When UN Loses Money to Dictators, It Resists Disclosure, Unlike Even Corporations

Byline: Matthew Russell Lee of Inner City Press at UN
www.innercitypress.com/un1disclosed120508.html

UNITED NATIONS, December 5, updated -- Following the exposure of the UN's quiet currency exchange losses to the governments of Myanmar and Zimbabwe, Inner City Press on December 5 asked a member of the UN's Responsible Management Education group what the UN should do when it faces or discovers such losses. "Disclose," said John Fernandes of the Alliance to Advance Collegiate Schools of Business. Gerard Van Schaik of Belgium's EFMD added that such disclosure should be to society at large, and not only to donors. Video here, from Minute 36:52.

Minutes later, Inner City Press asked the UN's humanitarian chief John Holmes if he agrees with and will implement these views of the UN's business partners. Holmes claimed that the UN had been "perfectly transparent" about its losses in Myanmar. But his colleague Dan Baker, when Inner City Press asked him about the losses on July 10, said incorrectly that Myanmar's "government does not benefit." Video here from Minute 46:20.

In fact, Baker and the UN only admitted their losses to Myanmar's military government after Inner City Press continued asking about it, in light of a June 26 UN internal memo which put the level of losses as high as 25%. Holmes on December 5 said that the UN still "has no systematic mechanism" to look for losses, but acknowledged only one other country where this has happened, Zimbabwe. But before Inner City Press last week asked about the UN's losses to Robert Mugabe, the UN had publicly disclosed nothing about those losses either.

Inner City Press asked Holmes, if the UN in the future losses money to government required currency exchange, will it as recommended disclose the level of losses in its Consolidated Appeal documents or other fund-raising pitches. Video here, from Minute 36:50. Holmes answered, apparently without irony, "I'm sure it will come out one way or another." Apparently, only if the information leaks to the press, and even then, the UN's first instinct, like Baker's, is usually to deny it.

Inner City Press is most often skeptical of corporation which come to drape themselves in the UN's blue flag -- on December 5, Inner City Press asked about the UN Global Compact membership and reporting of BHP Billiton, which is the subject of an undisclosed OECD Guidelines complaint for destruct act mining in Colombia. Video here from Minute 20:07, and see update below. But in this case, the UN is not even living up to or follow the minimally-responsible advice of the business school executives it has invited to its corporate society responsibility events. In fact, the UN's willful non-disclosure of losses would, if done by a publicly-trade business, trigger fines and imprison. But the UN is (still) benefiting from immunity, and impunity. This all needed to change.

Update: Less than 12 hours after the Global Forum for Responsible Management Education press conference, the Global Compact provided the following statement by its Director Georg Kell about the BHP Billiton / OECD matter:

To answer your question, here is a bit of a perspective on the OECD story
(attributable to Georg Kell):

"The Global Compact is about dialogue and learning. We try to foster change by providing incentives and recognizing good practices. Of course, no organization, large or small, can claim to be perfect, and there is always room for improvement. The main thing to understand is that the GC is not a compliance-based instrument. In situations where individual incidents require solution-finding, we very much welcome the constructive efforts of the OECD.

"But, as this case may illustrate, disclosure by companies on non-financial performance is not necessarily synonymous to implementation and does not cover all incidents that occur in a global organization. The Global Compact is aware of this, and we are undertaking efforts to make reports submitted under the reporting (COP) framework more tangible and meaningful."

We hope to be able to report more about these efforts. Later on December 5, Inner City Press asked Secretary General Ban Ki-moon if and how private corporations should deal with Myanmar's government at this stage. Despite having addressed the Global Forum for Responsible Management Education only hours earlier, Ban replied that he cannot comment on specifics, adding that "whoever has influence" should try to convince Myanmar to improve its record. Click here for that.

