual budget — and shut down its computerized financial management system yesterday when confronted by FOX News about their activities.

The new scandal involves UNDP’s headquarters financial unit, where checks are signed and purchase orders are approved for its sprawling operations world-wide.

Since the last week of June, FOX News has learned, investigators from the United Nations’ watchdogOffice of Internal Oversight Services, or OIOS, have been probing the financial unit for evidence of hiring irregularities and violations of UNDP financial rules.

And already there are some themes similar to the six-month battle over UNDP operations in North Korea: evidence of unauthorized personnel working in sensitive positions that — according to its own regulations — should only be held by UNDP staff; payments with puzzling authorizations that total nearly $2 million; service providers whose employees may violate important UNDP rules and regulations.

FOX News has also learned from UNDP insiders that critical files may have disappeared out of reach of investigators.

This was coupled with dramatic, sudden, and secretive shut-downs of UNDP’s computers in the wake of FOX News email queries Tuesday about the situation.

Indeed, something like a covert scramble began within UNDP on Tuesday in the wake of the arrival of the FOX News questions.

At first, a UNDP press spokesman declared that there had been a delay in receiving the questions, directed to the top echelon of UNDP officials, due to a computer shutdown.

But by that time FOX News had already received telephone confirmation of receipt of the emails from the office of UNDP administrator Kemal Dervis, the organization’s CEO. Those emails included copies of the questions sent to the three top UNDP officials under Dervis.

Just two hours later, however, at 3:37 p.m. on Tuesday, UNDP employees told FOX News that there was a sudden shutdown of UNDP’s computerized financial management system —which coincided with an emergency senior staff meeting that took place in the 21st floor office of UNDP’s No. 2 official, Ad Melkert. (Melkert himself was traveling outside the country; the meeting was chaired by Melkert’s chief of staff, Tegegnework Gettu.)

FOX News was unable to learn what took place in the emergency meeting, or how long it lasted. But at 6:22 p.m., much — but not all — of UNDP’s computer systems came back on line.

With one significant exception. The portions of UNDP’s proprietary financial software system that deal with personnel assignments, personnel records, and access to financial tasks, remained blocked to almost everyone who normally uses those parts of the system, until at least 2 a.m.

The sudden cloak of secrecy was significant, because the new internal investigation centers precisely on the central financial bureau at the heart of UNDP where that financial software is used — a bureau that is directly under the supervision of the agency’s top-most officials.
It is known as the UNDP’s Office of Finance and Administration (OFA), which is headed by UNDP’s No. 4 official, Comptroller Darshak Shah, a 10-year UNDP veteran. OFA, with 84 employees, is responsible for managing the cash flow of the entire UNDP — an organization with more than 8,000 employees whose budget grew from $4 billion to $5 billion between 2000 and 2004, and is expected to grow by another 40% by 2015.

Whatever money UNDP has flows out of OFA to its operations in 190 countries world wide — and to a network of suppliers who provide everything from consultants to foodstuffs to train locomotives for development projects around the world.

Financial controls at OFA are supposedly tight — under UNDP rules, only full-time staff members are supposed to have access to the UNDP’s proprietary financial accounting and disbursement system, known as ATLAS. But that is the rule that is now being violated.

All of which deepens the drama now surrounding UNDP and its relationship with a job placement agency known as Professional Financial Temporaries, Inc.—or PRO-FIT, as it calls itself on its website,www.accountancyatprofit.com.

According to UNDP payment records obtained by FOX News, PRO-FIT has received more than $1.9 million in payments from UNDP since January 2005 alone. Those payments cover the salaries, benefits and other expenses — plus, of course, profit — for PRO-FIT for a variety of employees who are working at UNDP in the Office of Finance and Administration. Those employees’ salaries are not paid by UNDP, but by PRO-FIT itself, which also hires and fires the personnel.

The full number of PRO-FIT employees in the department is not known, though some UNDP insiders place it as high as 31 — or more than a third of the staff. Most are in lower-level clerical or accountancy jobs, but at least several perform functions such as financial disbursement which are supposedly performed only by regular U.N. staffers.

At least seven of the 31 outsiders have log-ins that allow them to operate within the agency’s ATLAS financial system as the equivalent of regular UNDP personnel, in violation of UNDP regulations.

FOX News has obtained ATLAS user IDs for the PRO-FIT employees that confirm their presence in the financial software system, and their roles, which include the ability to approve certain types of financial transactions and move financial deposits within the UNDP’s worldwide system. Along with the IDs, FOX News has obtained copies of PRO-FIT hourly time-sheets filled out by OFA workers and transmitted to PRO-FIT’s Manhattan fax number.

Moreover, FOX News has obtained OFA data recording scores of UNDP payments to PRO-FIT since January 2005. Significantly, none of the payments hit the threshold of $100,000 that is a benchmark for oversight by higher levels of UNDP management. But in a significant number of cases, the monthly totals for the payments easily exceed the $100,000 threshold. And the totals for 2005, 2006, and so far in 2007 all exceed that mark handily.

