Published June 24, 2005
UNITED NATIONS – Oil-for-Food is the biggest scandal ever to hit the United Nations (search), but it is just one of many scandals erupting at the world body – all symptoms of trouble at the core.
The latest shocker intersects with Oil-for-Food (search), but centers on separate activities in the U.N. procurement department, where a longtime U.N. staffer handling tens of millions of dollars worth of contracts for a variety of U.N. operations is entwined in a father-son apparent conflict of interest similar to the one that engulfed Secretary-General Kofi Annan (search) and his son Kojo.
The story points to a pattern of crony connections and questionable practices at the United Nations, including family ties between U.N. officials and the organization’s multi-billion dollar contracting business for goods and services. Along the way it raises fresh questions about the already battered credibility of the U.N.-authorized investigation into Oil-for-Food, led by former Federal Reserve Chairman Paul Volcker (search).
The staffer in question is Alexander Yakovlev (search), a dapper Russian who is possibly the longest tenured member of the U.N. procurement department — which last year alone spent more than $1.3 billion buying supplies and services for the United Nations. Yakovlev joined the U.N. staff in the late 1980s, when U.N. jobs filled by natives of the Soviet Union and East Bloc countries went to applicants directly nominated by their governments. Colleagues say that even after the 1991 Soviet collapse, Yakovlev has kept in close touch with members of the Russian mission to the U.N.
Yakovlev’s job includes such sensitive matters as vetting potential U.N. contractors and processing their bids. In the 1990s, Yakovlev was deeply involved in the hiring of inspection firms for Oil-for-Food, including Cotecna Inspection S.A. (search), the Swiss firm for which Kojo Annan worked. After Secretary-General Annan reluctantly concluded that the more than $110 billion Oil-for-Food scandal was worth investigating, Yakovlev popped up as a key witness in two interim reports released earlier this year by the Volcker investigation.
In the Volcker version of events, Yakovlev emerged as a champion of integrity, portrayed as having fought a losing battle for fair bidding procedures on two major contracts under Oil-for-Food. Based in part on Yakovlev’s testimony, the Volcker committee censured another U.N. official, Joseph Stephanides, whom Kofi Annan last month fired. Stephanides is appealing his case on grounds that he simply followed orders from more senior officials and the U.N. Security Council.
Alexander Yakovlev told FOX News last month that he refuses to talk with the media without the express permission of Kofi Annan. FOX News’ request to Annan to supply that permission was denied recently by Annan’s deputy press spokesman, Stephane Dujarric, on grounds that Yakovlev remains an “important witness” in the ongoing Volcker investigation. Dujarric further stressed that “from the evidence presented in the Volcker report, it is obvious that [Yakovlev] acted with great integrity and followed proper procedure.”
It’s hard to be sure of that, given the secrecy that shrouds Volcker’s investigation as well as all Oil-for-Food records. But from material obtained outside the narrow focus of the Volcker reports, FOX News has learned that in matters of U.N. business, Yakovlev apparently had his own ideas involving proper procedures where it concerned a major U.N. supplier, IHC Services, Ltd. (search), which at his request employed his son — Dmitry Yakovlev, now 23.
This arrangement was not directly linked to Oil-for-Food, the deal that the U.N. struck with Saddam Hussein in 1996, which ended with the invasion of Iraq in 2003. Rather, it replicated some of the Oil-for-Food program’s failings in yet another area of U.N. operations. U.N. secrecy, plus refusals, evasions and conflicting accounts from those most directly involved, make it difficult to piece together a full picture of the Yakovlev-IHC relationship. But from interviews, phone records and leaked U.N. documents, what does emerge is that Yakovlev’s dealings with IHC bear a close resemblance to some of the transgressions that Volcker – relying in part on Yakovlev’s testimony – has been investigating.