And see, www.innercitypress.com/un1disclosed120508.html

UN Accepted Mugabe's Exchange Rate in Zimbabwe, Refuses to Disclose Losses As In Myanmar

Byline: Matthew Russell Lee of Inner City Press at UN
www.innercitypress.com/un1ratezim112708.html

UNITED NATIONS, November 27 -- The UN let the Zimbabwe regime of Robert Mugabe take a cut of all aid money it raised and, until two week ago, converted at a government-imposed rate at the Reserve Bank of Zimbabwe, two UN officials admitted to Inner City Press on November 26.

Catherine Bragg, Deputy Emergency Relief Coordinator in the UN's Office for the Coordination of Humanitarian Affairs, refused to compare the exchange rate the UN accepted from the government to other available rates. "The UN does use the black market," she said. "Whatever exchange rate the government allows us to have, the UN has to use." Video here, from Minute 11:59.

Ms. Bragg and OCHA were appealing for $550 million for Zimbabwe in 2009. In 2008, using but not disclosing Mugabe regime dictated exchange rates, the UN appealed for $400 million, and raised and spent $300 million.

Earlier this year, Inner City Press exposed the UN's loss of 20 to 25% of money raised by the UN and spent in Myanmar after Cyclone Nargis as the UN allowed the Than Shwe military government to require conversion of dollars into government Foreign Exchange Certificates. Click here for that.

At that time, Inner City Press asked OCHA chief John Holmes, as well as the spokespeople for Ban Ki-moon, UNICEF and the UN Development Program to disclose any other countries in which the UN system was losing 5% or more to government require currency exchange. The responses ranges from "there are no such countries" -- which is now shown to be untrue -- to "we don't need to tell you."

This latter approached was continued four months later, by Ms. Bragg and Ban's spokesperson Michele Montas. Ms. Bragg refused to compare the Zimbabwe rate up until two weeks ago to the exchange rates others were able to obtain.

Ms. Montas after a back and forth with Inner City Press said that even the UN's unofficial information on exchange rate losses "will not be available to you." Video here, at Minute 27:35 - in the UN's transcript, her quote is inaccurately transcripts as "will not be valuable to you." The UN's summary of Ms. Bragg's OCHA press conference does not use the word black market, which she used two times, and does not include the unanswered questions in this regard.

How could the UN appeal for hundreds of millions of dollars while it knew that of this aid money it was losing high percentages -- 25% in Myanmar, an unknown percentage in Zimbabwe and other undisclosed countries?

From the November 26 noon briefing transcript:

Inner City Press: And also I wanted to ask you, there was a press conference here at 11 by OCHA about Zimbabwe, the scope of which was explicitly Zimbabwe only… but an issue that arose was when, the UN, apparently up until two weeks ago when they converted donor dollars in Zimbabwe, they received a foreign exchange rate significantly lower than the market rate. But, they said that they were unwilling to compare the two, because the UN doesn’t do business “on the black market”. Is it, does the UN, I guess, if it’s spending donor money, is some attempt made to see that in fact the money is not just being lost to governments like, in this case Zimbabwe, or what happened in Myanmar. What safeguards are in place to make sure that money is not being lost to governments when they require conversions of funds with them?

Spokesperson: Okay, what we are also concerned about is not going through illegal channels. And the UN cannot afford to go the black market. What Ms. Bragg said was true. In terms of trying to find the best rates, as you know, they negotiate in every single country where the UN operates. So, short of going through the illegal market, we are doing what we can to try to get the best rate we can possibly have.

Inner City Press: I tried to ask Ms. Bragg if the UN had compared other rates available other than the one they were getting from the government and she said, no, we only take one with the government. So how would, how would the UN know if it’s getting a good rate or not if it doesn’t, I guess I’m, maybe the question to you or to OCHA is, what has been the spread between what other people get as an exchange rate and what the UN gets from the government?

Spokesperson: I don’t have that information. If Ms. Bragg could not give to you, I don’t have it.

Inner City Press: She said it was a matter of policy. They won’t even say what the comparison is because they don’t want to talk about a “black market”.

Spokesperson: I understand her point.

Inner City Press: So, I go back to this. With these cap appeals that come out, how is there any way to know how much of the money is being lost in government foreign exchange conversions, if the UN has a policy of never comparing the rates.