(Among the items paid there is a particularly unusual one: an invoice numbered 00040679, and dated April 26, 2006. It notes “placement fees” totaling $12,715 for an individual named Fatima Ba — a name almost identical to that of Administrator Dervis personal assistant, Fatimata Ba. Questioned by FOX News about her possible relationship with PRO-FIT, Fatimata Ba would only say that she “did not know” if such a relationship existed, and referred FOX News to the UNDP press office.)

PRO-FIT founder and president Alvin Galland declined to answer any questions from Fox News. (An associate who answered PRO-FIT’s telephone said that Galland “was about to go on vacation.”)

There is an even deeper mystery involving PRO-FIT — how it came to provide such sensitive, and possibly forbidden, services to UNDP that insiders say stretch back more than a decade, without any competitive rebidding of the contract for those services. (PRO-FIT itself, according to its website, was founded in 1996.)

Under UNDP regulations, all competitive contracts must be put up for rebidding every 36 months, but according to UNDP insiders, there are no records of the rebidding of the PRO-FIT contract within at least the past 48 months.

Moreover, insider sources have told FOX News that there is no sign at all of a PRO-FIT contract in UNDP’s legal files dating back for the past four years.

There is at least one piece of evidence that the PRO-FIT relationship stretches back beyond 2004. It’s date of registration in the ATLAS system is January 1, 1901; UNDP insiders explain that ATLAS was created in 2004 and any contracts preceding that time were given the same 1/1/1901 date.

Who authorized the deal with PRO-FIT, and who has been aware of it since that time?

Spending on the order of UNDP’s payments to PRO-FIT usually requires approval at the highest levels of the organization. For purchases of more than $100,000, only UNDP officials with the rank of Director and Assistant Secretary General and above are allowed to grant approval, with the required agreement of a special contract approval committee, known as the Advisory Committee on Procurement, or ACP.

Major purchases are also supposed to be open automatically for competitive bidding, with a rare number of exceptions.

There are at least some theoretical possibilities that the PRO-FIT contract escapes some of the regular UNDP rules. Some UNDP contracts, for example, are considered long-term, and exempt from the rebidding rule. But an examination by FOX News of records of the UNDP’s long term contracts, which are kept on the agency’s internal website, does not include the PRO-FIT deal among them. (FOX News obtained a duplicate image of the website at the time of examination in the event of subsequent tampering.)

UNDP financial rules also allow considerable authority to the organization’s Chief Procurement Officer to create contracts at his or her own discretion, without competitive bidding, so long as the reason is recorded in writing. But that discretion does not extend to granting outsiders access to the UNDP financial control system, ATLAS, which is expressly forbidden under UNDP rules.

UNDP’s Chief Procurement Officer is Akiko Yuge, the agency’s Deputy Assistant Administrator, and No. 3 official. FOX News queries to Yuge regarding the use of any discretionary authority in regard to PRO-FIT have so far gone unanswered.

Similar email questions were put by FOX News to Darshak Shah, head of OFA, along with questions about his awareness of outsiders having access to his office’s most sensitive financial record system. Shah acknowledged receipt of the questions, but said only that “UNDP will revert back to you soon.”

Additional questions sent to Ad Melkert and Kemal Dervis received no reply, beyond an advisory that Melkert was traveling until July 11.

But even without competitive bidding, UNDP purchases must observe safeguards. Any contract of $100,000 or more that is approved without bidding in a unit such as the Office of Financial Administration requires the specific approval of the Chief Procurement Officer — in this case, Deputy Associate Administrator Yuge — and it also requires review and endorsement by the Advisory Committee on Procurement, which Yuge chairs.

Questions to Yuge about whether the procurement committee was ever involved in reviewing PRO-FIT’s contract went unanswered.

The fact that outsiders have privileged access to UNDP’s sacrosanct financial software is not merely a breach of its most important financial rules. It raises the possibility that outsiders whose presence is known to UNDP’s senior management can enter, alter and delete data from the ATLAS record system — precisely the circumstance that the staffers-only access to ATLAS is intended to prevent.

That possibility is particularly sensitive at a time when UNDP has been locked in a bitter dispute with the U.S. government over the transfer of hard currency to the dictatorial government of Kim Jong Il, and, according to the U.S. mission to the United Nations transfers of sums totaling millions to North Korean entities that have a relationship to the country’s illicit nuclear weapons program.

Some of the U.S. accusations have been based on data obtained from the UNDP’s proprietary financial systems, samples of which were revealed to UNDP officials in closed door sessions. UNDP officials have in turn leaked stories claiming that the U.S. data samples differ from entries in those systems, with the clear implication that the U.S. information has been altered or otherwise falsified. The presence of outsiders with privileged and theoretically forbidden access to ATLAS, however, raises the possibility that UNDP itself could be altering data.

The sudden shutdown of UNDP computer access in the areas involving personnel records, duties and ATLAS access IDs further underlines that possibility.

