Report Details Progress in Battle Against Corruption at U.N. Office

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Published October 11, 2007

| FoxNews.com

How much housecleaning has taken place in the United Nations’ scandal-ridden, billion-dollar procurement department? And will it continue?

Those are the questions raised — and only partially answered — in a 46-page report on the efforts of the U.N.’s special procurement task force that has just been submitted to the U.N. General Assembly. The report is signed by Inga-Britt Ahlenius, head of the U.N.’s watchdog Office of Internal Oversight Services (OIOS), who also supervises the 20-member task force.

The good news, according to the document, is that substantial progress has been made in the past 18 months in uncovering corruption, bribery and wrong-doing associated some $1.4 billion worth of contracts, largely associated with burgeoning U.N. peacekeeping missions.

But the report further underlines that a lot more remains to be done — and meantime, uncertainty hangs over the future of the task force itself, whose mandate and funding expire at the end of this year — just as the investigators’ work enters, as the report puts it, a “critical phase.”

By that, the task force apparently means some of its most important work lies immediately ahead. So far, the task force operatives have conducted 63 investigations, but have a stack of more than 300 additional cases that still need probing. Among other things, the task force has looked at individual cases in seven UN peacekeeping missions so far, but the world organization currently has 18 such missions operating world wide — with a 2006-2007 budget of $5.5 billion.

Whether — and how — that anti-corruption work continues will go a long way toward determining whether U.N. Secretary General Ban Ki-moon is serious about setting the “highest ethical standard” for the organization, as he claimed he would do in his January inaugural address.

What the task force has uncovered so far is serious enough. According to the report, their examination of $1.4 billion worth of contracts turned up ten “significant” corruption schemes in deals worth more than $619 million, or 44% of the total.

They specifically identified at least $25 million in misappropriated funds, though that did not include the value of contracts steered to vendors who paid bribes or engaged in other forms of wrongdoing, which would have sent the total far higher. The details concerning individual miscreants are blurred, but the report says that “a number of cases” have been referred to national governments for criminal prosecution, and from internal evidence, well over a dozen U.N. employees have also been cited for possible disciplinary action by the organization itself.

The criminal cases mentioned in the report are cited anonymously — with the exception of two U.N. procurement staffers who have been found guilty in U.S criminal courts of various charges of bribery, fraud and money laundering as a result of their misdeeds.

One is Sanjaya Bahel, a senior procurement official found guilty in June of steering contracts worth $100 million to an Indian firm in exchange for cash and a discount on the purchase of two Manhattan luxury apartments. He has yet to be sentenced.

The other is Alexander Yakovlev, a Russian born procurement official whose secret Caribbean bank account was discovered by FOX News in 2005, which led to his resignation and subsequent arrest. Yakovlev pled guilty to money laundering and corruption charges, and has since been cooperating with U.S. federal investigators before being sentenced.

Yakovlev’s discovery after more than a decade of soliciting and accepting bribes — he began in 1993 — was one of the main events that led to the creation of the U.N.’s procurement task force. The current report contains additional details of his wrongdoing, including the fact that he maintained 14 bank accounts in seven countries: Antigua, Austria, Cyprus, Liechtenstein, Russia, Switzerland and the U.S. Some of these, the report says, “still contain substantial assets,” including at least one million-dollar deposit.

The report does not total up the value of contracts steered by Yakovlev to those who bribed him, but declares that five different vendors have been caught using Yakovlev’s services.

FOX News has learned from other U.N. statements and through its own investigations that these include Eurest Support Services (ESS), a former branch of the British food giant Compass Group; Volga-Dnepr, a huge Russian air transport firm; Russian-based Avicos Insurance Company; Cogim, an Italian-based firm specializing in pre-fab construction, especially for military units; and Corimec Italiana, another pre-fab military provider. The Eurest contracts — for peacekeeping food services in Liberia and Eritrea — were worth more than $86 million.

The task force report also reveals new details about how Yakovlev apparently beat a bidding system that the U.N. widely touted as foolproof: by simply adding and subtracting bidding details from proposals that were supposedly out of reach of such tampering, while representatives of the bribing firms holed up in a nearby hotel room.

The report links those activities with another firm that had a relationship with Yakovlev: IHC Services, a middleman in obtaining contracts for ESS, among others, and which from 1997 to 2000 had a former star U.N. diplomat, Giandomenioco Picco, as a board member and then chairman. During part of that time, Picco also served as a special envoy for then U.N. Secretary General Kofi Annan.

But the wrongdoing covered in the task force report covers almost every variety of procurement activity.