Spokesperson: Well, the situation is that we are an intergovernmental organization. You have to take into account the legal government that is in any country, whether there are problems or not, of course. The policy is trying to find the best rates, but within legal ways.

Inner City Press: I guess I’m…

Spokesperson: In some countries it’s not a black market. It’s a competitive market. Then the UN tries to get the best rate. Whenever you have a government-controlled system like this one, the UN does not have a choice.

Inner City Press: Right. I guess, just to deal with that, I understand what you’re saying, it seems important to know what, to know what the losses are, to know…

Spokesperson: I’m sure they are aware of it.

Inner City Press: Then why wouldn’t they disclose them? If they just asked the international community for hundreds of millions of dollars, if the UN knows how much is being lost to the Government, why would it be against the policy to say…?

Spokesperson: Because they cannot officially take into account the black market.

Inner City Press: Could it be done on some unofficial basis?

Spokesperson Montas: It’s certainly done on an unofficial basis. But it won’t be valuable to you.

This last transcription is significantly and seemingly intentionally inaccurate. As the video shows, Ms. Montas says, "it won't be available to you." Video here, at Minute 27:35; the Q&A starts here at Minute 24:30.

After Ms. Bragg's formal press briefing, Inner City Press asked OCHA's country leader Rania Degash if she could speak about the exchange rate losses. No, she said, saying that the UN Development Program had been in charge of it. Another correspondent muttered, this is so secret, what is it, the CIA? But even that agency is overseen to some degree by a legislature. Who oversees the UN? The ethically-compromised Inga-Britt Ahlenius of OIOS? No one, apparently.

And see, www.innercitypress.com/un1ratezim112708.html

On Currency Exchange Losses, UN Starts Cover-Up in Myanmar and Beyond

Byline: Matthew Russell Lee of Inner City Press at UN
www.innercitypress.com/un1newno081408.html

UNITED NATIONS, August 14 -- Despite an internal UN memo admitted a "serious 20% loss" of aid money in currency exchanges required by Myanmar's government which led to an admission of $10 million in losses, on Thursday the UN cut its losses to $1.5 million, then refused to explain. The UN Development Program has for weeks refused to disclose how much money it has converted in Myanmar, nor in which other of the 160 countries it does business in its loses money in government-required conversions. The Office for the Coordination of Humanitarian Affairs, whose director John Holmes initially took the lead in admitting the losses, has similarly declined to provide information about any other countries, despite Holmes' July 28 commitment to do so. As is too frequent in the UN, exposure of a problem has been followed not by reform but by cover-up and stonewalling.

In fact, despite a clear written and video record, the UN now claims that the problem wasn't exposed at all, but rather was "first raised" by John Holmes on July 24. But Inner City Press asked Holmes about the losses on July 9, 10 and 11, just as it had asked UNDP about the losses as far back as June 26. In minutes of a conference call that day, which whistleblowers showed to Inner City Press, a "serious loss of 20%" was admitted to. Inner City Press subsequently quoted from and then published the minutes.

On August 14, after reading out a statement that losses were "only" 4.5%, UN Associate Spokesperson Farhan Haq refused to answer Inner City Press' question about how the 20% loss admitted in the internal memorandum had been changed, without explanation, in this new public figure. "Internal conference calls are internal discussions," Haq said. When Inner City Press asked that someone come to a press conference to answer questions about the new numbers, Haq said he's check "if Holmes is interested in talking," but that Holmes is not available now. Video here, from Minute 12:11.