If so, the issues surrounding UNDP may no longer involve just the violation of vital rules and procedures. In light of the investigations underway into the Office of Finance and Management, the issues may include obstruction of the United Nations’ own system of justice.

UPDATE

After publication of FOX News’ story, various U.N. officials have responded to some of the questions posed to them concerning OFA and PRO-FIT. Among other things, the officials state that OFA currently has 117 employees, of whom 101 are staff and 16 contracted workers. Of the 16, 10 are said to be employees of PRO-FIT, while "the other six come from three other external companies."

According to U.N. Chief Procurement Officer Akiko Yuge, the contract for PRO-FIT was approved after a "competitive bidding process" in 1998. The contract was approved under an arrangement known as a Reimbursable Loan Agreement, which allows UNDP to pay outside companies for the services of temporary employees, and does not, Yuge says, require further competitive bidding. "UNDP believes that to date it has received value for money from PRO-FIT," she added.

Even so, Yuge said, OFA has already changed its ways. After deciding "some time ago" to undertake a "new competitive process" for the kind of services PRO-FIT offers, she said, "the bidding process took place three months ago and is currently under review."

FOX News has examined the UNDP procurement Web site where competitive bidding exercises are announced and posted. There is no record on the site of any posting for the services offered by PRO-FIT during the time period Yuge mentions.

Yuge’s claim about the date of UNDP’s relationship with PRO-FIT is contradicted to some degree by answers provided to FOX News by OFA head Darshak Shah. He declared that "PRO-FIT has provided services to UNDP since the mid 1990s." He did agree with Yuge that the deal was finalized under a Reimbursable Loan Agreement, or RLA, "under the authority delegated in accordance with UNDP financial regulations and rules."

FOX News has obtained a copy of the UNDP circular that initially announced the introduction of RLAs. Issued by the UNDP Office of Human Resources, it is dated July 27, 1999 — long after both officials say it was used in the case of PRO-FIT.

Both UNDP officials claim that outside employees at OFA — including those from PRO-FIT — are not forbidden access to the ATLAS financial management system, but are restricted only to data-entry functions.

"PRO-FIT employees in OFA have not been delegated certification and approval functions in ATLAS," Shah asserted.

But UNDP guidelines for hiring short-term help and contractors, which FOX News has examined, explicitly cite ATLAS "access" as a form of "approving or signing authority" that must not be granted to the employee. The same guidelines cover employees under RLAs.

Moreover, UNDP documents, computer log-ins and other information in FOX News’ possession confirm that PRO-FIT employees perform financial approval and other tasks that are supposedly done only by UNDP staffers, as previously reported.

Alvin Galland, the president of PRO-FIT, who initially declined to speak to FOX News, also responded by telephone after the originally story was published. According to Galland, his firm has had a "relationship with UNDP for 13 or 14 years," which would date it to the early 1990s. "We do have contracts, they were competitive, and they were bid," he declared. "I have had nothing but fully professional relations with UNDP."

Galland declined, however, to discuss any specific details of his relationship of his contractual relations with UNDP, suggesting that any such information should come from the international agency.

George Russell is Executive Editor of FOX News.

U.N. Auditors Find Development Program Broke Rules in Offering Aid to North Korea

By George Russell

Did the United Nations Development Program, the U.N.’s multibillion-dollar development flagship, break its own rules in offering assistance to the dictatorship of Kim Jong Il?

The long awaited answer, offered up by the U.N.’s own Board of Auditors, is a clear "Yes" — though UNDP itself quickly spun the answer as a vindication.

The long-awaited and controversial audit of United Nations operations in North Korea has concluded that, in line with accusations first raised by a senior U.S. diplomat, the United Nations Development Program and other agencies contravened their own regulations in hiring local staff nominated by the dictatorial North Korean government, and in making unauthorized hard currency payments to the Kim Jong Il regime.

The auditors, who stressed that their work was only a preliminary investigation, also declared they were unable to determine the total amount of unorthodox payments that had made. They lacked access to documentation from the U.N.’s offices in North Korea, a frequent observation throughout their report, and even lacked access to the cashed checks involved in the transactions. The auditors also were refused access to North Korea by the Kim Jong Il regime, which refused to cooperate in the investigation.

Paradoxically, the results of the audit immediately were hailed as a vindication by the UNDP, the United Nations’ flagship development organization, which has been largely responsible for running U.N. operations in North Korea.

The UNDP claim was that the report did not specifically support all the charges originally raised last January by U.S. Ambassador to the U.N. Mark Wallace, citing unpublished previous U.N. audits, that tens of millions of dollars in UNDP spending might have been misappropriated by the Kim Jong Il government as a result of the UN’s unorthodox policies in North Korea. Among other things, Wallace declared that it was “impossible” for the U.N. aid agency to verify whether its funds “have actually been used for bona fide development purposes or if the DPRK [North Korea] has converted such funds for its own illicit purposes.”