Among them is a husband-and-wife scheme in the Nairobi branch of the U.N. Office for Project Services (UNOPS) to steer contracts to a firm owned by a spouse, which netted more than $350,000.

Another is a $45,000 fuel services contract with peacekeepers in Sudan that ballooned over time to $22.5 million without review, while a U.N. staffer allegedly received favors from a vendor.

(FOX News reported in May that a Canadian-based air carrier, SkyLink Aviation, Inc., had been suspended from the U.N. vendor roster due to apparent non-cooperation in a U.N. probe; SkyLink was doing roughly $100 million in fuel supply business with U.N. peacekeeping in Sudan at the time it was suspended.)

Still another is a $57 million electrical services contract at U.N. headquarters in New York that was improperly endorsed for continuation, despite “extreme work performance deficiencies” by a vendor. (A New York City electrical contractor, Petrocelli Electrical Company, is on a list of suspended U.N. vendors.)

The task force was particularly active in looking at peacekeeping procurement in the Congo, where it investigated 18 cases and discovered “numerous” cases where vendors had to pay kickbacks to U.N. staffers to win business. The report described a “collapse of ethical culture and extensive corruption” in the Congo mission, and five staffers charged with misconduct as a result.

On the other hand, the report says, a number of U.N. staffers were also absolved of wrongdoing as a result of the task force investigations, including in peacekeeping missions.

Aside from specific misdeeds, the report points to a “pressing need to bring sweeping changes into the U.N. procurement system.” Among the soft spots: a need for greater financial disclosure by U.N. staffers and by vendors, who are currently not required to divulge even the names of owners of firms that want to do business with the U.N. Nor are they required to reveal direct or indirect connections with any U.N. staff member. Penalties handed out in one part of the organization are often ignored in other parts, the report says, citing the case of one unnamed company that won a U.N. contract only two months after being caught in an improper U.N. deal.

The U.N. also needs to be more vigorous in seeking to recover money improperly obtained from it, the report says. It notes that two vendors recently sued Britain’s Compass Group for damages resulting from the corrupted bids involving Alexander Yakovlev, and won, according to the report, $74 million as a result.

For its part, the U.N. has only begun proceedings to recover bribe money still in Yakovlev’s possession, and other attempts to recover funds spent on fraudulent contracts “are used rarely,” the document says.

The biggest single reform that the report suggests, however, is the incorporation of the special task force into the normal operations of Ahlenius’ OIOS. The move would prevent the unit’s disappearance at the end of 2007, when its funding expires under U.N. budgeting rules. (Through June, 2007, the task force had spent some $6.5 million of its budgeted $10.8 million.)

It would also preserve the specialized expertise of the task force’s white-collar crime fighters, many of whom are on short-term contracts.

The question is whether the budget committee of the General Assembly will go along.The task force’s work has been bitterly opposed by, in particular, the U.N. mission of Singapore. That delegation has strenuously decried its investigation of the senior Singaporean on the U.N. staff, Assistant Secretary General Andrew Toh, formerly head of the Office of Central Support Services, which includes the procurement division.

Toh has been suspended since late 2006, and has been charged with refusing to cooperate with the task force, especially in revealing his personal bank records and those of his spouse. In March, a Singaporean diplomat called Toh’s treatment “a travesty of justice.”

Toh has claimed discrimination on account of his nationality, and last June won the support of a non-binding eight-member U.N. panel that considers discrimination cases.

Singapore’s opposition to the task force might not count for much except for the procedural rules that govern decisions by the General Assembly budget committee, known as the Advisory Committee on Administrative and Budget Questions (ACABQ). Its 16 members decide by consensus, and Singapore is a member, which may give it a veto power over the task force budget.

If Singapore were able to block Ahlenius’ proposal for the task force, it could well bring an end to the current efforts at rooting out corruption, even as, the OIOS report says, the task force has now turned its “full attention to large contracts in the peacekeeping missions and other large scale matters in the headquarters.”

It would also provide a crowning irony in the long history of U.N. administrative fecklessness. For the ACABQ’s former chairman, Vladimir Kuznetsov, was himself convicted last March on money laundering charges. He is currently slated for sentencing later in October.

The money in question came from bribes he had solicited from U.N. procurement fraudster Alexander Yakovlev, while still holding the ACABQ chairmanship, after learning of Yakovlev’s own booming contract-fixing business.

Kuznetsov, a career Russian diplomat, thus became the highest-ranking U.N. diplomat ever convicted of a corruption-related offense — and part of the inspiration for the procurement task force.

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