Inner City Press sent written questions to Holmes' office and to Haq, stating that on the record answers were being sought on deadline:

"of how the 20% loss referred to both in the Teleconference minutes and elsewhere was changed to a 4.5% loss, and by whom. I am told, by a participant in the estimate-reduction exercise, that UNDP took the lead; I would like a confirmation or denial of that. I have asked UNDP the following, and hereby ask OCHA (and spending under OCHA's control), on deadline

how much money has OCHA / the UN converted through Foreign Exchange Certificates in Myanmar in the past one, five and ten years? At what rates? With what losses? If any, how were these disclosed? And, please any and all other countries in which OCHA / the UN has faced currency exchange losses of over 5%, and what you have done and, separately, will do about it? And when will Mr Holmes (and separately Mr. Baker, in light of his July 10 statements) hold press conference(s) at UN HQ on these topics?" I trust you remember that Mr. Holmes said he saw no reason not to make public a list of countries in which OCHA / the UN suffers currency exchange losses. So, please do.

Eight hours later, no answer of any kind had been received. UNDP, as noted, has had the questions before it since June 26, multiply reiterates since then. On August 14, rather than providing the numbers about how much money UNDP has converted in Myanmar, UNDP's Spokesman Stephane Dujarric wrote:

On Myanmar, you received extensive answers on the currency exchange question at the noon briefing. With regards to our programme in Myanmar, UNDP does not have a regular country programme in Myanmar. Since 1993, all assistance from UNDP to Myanmar has been governed by a restrictive mandate from UNDP's Executive Board, which stipulates that assistance must be focused at the grass-roots level, particularly in the areas of primary health care, environment, HIV/AIDS, training and education and food security.

Extensive controls are in place to ensure compliance with the UNDP Executive Board mandate in Myanmar and the Executive Board receives regular reports. Independent assessments have all found that the programme is in full compliance with the Executive Board mandate: i.e., that it is effective in addressing the needs of the poor and vulnerable in rural areas of Myanmar, and that all projects operate independently of the government. The full 2005-2006 assessment, including the budget, is available online on the Executive Board website www.undp.org/execbrd/adv2006-second.htm .

But the questions, asked of Mr. Dujarric and in his absence of UNDP's Christina Lonigro and, in great detail, Stanislav Saling, included how much money was been in UNDP's account at the Myanmar Foreign Exchange Bank, how much was converted and at what loss. Also, Dujarric entirely ignores the wider question posed to him and to UNDP Administrator Kemal Dervis, to disclose "any and all other countries in which UNDP has faced currency exchange losses of over 5%, and what you have done and, separately, will do about it?"

This is a question that, as to OCHA, John Holmes said on July 28 there was no reason he would not answer. But despite repeated reminders, the question has not been answered by him and OCHA, nor UNDP, nor the Department of Peacekeeping Operations, to which Ban Ki-moon's Spokesperson passed the buck (DPKO in turn has said it has asked the UN Controllers Office, just as it passes from the UK's Warran Sach to a new Controller from Japan). DPKO has promised an answer, and we'll wait for it and publish it on this site.

Inner City Press has been contacted by other whistleblowers concerned with the UN system's currency losses. But is the only way to get any change to shame UN officials and point out their mis-statements? We'll see.

And see, www.innercitypress.com/un1newno081408.html

UN in Myanmar Still Losing 20% on Currency Exchange, Asks for More, Problem Widens

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis
www.innercitypress.com/un2forex080508.html

UNITED NATIONS, August 5 -- While the UN in Myanmar has yet to resolve or even minimize the 20%, $10 million currency exchange losses it admitted eight days ago, it is going public with requests for more funds. At the UN's noon briefing on Tuesday, spokesperson Michele Montas quoted UN humanitarian coordinator for Myanmar Dan Baker that $51 million is needed for rice paddies, and that of the UN's July 10 revised appeal, there is a $285 million, or 59%, shortfall. Video here, from Minute 4.

Inner City Press, which back on June 26 first reported on the UN's losses to government-required currency exchange, asked Ms. Montas if the UN is still losing 20% of each dollar spent in Myanmar. "The information you have stands," Ms. Montas said. "I have heard of no changes." Video here, from Minute 12:03.