According to UNDP spokesman David Morrison, the latest audit findings are still under review by the U.N. development organization, which plans to file a formal response. But Morrison declared that the latest audit findings explicitly ruled out the possibility that there had been any diversion of UN funds to North Korea’s nuclear weapons program, and, contrary to U.S. Ambassador Wallace’s January assertions, said that UNDP officials had in most cases been able to visit UN development projects in North Korea to determine that money had been properly spent. “the money went where it was intended,” he said.. Moreover, he claimed, the audit confirmed that there were only “modest” levels of funding involved.

In fact, the specific language of the audit did not necessarily support Morrison’s assertion, especially insofar as the auditors declared they had not even had access to the checks used to pay North Korean staffers or other bills. Morrison’s arguments about the “modest” size of UNDP payments were also immediately contested by a U.S. official, speaking on background, who pointed out that the report tallied more than $72 million in spending by various U.N. agencies in North Korea from 2002 to 2006, and the list of agencies was far from inclusive. (The latest audit specifies thaht UNDP processed payments on behalf of all the mentioned agencies.) During that period, UNDP and one of its subordinate agencies operated anywhere from 28 to 41 projects in North Korea.

The same official pointed out that the audit report said only that visits to projects “only occurred in a coordinated way with the authorization and supervision of DPRK authorities.” (Nor did the report specify whether locally hired UNDP staffers, who continued to work for the Kim Jong Il government, were the ones actually carrying out the visits.)

For his part, Secretary-General Ban Ki-Moon was more cautious in drawing conclusions about the audit findings. A statement issued by his official spokesman, Michelle Montas, noted that the report “does not indicate that large-scale UN funding has been systematically diverted, as has been alleged” -- an unsurprising conclusion, as the report specifically declared that it was unable to judge the amount of funds involved in hard currency payments, without access to documentation in North Korea. But the spokesman’s statement also declares that the auditors’ document “identifies practices not in keeping with how the UN operates elsewhere in the world.”

Ban’s spokeman said that the Secretary General would ask for a further continuation of the auditing process, including a visit by auditors to North Korea, without mentioning the fact that North Korea already has rejected any such cooperation.

In one sense, the entire debate over diversion of UNDP money in North Korea became moot two months ago. At that time, even while declaring it had done no wrong, UNDP revised its policies to prevent further North Korean selection and control of local staff, and banning any payments in hard currency in that country. North Korea refused to accept the new rules, and all UNDP staff have subsequently left the country. A variety of other U.N. agencies, however, including the World Food Program and UNICEF, continue to operate there.

Even while declaring that it lacked access to documents that would have revealed the full extent of hard currency payments to North Korea, the latest audit makes clear that North Korean input into UNDP operations in the country was extensive and pervasive. Of 31 UNDP staff in North Korea in February, 22 were described as local hires, meaning North Korean government nominees, who, the report notes. These included four of UNDP’s program officers, the Information Technology officer who managed local computer networks, and the finance officer.

According to the report, these local hires were “seconded” to the UN agencies from the North Korean government, meaning that they were still government employees, and in general considered to be immune to U.N. rules and regulations governing staff conduct.

The report also noted, as Ambassador Wallace had done in his original complaint, that the unorthodox hiring and foreign exchange practices of the UNDP in North Korea had been exposed in previous audits dating back to 2001.

In his original complaint, Wallace noted that audits had uncovered the practices dating back to 1994; his point was that nothing was done as a result. In a brief on-the-record comment after the latest audit report was released, Wallace declared that the document “vindicated certainly some of our concerns.”

The UNDP’s current argument, on the other hand, is that members of the 36-nation Executive Board supervising UNDP activity (which includes both the U.S.and North Korea) were aware of those practices through the previous audits, and tacitly accepted them. UNDP spokesman Morrison indicated his agency’s view that there were no restrictions, for example, on the type of currency to be used in local economies.

The audit report itself noted that the UN’s current chief representative in North Korea, known as the Resident Representative, viewed the paying of North Koreans in hard currency to be an “established practise” in place when he first arrived in July 2005.

The latest audit report, on the other hand, while noting a lack of basic documentation on payment practices in North Korea, specifically mentioned that hard currency payments were made in violation of specific sections of a basic operating agreement covering UNDP operations in North Korea.

The latest audit report added a further mystery of its own. It was signed not by the auditors who carried out the investigation, but by senior officials in the member countries who had provided the experts under U.N. auspices. UNDP spokesman Morrison was unable to say why the auditors themselves did not sign the document, but it is known that one member of the three-man team who carried out the work, Pierre Brodeur of France, abruptly resigned from the group before the audit was made public. Brodeur was contacted prior to the audit’s publication by FOX News, but refused to make any statements.

There has been widespread speculation that Brodeur resigned due to disagreements with the audit’s conclusions, or the lack of access to documents required for a more definitive report.

U.N.: Behind the Scandal in Pyongyang

By George Russell

The mood was nervous around the United Nations Development Program (UNDP) conference table on a chilly Thursday, Dec. 8, 2005, in the North Korean capital of Pyongyang.