Records of Yakovlev’s ties to IHC Services go back at least to the late 1990s – the same era in which Oil-for-Food, under Annan’s stewardship from 1997 to 2003, ballooned into the biggest corruption scandal in history. IHC is a private firm with offices in New York and Milan, and a mysterious owner who, according to IHC executives, lives in Switzerland. Those executives refused to name the owner, and attempts to follow the paper trail dead-end at a liquidated holding company in Liechtenstein. There is less mystery, however, about IHC’s business in New York. According to IHC’s chief operating officer, Angelita Quinteros, the company “acts as an agent to procure contracts,” with “the U.N. mostly.”
IHC belongs to a category known in U.N. parlance as a “vendor intermediary” – meaning a company that brokers contracts for other firms that wish to supply the United Nations. Often these contracts are not signed by IHC, although the company is a registered U.N. vendor and has done deals in its own name. IHC specializes, among other things, in brokering U.N. supply contracts for a number of U.S., French, Italian and South Korean firms. The goods supplied range from prefabricated buildings to earthmoving equipment, water treatment facilities and diesel electrical generators, which the United Nations buys for projects such as development aid and peacekeeping. Since 1997, IHC has done some $12 million worth of business with the world body under its own name.
In recent interviews, both IHC's chief executive officer, Ezio Testa, and COO Angelita Quinteros were emphatic that IHC did no business with the scandal-wracked Oil-for-Food program, and was not registered as an Oil-for-Food vendor. But that assurance did not cover important IHC clients, such as a French producer of portable generators called SDMO, which worked through IHC for regular U.N. procurement contracts between 1997 and 2002, and also did an impressive amount of Oil-for-Food trade with Saddam Hussein. According to a table of U.N. records released by Volcker, SDMO did more than $140 million worth of business with Saddam under Oil-for-Food. SDMO has also done some $4.5 million worth of business with U.N. procurement since 1997.
IHC Services’ business with the United Nations, on behalf of itself, SDMO and a variety of other clients is noteworthy, because on its own website the U.N. procurement department specifically warns companies that wish to deal with the organization to avoid going through “vendor intermediaries,” saying that some of them “claim that they can place a vendor in a more advantageous position in a competitive bidding exercise.” The caveat is clearly intended to keep the shadow of unfair dealing away from U.N. procurement. At the same time, according to a senior U.N. procurement official, while the United Nations in general prefers to avoid vendor intermediaries, in pursuing cheaper prices “we sometimes get a better deal from them than we can manage on our own.”
The U.N. as a rule has refused to disclose to outsiders which staff members handle which contracts in the procurement process, and members of the procurement department can shift assignments. But FOX News has obtained a copy of one U.N. supply contract signed on Sept. 28, 1999, for which Yakovlev was the procurement officer and IHC was the supplier. Tagged in U.N. officialese as PD/CO473/99, that contract involved the U.N. purchase from IHC of nearly $1.2 million in portable generators for peacekeeping missions. The amount of the contract was increased by July 2000 to more than $1.8 million.
Not long after that contract was signed, IHC hired the younger Yakovlev — Dmitry — first for two stints as an intern, then as a full-time employee, according to a copy of his resume obtained by FOX News. Accounts of the exact timing vary, with different IHC officers giving different dates and versions of the tale. The copy of Dmitry Yakovlev’s resume states that he began working as a summer hire for IHC in May, 2000. That would have been eight months after the portable generator supply contract negotiated by his father and while it was in force.
The son’s first job at IHC lasted through August, according to the resume, when he returned to university. The following year, the resume states, he returned to IHC as an intern, again from May through August. He then joined IHC full-time in December 2002 and worked there, according to the resume and confirmed in a brief and reluctant telephone interview with Dmitry, until December, 2003. Throughout this period Dmitry lived with his parents, as he still does, at their spacious brick home in the New York suburb of Yonkers—as he confirmed to FOX News.
Dmitry’s full-time employment at IHC was arranged at the specific request of Alexander Yakovlev, according to IHC’s CEO, Testa, who told FOX News that he had known the senior Yakovlev “for many years. I would see him at [U.N.] procurement services every week.” Testa agreed to hire the younger Yakovlev full-time in 2002, he related, after Alexander Yakovlev talked to him in the corridors of the U.N. procurement offices and said, according to Testa's recollection, “My son is graduating. He’s looking for an international environment.” Testa replied: “Let me see what I can do.”
