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Did U.N. Program Secretly Funnel Money to North Korea?

UPDATE: Following publication of this story, White House Press Secretary Dana Perino told FOX News that "we are aware of these allegations. We are working hard to ensure the allegations receive a full investigation."

Perino added: "Our Ambassador for U.N. reform and management, Mark Wallace, specifically works with the U.N. on these issues."

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Did the United Nations Development Program use an American charitable organization to secretly funnel nearly $2 million, and perhaps much more, to North Korea — over and above the millions in hard currency it is already known to have given the Kim Jong-il regime in violation of its own rules?

UNDP documents seen by FOX News raise those questions, and others about the relationship between UNDP and the humanitarian group Mercy Corps, also known as Mercy Corps International. The documents show millions of dollars allocated to Mercy Corps International for North Korea seem to have escaped normal UNDP oversight.

Both UNDP and Mercy Corps have rejected the idea of any direct dealings on North Korean territory, and spokespersons for both organizations told FOX News that their only joint project in the region operates solely in China, in a region adjacent to North Korea.

UNDP says it suspended all its operations in North Korea when the Kim regime refused to cooperate in an investigation of UNDP funding and staffing methods in the country, as well as the unexplained presence of thousands of dollars of counterfeit U.S. money that was stashed in a UNDP safe in Pyongyang.

Nonetheless, according to the internal documents seen by FOX News, close to $2 million in UNDP money was disbursed to Mercy for a project clearly labeled “MCI-DPRK” (the acronym for Democratic People’s Republic of Korea, as North Korea is formally known), and numbered in the UNDP book-keeping system as 12431.

The payments stretch from 2004 to January 2007 — or just weeks after accusations were first raised by U.S. diplomats concerning the hard-currency UNDP payments to the Kim regime. More than $200,000 was released to the Mercy Corps project at the end of January 2007.

Additional documents seen by FOX News seem to indicate that much more money — roughly $5.9 million — was budgeted by UNDP over the same 2004-2007 period under the MCI-DPRK rubric.

And intriguingly, most of the funds — roughly $4.6 million — are listed on the UNDP budget as coming from the U.S. Since 2002, the Bush Administration has expressly forbidden that any of the roughly $100 million it donated annually to UNDP be used on any project connected with the North Korean regime. (The U.S. government contribution is currently about $125 million.) UNDP has always declared that it honored those wishes.

UNDP operations in North Korea have been a hot-button issue for much of this year, following U.S. charges that the development organization had violated its rules for dealing with the North Korean regime. A U.S. congressional subcommittee is preparing to hold hearings on exactly how UNDP funneled millions in hard currency to the Kim regime, and whether some of that money ended up in North Korea’s illicit nuclear weapons programs

The money itemized in project 12431 is not part of that congressional inquiry, and the purpose of the project is not revealed in the documents seen by FOX News. Internal UNDP records further seem to indicate that the project has never been audited or formally evaluated through conventional UNDP mechanisms — normally a requirement for all UNDP projects of any magnitude or duration.

Both UNDP and Mercy Corps readily acknowledge that they operate a UNDP-financed project on the Chinese side of the China-North Korea border, known as “Poverty Alleviation and Humanitarian Assistance in the Tumen River Area.” The Tumen project combines a major emphasis on “micro-finance” loans for local small entrepreneurs with food, medical and housing assistance as well as job training for “vulnerable” local populations. Those populations include some 15,000 North Koreans in the vicinity, according to the UNDP’s own analysis of the project.

The Tumen project is labeled INT/02/H01 on UNDP documents describing it — and the same letters are used in labeling some project payments in the documents seen by FOX News. According to information provided by UNDP, the beginnings of the Tumen River project dates back to Mercy Corps relief efforts in 2001, which were revised and extended in 2003 to allow for greater micro-financing effort alongside the humanitarian relief.

For their part, Mercy Corps spokesmen list the project as only operating in China, though one of them added that most of the Chinese citizens in the designated area of China were of Korean ancestry, and the program “almost certainly covered some people who came and went back to Korea.”

But both Mercy and UNDP insist that the project does not extend to the North Korean side of the river.

“We are not aware of any other work with Mercy Corps remotely connected to DPRK,” said UNDP spokesman David Morrison, who also provided detailed information on the Tumen River project. “None inside DPRK and no other in the vicinity.”

UNDP documents seen by FOX News, however, clearly list project 12431, labeled “MCI-DPRK,” as distinct from the Tumen River project. The budget for project 12431 allocates large sums between 2004 and 2007 — nearly $2.7 million — for “consultants” and travel; and about the same amount for individual and corporate “services.”

But the documents say nothing about humanitarian supplies, job training or micro-finance resources, which are the apparent focus of Mercy Corps’ Tumen River efforts.

North Korea is far from the only focus for Mercy Corps’s humanitarian efforts. According to its website, the organization was founded in the late 1970s, currently employs about 3,400 people, and works in some 35 countries, including Afghanistan, Ethiopia and Zimbabwe. Its main focus is on helping communities recover from the ravages of war or social upheaval, with an emphasis on sustainable development and rebuilding civic institutions and the rule of law.

According to the website, Mercy Corps has a history of involvement with North Korea dating back to 1996, which includes an initiative to grow apple orchards and sustain fish farming. The involvement also includes substantial forays into “peace-building” between the U.S. and North Korea, originally begun by the organization’s co-founder and senior vice president Elis Culver, now deceased.

In 2004, as the Bush Administration expressed sharply growing alarm over North Korea’s bellicose statements and avowed intent to produce nuclear weapons, Culver led a private 12-person mission to North Korea to foster better relations. He won a posthumous “friendship medal” from North Korea for his efforts.

Mercy Corps’ current president, Nancy Lindborg, a well-regarded international aid professional, also has a personal history of trying to foster improved U.S.-North Korea ties. According to Mercy Corps’ website, she is “co-chair of the [U.S.] National Committee on North Korea and chair of the InterAction North Korea working group, [where] she leads efforts to advance, promote and facilitate engagement between citizens of the United States and the Democratic People’s Republic of Korea.”

Mercy Corps spokesmen did not respond to requests from FOX News to interview Lindborg in connection with this article.

Mercy Corps and UNDP also have dealings with each other in a wide variety of countries. “We probably work with them in 20+ countries around the world,” says UNDP spokesman Morrison. Getting the exact number is difficult, as UNDP record keeping is highly decentralized. Much of the cooperation may not include major financial involvement.

For its part, Mercy Corps says it is receiving significant funding from UNDP in Liberia, southern Sudan, Kosovo and Indonesia, as well as on the Tumen River project.

In January, 2007, Mercy Corps, according to its website, merged with Net-Aid, a UNDP-funded Internet initiative to raise awareness and funds for poverty eradication around the world.

George Russell is executive editor of FOX News.