More than three years after the United Nations' scandal-tarred, multi-billion-dollar procurement division decided that it needed a streamlined process to punish corrupt, unethical or criminal suppliers, a new sanctions mechanism is finally scheduled to start operating next month — after two previous phantom appearances.
The U.N. also said much the same thing in March, 2008, when officials told members of the U.N. General Assembly's budget committee that arrangements for a sanctions committee "should be finalized by summer 2008."
This followed an assurance five months earlier, on November 5, 2007, from U.N. Secretary General Ban Ki-moon to the UN General Assembly, that the very same sanctions committee "is being established."
In the report where he made that announcement, Ban assured the assembly that the U.N. Procurement Service was already "developing terms of reference for the ... committee and is currently in consultation with the Ethics Office and other relevant services in order to appoint independent representatives to discharge [its] functions."
But, Ban also warned, the "nature and complexity" of some procurement reforms — such as the sanctions committee — meant that they "cannot be rushed."
No one could accuse the U.N. so far of rushing when it comes to updating its clanking machinery to punish vendors who lie, cheat, bribe or steal their way to securing lucrative U.N. procurement contracts.
Indeed, the glacial pace of the world organization in efficiently punishing cheaters is similar to the problems that have long plagued the buying and selling of goods and services across the entire U.N. system.
Without the so-called "senior vendor review committee" that the U.N. has long promised, but not yet delivered, all of its current sanctions against corporate wrongdoing are funneled through the same overstretched committee that considers such matters as supplier under-performance on food delivery and complaints from vendors denied access to U.N. registration.
The senior committee, which will be chaired by the U.N. Secretariat's chief ethics officer — a post only filled in May 2007 — will make the issue of what to do with wrongdoers a central concern.
When asked directly about the reasons for the long delay in getting the committee established, a U.N. official ducked the question, saying only that "the establishment of the [committee] was done in close consultation with all key stakeholders of the U.N. Secretariat."
Despite any number of reports and investigations that indicate the U.N. needs sharper teeth, used more frequently, to discipline wayward suppliers — not to mention its own wayward staff — the long, long saga of the "senior vendor review committee" through the entrails of the bureaucracy shows that the will to hone those fangs is still lacking.
The problem is far from unique to the U.N. Secretariat alone, with its more than $2 billion in annual procurement spending. Recent internal U.N. investigations have judged that the system for spending roughly $10 billion on procurement across the global U.N. system is a managerial disaster, in which coordination, accountability and even paperwork is often in short supply.
Click here for the FOX News story on the U.N.'s managerial disaster.
Moreover, wrongdoers caught cheating in one part of the sprawling U.N. system are not always punished elsewhere.
In January, 2009, for example, FOX News reports that the World Bank had failed to tell the rest of the world organization that it had banned Satyam Computer Services — an Indian computer services giant that imploded in fraud last February — and thus allowed the U.N. to enter into a $6 million deal with Satyam in July 2008.
Click here for the FOX News story about Satyam's spreading stain.
Satyam also had another, $55.5 million contract with the U.N.'s World Health Organization that according to documents obtained by FOX News was far behind schedule and likely to end up far exceeding its budget.
Click here for the story about the World Health Organization.
Indeed, a report by the UN Secretariat's investigative arm, the Office of Internal Oversight Services, declared in November 2007 that "there is a conspicuous need for improved information-sharing between different parts of the United Nations and a more robust response to vendors when their malfeasance is identified."
Among other things, the OIOS report called for the public posting of the names of suppliers who had been sanctioned at the U.N., a practice that the investigative body said was already followed at the World Bank (itself a U.N. -related institution) and the European Commission. A World Bank spokesman confirmed that since 1999, "the bank has debarred 355 firms and individuals for engaging in fraud and corruption, with the debarments publicly listed on our website."
U.N. Secretary-General Ban, however, responded tepidly to the public listing idea. In a response to the OIOS report, he agreed that "vendors involved in improper activities should no longer have the opportunity to transact business with the Organization." He also agreed that other U.N. organizations should be told about the wrongdoer, to prevent sanctioned corporations from simply doing business elsewhere.
But then he noted that "publishing and disseminating allegations about vendors resulting from investigations" would require development of a due-process mechanism, and without it, the U.N. might face legal claims.
The development of that mechanism "would require the dedication of significant resources to be authorized by the General Assembly," Ban noted — a course of action that he conspicuously failed to endorse.
Thus, the final paradox of the U.N.'s strange reluctance to get tough with crooked vendors: it still won't tell on them publicly even when the corrupted suppliers tell on themselves.
Case in point: the behavior of Siemens AG, the German electronics giant.
On April 29, 2009, Siemens announced that more than four months earlier it had pleaded guilty to criminal charges of "knowingly circumventing and failing to maintain adequate internal controls and failing to comply with the books and records provisions of the U.S. Foreign Corrupt Practices Act." According to a Securities and Exchange Commission complaint, the charges more than $1.4 billion worth of bribery cases around the world and across many lines of Siemens' businesses. Among other things, Siemens agreed to disgorge $350 million in profits and in Europe paid a fine worth about $529 million.
Siemens also revealed that it had been hit with an proposed eight-year suspension by the World Bank as a result of the bribery cases, with the possibility that the penalty could be reduced to one year if Siemens, among other things, "maintained an appropriate corporate compliance program acceptable to the World Bank."
Siemens is still contesting the proposed World Bank penalty and declined to comment further to FOX News. The World Bank also declined comment, beyond a statement that "the World Bank is currently moving forward with sanctions proceedings against Siemens as a result of our investigation. No sanction has been announced."
A bank spokesman added that "we are taking a second look at Siemens' ongoing contracts to determine if there are indications of fraud and corruption."
In the same announcement, Siemens said that on March 9, 2009, it had been hit with at least a six month suspension by the U.N. procurement service for the same bribery cases involving the Foreign Corrupt Practises Act, and added "the review of the decision is pending."
Click here to read the Siemens announcement.
When contacted by FOX News, U.N. officials confirmed that sanctions had been leveled, on three Siemens businesses, out of "maybe more than ten" on the U.N.'s list of authorized vendors. The three: Siemens AG Medical Solutions, Siemens Power Transmission & Distribution, and Siemens Aktiengesellshaght, Power — all of Germany. The U.N.'s business with Siemens was fairly marginal, the officials said, about $800.000 since 2007 with the various corporate subsidiaries.
The point of the sanctions, the officials said, was not punishment for its own sake, but — even though the U.N. did not publicize them — "simply to send a strong signal to the world that the U.N. values are not compromised and that the U.N. wants ethical and professional vendors."
The "strong signal to the world," however, could not easily be detected.
George Russell is executive editor of FOX News.
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