Yakovlev’s request would seem to violate an important provision of the U.N. staff regulations that declares, “Staff members shall not use their office or knowledge gained from their official functions for private gain, financial or otherwise, or for the private gain of any third party, including family, friends and those they favour.” A senior U.N. procurement official, when asked by FOX News about the propriety of such a request, described it as a “total no-no, completely inappropriate.”
IHC chief operating office Angelita Quinteros (search), interviewed separately by FOX News, told a somewhat different story than her boss about Dmitry’s hiring. According to Quinteros, Dmitry “walked in and applied for a job.” She said she did not remember when he first came to the firm, and did not know when he became a full-time employee. The records of his employment, she said, were at a separate firm. “We don’t keep files here.” More than two weeks after her interview, Quinteros sent an email to FOX News stating that Dmitry had worked at IHC in August 2001 and then from December 2002 to June 2003.
Quinteros described Dmitry Yakovlev’s duties as “helping in accounting” and said he “did payables.” She added that he had worked as an assistant to an IHC accountant, who was himself a consultant and had since left the firm. She dismissed the younger Yakovlev’s designation of himself in his resume as “assistant to the Vice President,” saying that she ran the office, and that “everyone” was her assistant. His duties, she said, had “no relation at all with the U.N.”
Quinteros’s account of Yakovlev’s duties was backed by her boss, Ezio Testa (search), in the same interview where he declared that Alexander Yakovlev had asked him to find Dmitry a position. Testa said that the younger Yakovlev only worked for “nine months, ten months” full-time, and “for a few weeks” as a summer intern. He agreed with Quinteros that Yakovlev’s job involved accounting.
Both executives were emphatic that they had no contact with the younger Yakovlev after he left the firm.
Dmitry Yakovlev’s resume, as well as his cell phone records, also obtained by FOX News, tell a different story. He did indeed assist in preparing financial statements during his two summer stints at IHC, according to the resume, but his duties also included, the document says, “preparation of proposals.” During his full-time stint at IHC, according to a full-page annex of the resume, “among various tasks assigned to me…one of the most significant and important is participation in soliciting, preparing and evaluating commercial proposals.” That would have put him in the mainstream of work that IHC did with organizations like the U.N.
Copies of Dmitry Yakovlev’s cell phone records from the period Dec. 21, 2003 to Feb. 20, 2004, show that communications between Dmitry Yakovlev and Angelita Quinteros did not end when he left the firm in December 2003, (or in June, 2003, as Quinteros later told FOX News).The phone records more than 120 cell phone calls between Quinteros and Dmitry Yakovlev, at all hours of the day and night. (FOX News has not had access to more recent records.) On a number of occasions the daytime calls to or from Quinteros were immediately followed or preceded within the space of minutes—sometimes less than a minute— by calls from Dmitry to his father’s U.N. office. Evening calls from Quinteros to Dmitry’s cell phone and vice-versa were often followed or preceded quickly by calls to the Yakovlev family home.
While the precise nature of these calls remains unknown, it bears noting that Dmitry Yakovlev’s live-in relationship with his parents, while working at a job obtained through his father’s U.N. procurement department connections, put him in a position to gain sensitive bidding proposal information that conceivably would benefit IHC or some of its clients. If so, that might place Alexander Yakovlev in conflict with a section of the staff regulations cited by Volcker in the case of Kofi Annan, requiring that staffers certify “that there is no conflict of interest with regard to the economic activities of spouses and dependent children.”
According to Testa, from 2002 onwards, IHC had “no dealings” with Alexander Yakovlev in the procurement department. The United Nations does not make publicly available the information needed to confirm that; such as which individual procurement officers handled which contracts.