That each dollar of aid must be converted with Myanmar's military government for a Foreign Exchange Certificate with, now, 80% of the value means that 20% of aid is directly benefiting the regmine led by General Than Shwe. This puts in a different light -- bribery, some call it -- Chevron Corporation's self-described "$1 million cash contribution." $200,000 of that goes to the government, which controls licenses, including of those few money changers which in turn convert the devalued FECs. Other corporate contributors include French oil company Total, Siemens AG and JP Morgan Chase.

On July 28, the UN's John Holmes publicly admitted $10 million of losses and promised both to get to the bottom of it, and at Inner City Press' request to produce a list of other countries in which the UN is losing more than 5% to currency exchange. So far neither has been done.

A representative of the UN Development Program telephoned Inner City Press the day after Holmes' public admission, by contrast providing UNDP's answers only on a not for direct attribution basis. He said that the Myanmar government, in order to "control" foreign exchange, licensed a few approved money changers. He jotted down Inner City Press' request for UNDP's pre-cyclone currency exchange losses and a list of other countries in which UNDP is losing 5% or more to currency exchange, but said that UNDP will be relying on and deferring to John Holmes' inquiries in this regard.

Now, however, well-placed UN sources tell Inner City Press that the reason for the delay on making any disclosures, even about Myanmar, is that UNDP demanding a re-do of the numbers, trying to whittle down Holmes' admission of $10 million in losses. The attempt to re-fudge the numbers is being down through the UN Country Team, headed by UNDP's Bishow Parajuli, previously the head of the UN World Food Program in Egypt.

Meanwhile, UNDP has been unable to provide any figures about how much money it has converted in Myanmar, including for a program it calls "Micro-Finance." The spokesman-without-name repeatedly like a mantra, our work is good. But how much was converted and spent? How much money has been and is in UNDP's account with the Myanmar Foreign Trade Bank? There has still been no answer.

Belatedly joining its Western Permanent Five compadres the U.S. and UK, the French Mission to the UN provided Inner City Press with the following response to the scandal:

"Obviously, we are sharing the concerns expressed by John Holmes toward these difficulties. Since the beginning, France has been very engaged in the international effort to hurry assistance to the victims of Cyclone Nargis. Consistent with the principle of the responsibility to protect, we have also urged the Myanmar government to fully allow access of international aid to victims. We pay tribute to the UN involvement to improve the situation. It is obviously crucial that no financial resources dedicated to humanitarian assistance should be wasted, and we therefore support the UN efforts to find a solution to that problem."

But for now the efforts focus on cover-up, and nothing is being done to ensure that the problem doesn't continue, and in countries beyond Myanmar.

On August 5, to try to get answers since UNDP Administrator Kemal Dervis has refused to answer questions or to hold a press conference, Inner City Press attended a meeting of UNDP's Executive Board. After a presentation by UNDP controller Darshak Shah, comments were sought by UNDP from the member states on the Board. Nothing was said about Myanmar or the currency exchange losses. Rather the talk was of boosting UNDP's "direct budget support" to governments, and ensuring "government ownership" of funds. This has been UNDP's priority in Myanmar.

[Since Kemal Dervis does not, as he puts it, "answer questions in the hallway," nor hold press conferences, Inner City Press has formally posed the questions here.]

Similarly, despite a commitment by World Health Organization official Eric Laroche -- previously of UNDP -- to provide a description of WHO's currency exchange practices and losses in Myanmar, no information has yet been provided by WHO, despite reminders to Mr. Laroche's spokesman. Apparently the cover-up mentality of UNDP spreads with its former employees.

Inner City Press asked Ms. Montas when the Holmes-promised list of other countries with currency losses would be provided, and how that would cover UNDP and UN Peacekeeping. Ms. Montas said that Inner City Press will have to ask each agency, even each department, separately. One agency spokesman told Inner City Press that the agency's controller / accounting department might not be tracking currency exchange losses, even now, and that if is such information were being collected, it is not the UN's job to "do research" for Inner City Press. How about making basic disclosure, of losses up to 25% of each aid dollar, to donors? Apparently the UN does not that that is required, either.

The time for semi-proactively disclosing other countries with currency losses is now.

And see, www.innercitypress.com/un2forex080508.html