The officials were huddled in a UNDP villa in the United Nations compound, located in the secrecy-shrouded diplomatic Munsudong district of Pyongyang (known to some North Korean diplomats as "the greenhouse"). The U.N. managers felt that they were under siege — as, in a sense, they were. (Sources familiar with U.N. activities in North Korea supplied the bulk of the information about the meeting in this article.)

The small group around the table was made up of the operations managers of the United Nations agencies operating in North Korea: UNDP, the World Food Programme (WFP); the United Nations International Children's Fund (UNICEF); the United Nations Population Fund (UNFPA) and the World Health Organization (WHO). Altogether, the group was responsible for administration, finance, human resources and security for their respective organizations, which were spending roughly $150 million on their own operations, and on numerous development and relief projects around Kim Jong Il's communist kingdom. The reason they were meeting was a deep concern on their part that all their activities might be illegal — a concern that has since turned into a full-blown scandal.

The officials had gotten together, after months of tense discussions among themselves, to make a collective appeal to the bosses of their agencies in North Korea, and ultimately to the heads of their worldwide organizations, and to the U.N. Secretary General (at the time, Kofi Annan) himself. By taking such a strong step, several of them were worried that they were about to damage their careers.

They were also worried about the possible presence of concealed North Korean spy devices in the room. And they were deeply distrustful of many of their local staff, whose credentials to work for the U.N. were unknown, and who had been imposed on them unilaterally by the Kim Jong Il regime.

But the U.N. officials were even more worried that failing to act would leave them and the U.N. deeply damaged by a continued pattern of unauthorized payments, in cash and in hard international currency, to the dictatorial North Korean government. And personally, they were worried that a future U.N. audit might cast a harsh spotlight on the highly irregular ways that their agencies, led by UNDP, were acting in North Korea, and might accuse all of them of acting illegally.

Every day, for example, agents from the regime's General Bureau for Diplomatic Services — a section of the North Korean Ministry of Foreign Affairs that deals with, and spies on, foreign diplomats — would arrive at the U.N. compound and collect envelopes of cash, handed over by the U.N. to pay local salaries, utilities and maintenance fees. No receipts were ever given.

The same applied to money ostensibly used for U.N. agency projects around the country — projects that the staff were not free to visit at will, if ever. (The Munsudong compound is a highly restricted area, with armed patrols at its perimeter. The U.N. officials could only live in designated quarters located a few hundred yards from their office.)

• Click here to see a satellite image of the U.N. compound in Pyongyang (pdf format).

There were mild differences between the agencies, but the overall pattern of hard currency cash payments remained the same.

• Click here to see a spreadsheet of U.N. disbursement practices in North Korea (pdf format).

The mysteriously appointed local staff, who included critically important finance managers and communications specialists, were another matter of urgent concern. Many had received expensive U.N. training — only to be pulled out of U.N. employment after a few months on the job and assigned to other, unknown Korean government offices.

The U.N. operations officials were also uneasily aware that locally-appointed North Korean staff had access to sensitive U.N. files and communications, without supervisors' knowledge.

Even U.N.-designated cars and their North Korean drivers were operating outside U.N. control. Sometimes they were available and sometimes not; the officials were not even aware of what happened to their cars in the evening.

But the most disturbing fact under discussion in the Munsudong meeting was the absence of normal legal agreements with the North Korean government that would either justify or rein in the chaotic and mysterious operations of the agencies, which in the officials' experience did not conform with the U.N.'s operations anywhere else.

The most important of those agreements, known in UNDP jargon as an Operational Basic Agreement (OBA), had apparently vanished from U.N. files both in Pyongyang and in New York, sometime in 2001. That was a year or more after the U.N. agencies suddenly began making the unorthodox cash payments in Pyongyang, according to U.N. sources.

The only version of the OBA available to U.N officials in Pyongyang and Manhattan was a draft version, dated February 10, 1981.

• Click here to see the draft version of the Operational Basic Agreement (pdf format).

That version clearly states, among other things, that all payments to the North Korean government "will be made in local currency on the basis of monthly invoices."

The U.N. officials at the Munsudong session wanted the uncomfortable and disturbing situation in North Korea to end. By the time they finished their four-hour meeting, they had agreed to ask the U.N.'s most senior officials in North Korea to sign off on changes in procedure that would return the North Korean operations to something approaching normal.

• Click here to see the minutes of the Dec. 8, 2005 meeting (pdf format).

On January 24, 2006, after a winter hiatus, the group sent its proposals to their bosses, known collectively as the U.N. Country Team, including the U.N. Resident Coordinator, who is the U.N. Secretary General's personal representative in town. (The Coordinator was named Timo Pakkala, who doubled as the top UNDP official, or Resident Representative, in Pyongyang. Pakkala still holds both jobs.)

Among other things, the reformers suggested that the U.N. revert to paying its bills in local currency, as required in the organization's rules and regulations. They also suggested that cash payments be eliminated, and that the U.N. regain control over local hiring.

• Click here to see the Jan. 24, 2006 message from the Operations Management Team to the UNCT (pdf format).