Indeed, a mix of U.N. internal obfuscation and confidentiality makes it difficult even to obtain a complete overview of the in-house rules regarding conflicts of interest. According to information gleaned from the Volcker committee’s report on Kofi and Kojo Annan, there is no U.N. staff rule or regulation that requires United Nations personnel to disclose that a family member works for a company doing business with the U.N., for example.
But the committee also noted that according to the U.N. Procurement Manual, anyone signing a contract with the United Nations must declare that no U.N. official “has received or will be offered…any direct or indirect benefit” as a result of the contract.
A 1998 staff regulation further demands U.N. staffers “avoid any action…that may adversely reflect on their status, or on the integrity, independence and impartiality” required of them, and the U.N. standards of conduct for employees specifically mention “procurement matters” as being “particularly important.”
Raising yet more questions is the matter of financial arrangements pertaining to Yakovlev’s wife, Olga, who when contacted by telephone by FOXNews seemed to be a housewife with little command of English. In January 2004 she was issued with a Visa card from a company called Moxyco Ltd. The card was issued by the Caribbean-based Antigua Barbuda Investment Bank, which adheres to the Caribbean nation’s strict banking privacy laws and requires that all its Visa cardholders maintain an account with the bank. The Moxyco Visa card was subsequently used at least once to pay for a flight to Moscow for Dmitry.
According to records seen by FOX News, Olga’s Visa card was supplied to her by Maritime International Ltd., a firm that specializes in helping individuals create offshore incorporations and create bank accounts and other asset vehicles offshore for tax minimization and financial secrecy. Contacted by telephone to explain the nature of Moxyco Ltd, Mrs. Yakovlev suggested only that FOX News should talk to her husband.
Beyond the questions the Yakovlev-IHC relationship raises about U.N. procurement procedures, this tale begs some further explanation from the Volcker committee, appointed by Kofi Annan 14 months ago to get to the bottom of the Oil-for-Food scandal. Volcker relied extensively on Yakovlev’s testimony in each of the two interim reports he has issued so far. And this is only the latest in an awkward series of revelations about the Volcker committee’s investigations that have emerged in the past few months.
Starting the day after the U.N. Security Council authorized the Volcker investigation, Annan’s chief of staff, Iqbal Riza (search), spent seven months shredding documents for the years 1997 to 1999, covering the crucial first two years of Oil-for-Food, during which Annan greatly shaped and expanded the program. The shredding covered the period in which the U.N. in late 1998 hired the inspections firm, Cotecna, which had employed Annan’s son. (Riza has since resigned as chief of staff, but retains his diplomatic immunity and U.N. access as a $1 a year adviser to Annan).
When it came to conflict of interest allegations concerning Kofi Annan himself, the Volcker committee allowed the secretary-general to select the documents he submitted for inspection.
Less than two months ago, one of Volcker’s top investigators, Robert Parton (search), resigned — protesting that Volcker had overridden evidence that put Annan in a bad light, in producing a March 29 interim report that the Secretary-General is still advertising as an exoneration. The committee showed similar discretion in its first report when it failed to name Deputy Secretary General Louise Frechette (search) by name an extraordinary 12 times, including in discussions of an occasion when she telephoned U.N. investigators to squelch their bid to report on the Oil-for-Food program to the U.N. Security Council.
More broadly, the need, now apparent, to get to the bottom of the Yakovlev tale, ought to help focus the attention of reformers on the glaring necessity of starting an investigation that goes well beyond Oil-for-Food, into the clandestine networks of favoritism and cronyism that infest the U.N., and about which lower-level staffers have often complained loudly. When it comes to genuine accountability and transparency, the questions raised by the case of Alexander Yakovlev show that in all of its dealings, the United Nations has far to go.
Editor's Note: In the aftermath of FOX News' investigation, the U.N. Office of Internal Oversight Services announced June 20 that it is now investigating Yakovlev "as a matter of urgency." On June 21, Yakovlev submitted his resignation, which the United Nations accepted the next day.
Claudia Rosett is journalist-in-residence with The Foundation for the Defense of Democracies. George Russell is executive editor of FOX News.