The response was a long silence. The U.N. Country Team did not take up the issues raised by the subordinate managers until April 13, 2006 — a delay of three months. And the next response was opposition. As minutes of that meeting, obtained by FOX News, show, a number of U.N. agencies worried about the "impact it might have in the relations with the government as well as to local staff well-being." Other agency heads found the issues "rather not of their immediate concern" even though their own operations chiefs had signed off on the suggested changes.

Some agencies went further. While recognizing "the fact" that their financial rules and regulations demanded payment in local currency, "they feel that this issue is very sensitive and could endanger their relation with the government, even in the absence of a written explicit agreement" — a reference to the missing Operational Basic Agreement.

The final recommendation:of the U.N. agency heads was to "endorse the current practice of issuing payments in hard currency (US$/Euro) based on special conditions in the country."

• Click here to see the minutes of the April 13, 2006 UNCT meeting (pdf format).

The previously unpublished minutes of the U.N. Country Team in North Korea go a considerable way toward supporting accusations made against the UNDP by U.S. envoy to the U.N. Mark Wallace in January. Among other things, Wallace cited secret UNDP audits to accuse the organization of making cash payments to the Kim Jong Il regime in violation of UNDP rules; allowing North Korean government employees to "dominate" local staff; and allowing North Korean government workers to perform "financial and program managerial core functions" in another violation of organization rules. Wallace also accused UNDP of hiding evidence of the violations since 1999.

• Click here to read Ambassador Mark Wallace's letter to the United Nations Development Program (pdf format).

The minutes of the U.N. Country Team meeting on April 13, with their acknowledgement of "the fact' that financial rules and regulations demanded payment in local currency, also seem to rebut portions of a formal reply to Wallace given by UNDP's No. 2 official in New York, Ad Melkert. In a letter dated January 12, 2007, Melkert asserted that "there is no formal requirement to pay local expenditures exclusively in the local currency, although country offices are encouraged to utilize local currencies as circumstances permit."

• Click here to read UNDP Associate Administrator Ad Melkert's reply to Ambassador Wallace (pdf format).

In the same letter, however, Melkert declared that UNDP would give up the use of hard currency cash payments to North Korea effective March 1 and suspend nomination of its local staff by the Kim Jong Il government. A short time later, UNDP announced that the North Korean government had objected to the change of practice, and the agency would pull most of its international staff out of Pyongyang.

Meantime, the U.N.'s Board of auditors, on direction from newly appointed U.N. Secretary General Ban Ki-Moon, is taking a look at the operations of U.N. agencies in North Korea.

The audit is supposed to conclude in early April.

George Russell is Executive Editor of Fox News.

U.S. State Department Reveals North Korea's Misuse of U.N. Development Program Funds and Operations

By George Russell

Has North Korean leader Kim Jong Il subverted theUnited Nations Development Program, the $4 billion agency that is the U.N.’s main development arm, and possibly stolen tens of millions of dollars of hard currency in the process?

According to a top official of the U.S. State Department — using findings made by the U.N.’s own auditors — the answer appears to be a disturbing yes, so far as UNDP programs in North Korea itself are concerned.

And just as disturbingly, the U.N. aid agency bureaucracy has kept the scamming a secret since at least 1999 — while the North Korean dictator and his regime were ramping up their illegal nuclear weapons program and making highly publicized tests of intermediate range ballistic missiles.

Nothing was disclosed even to the UNDP Executive Board, which oversees its operations and is composed of representatives of 36 nations — including the United States and, this year, North Korea itself.

That fact is sure to be a bombshell at the Executive Board’s regular annual meeting, which begins Friday and extends through Jan. 26. Among the main items to be discussed is the $18 million, two-year UNDP budget in North Korea.

Moreover, the period of scandal and secrecy in the UNDP’s North Korean operations coincided in large measure with the tenure of Mark Malloch Brown, most recently Deputy Secretary General of the United Nations itself, as administrator of the UNDP.

Malloch Brown took over the UNDP in July 1999, and stayed in his post even after August 2005, when he also became chief of staff for then-U.N. Secretary-General Kofi Annan, who at the time was reeling under the effects of the Oil for Food scandal.

In March 2006, Malloch Brown took over as Deputy Secretary General from Louise Frechette, who suddenly left the U.N. ahead of schedule, after her own role in Oil for Food became widely known and criticized. Only then did Malloch Brown give up his UNDP fiefdom.

Malloch Brown left the U.N. along with Annan at the end of last year and has since been harshly critical of the Bush Administration and its former ambassador to the U.N., John Bolton, for their demands for greater U.N. transparency and reform.

From at least 1999 to at least 2004, it appears the UNDP, and the U.N. itself, had no idea what Kim Jong Il did with the aid agency’s money, ostensibly intended for aid programs ranging from development of energy programs and small and medium sized businesses, and for environmental protection.

But the UNDP had plenty of warnings from auditors it had contracted to look at the program during that period, and who signaled loudly that something was badly awry.

In a letter sent to the UNDP on Jan. 16, Mark Wallace, the U.S. State Department ambassador at the U.N. for management and reform, wrote that the auditors’ testimony shows it is “impossible” for the U.N. aid agency to verify whether its funds “have actually been used for bona fide development purposes or if the DPRK [North Korea] has converted such funds for its own illicit purposes.”

Click here to read U.S. Ambassador Mark Wallace's letter to the UNDP. (pdf)

Ironically enough, neither Wallace nor the U.S. government has been allowed to obtain copies of the audits, which are deemed “management tools” by UNDP bureaucrats and therefore not even available to governments that pay for the organization.

Their contents came to light only after Wallace and the U.S. demanded an opportunity to view the audits at UNDP headquarters, and took careful notes based on the documents. Wallace reiterated the contents in his letter, addressed to Ad Melkert, the UNDP’s No. 2 official.

The difficulties in finding out what the UNDP was doing in North Korea were apparently something that U.S. diplomats and UNDP auditors shared.

Wallace relates in his letter that whenever the auditors, contracted from the consulting firm KPMG, tried to discover what was going wrong, they were either limited in what they were allowed to investigate, or they were forced to accept “sham” audits done by the North Koreans themselves.

The picture painted by the auditors, according to Wallace, shows a U.N. agency that “operated in blatant violation of U.N. rules.”

The UNDP allowed members of Kim’s regime to “dominate” local UNDP staff, who were apparently first selected by the North Korean government itself, the auditors said, and added that Kim’s operatives even ran “core” financial and managerial functions directly.

The regime also demanded cash payments from the aid agency in violation of U.N. rules, and kept UNDP officials from visiting many of the sites where development projects were supposed to be underway.

On at least three occasions, in 1999, 2001 and 2004, the KPMG auditors filed reports that brought troubling aspects of the situation to the attention of UNDP headquarters, recommending “timely corrective action.” There is no evidence that any such action took place.

Just exactly how much money the UNDP funneled into North Korea in all those years is not revealed in Wallace’s letter. But he notes that in 1999 there were 29 ongoing UNDP projects in North Korea, with a total budget of $27.86 million. Two-thirds of the programs were so-called “National Execution programs” run by North Korea directly, using UNDP money. The other third was ostensibly run by UNDP itself.

But that may not have made a difference. The auditors complained that even UNDP-run programs paid for everything in cash, which is against UNDP policy, at prices set by the Kim regime, and to suppliers that the regime designated. There were not even any purchase orders involved. The regime provided no audits of the programs under its own direct control.

In his letter to Melkert, Wallace called for a “full independent and outside forensic audit” of UNDP’s programs in North Korea, going back to at least 1998.

Only “the bright light of real oversight” would allow the UNDP’s overseers to decide whether any or all of the programs should be continued, he said.

UPDATES:

In the wake of this FOX News story, Republicans in Congress have started to take up the issue. Florida Rep. Ileana Ros-Lehtinen, ranking Republican member of the House Foreign Affairs Committee, called on the UNDP Friday to end its project funding in North Korea. She further called on newly inaugurated U.N. Secretary-General Ban Ki-Moon to hold accountable officials who had allowed the North Korean regime to control UNDP programming. "This is yet another example of the abuses made possible by the lack of accountability within the U.N. system," Ros-Lehtinen said.

A representative speaking for Ban Ki-Moon announced Friday that in response to the allegations regarding North Korea and the UNDP, the secretary-general has called for "an urgent, systemwide and external inquiry into all activities done around the globe done by the U.N. funds and programs."

George Russell is Executive Editor of FOX News Channel.

Will the U.N. Development Program Probe Be Ban Ki-Moon's First Cover-Up?

By Claudia Rosett and George Russell

Less than one month into his job, the new United Nations Secretary-General, Ban Ki-moon, has already had his first scandal. Now he may be engineering his first cover-up.

For just one day last week, it looked like Ban, in the first real test of his self-proclaimed mission to “restore trust” at the U.N., had risen above the bureaucratic evasions of his scandal-plagued predecessor, Kofi Annan. That day was Jan. 19, shortly after FOX News and The Wall Street Journal broke the story of U.S. State Department accusations that the United Nations Development Program (UNDP), violating its own rules, had allowed hard currency to flow to the now-sanctioned rogue regime of North Korean dictator Kim Jong Il. The State Department told of UNDP offices in North Korea dominated by officials of the regime, “sham” audits of programs to hide the cash flow, and an extended cover-up of the situation by the UNDP itself.

Ban came out that same day for a public housecleaning, with guns blazing. In a break with the stonewalls of the U.N. when faced with Oil-for-Food and other scandals, he promised to call for what his spokeswoman described as “an urgent, system-wide and external inquiry into all activities done around the globe by the U.N. funds and programmes.”

For this, Ban earned immediate praise, even from some of the U.N.’s most diehard critics. And he seemed intent on sticking to his guns. When a reporter dropped by the office of Ban’s spokeswoman, Michele Montas, late that same Friday evening, she took time to offer assurances that yes, indeed, the audit would be rigorous, complete and independent. Asked, specifically, if outside, private auditors would be employed to ensure integrity, she said, “Yes.”

But by Monday, Ban was backtracking faster than you can say “ACABQ” — which is the acronym for the U.N. General Assembly’s own budget oversight body, the Advisory Committee on Administrative and Budgetary Questions — which Ban was suddenly proposing to use as the overseer of his promised housecleaning.

To call that a huge step backward would be understatement. Among other things, the former chairman of the ACABQ, Vladimir Kuznetsov, was one of two U.N. officials indicted in 2005 on charges of bribery and money-laundering in connection with a highly publicized U.N. procurement scandal. (One, Alexander Yakovlev, pleaded guilty. Kuznetsov has pleaded not guilty, and goes on trial next month in New York federal court).

It was during the time that Kuznetsov held his U.N. budget oversight job that illicit funds were allegedly passing through his secret Caribbean bank account. Somehow, his alleged crimes escaped the ACABQ’s attention.

It is this same ACABQ that Ban now proposes to use as a conduit for handling the inspection of the UNDP’s North Korean unit, which will be carried out not by a truly independent outside auditing firm, but by using the U.N.’s own “external auditors.”

This U.N. group of auditors may be called external in U.N. parlance — meaning it is not composed of career U.N. bureaucrats — but it is hardly independent of the U.N. itself. The board is made up of the government audit arms of a rotating trio of U.N. member states, currently consisting of the Philippines, South Africa and France. This was precisely the same trio of government auditors, serving on precisely the same U.N. oversight board, that provided so-called external audits during the final graft-crammed years of Oil-for-Food.

Over a period from 1996 to 2003, the so-called external auditors blew the whistle on precisely nothing, even as Saddam Hussein stole billions from Oil-For-Food in bribery and kickbacks.

It was thanks in part to this board’s feeble oversight that BenonSevan, the recently indicted former head of Oil-for-Food, was able to file a report in 2002 that claimed that the Oil-for-Food program was “one of the most audited in the United Nations system.”

Not only did these government external auditors fail to sound a general alarm about the record-setting scale of corruption under Oil-for-Food; in the cases of South Africa and France, countries that were prime players in Saddam Hussein’s scams, the overseers didn’t even try to stop the corruption when it showed up at home.

In the case of North Korea, their track record may be as bad, since the board has already been involved in oversight of the UNDP’s operations there. According to the UNDP’s No. 2 official, Ad Melkert, copies of lower-level audits that outlined many of the problems had been passed on to the oversight board — which, in his view, had the responsibility to pass them on to member states. (Melkert’s viewpoint eerily echoes the Oil-For-Food defenses of Annan, who also argued that his office was not responsible for policing that program; only a committee of the Security Council was.)

But even if one buys Melkert’s argument, which it is impossible to do without a truly impartial investigation, he is also pointing to a grievous conflict of interest on the part of Ban’s board in overseeing any subsequent audit.

Ban is now proposing that this apparently feckless board confine itself, for the time being, to examining over the next three months the operations of U.N. agencies in North Korea and other places, where “issues of hard currency transactions, independence of staff hiring and access to reviewing local projects are pertinent.” It appears that the urgent worldwide audit proclaimed last week for the U.N.’s entire $20 billion system will have to wait until at least September.

Without clarifying any further details, Ban left U.N. headquarters Wednesday on an extended trip to Africa via Paris. Meanwhile, without waiting for fresh audit reports of any kind, the UNDP’s chief administrator, Kemal Dervis, told his executive board — whose 36 members include North Korea — that “there is really no justification for the extreme allegations and interpretations we have seen over the last few days.”

This is the second time in about three weeks that Ban, put to a test, has first signaled a sound instinct, only to retreat after a dose of in-house consultation. The first occasion came during his first week on the job, after the execution of Saddam Hussein.

In a break with the orthodoxy of his predecessor, who had led the U.N. on an anti-capital punishment crusade, Ban first noted that Saddam had committed heinous crimes, and that hanging such a monster was a matter for individual U.N. member states to decide. By the end of the week, however, he had joined the eternal U.N. chorus that condemns all capital punishment, even of mass murderers like Saddam.

This retreat is much worse for the U.N., and even for Ban himself. In backing away from a genuinely independent audit of U.N operations in North Korea, Ban may well be throwing a blanket over significant aspects of his own history. Prior to his U.N. appointment, Ban was South Korea’s foreign minister. His country has been shipping huge amounts of aid, including hard currency, to the North Korean regime for years, some of it during his own term in Seoul as foreign minister. Some of those funds may well have passed through the UNDP. If there is anything unsavory to uncover in that regard, Ban would be wise to get it over with now, via truly independent investigators. Otherwise, the UNDP scandal, which currently looks like a holdover from his predecessor, might turn out to be Ban’s own Achilles’ heel.

Claudia Rosett is a journalist-in-residence with the Foundation for Defense of Democracies. George Russell is executive editor of Fox News.