3 April 2022 – Mukesh Kapila
Grete Faremo, the Executive Director of the United Nations Office for Project Services (UNOPS) has overlooked the wisdom attributed to Abraham Lincoln: “you can fool all the people some of the time and some of the people all the time, but you cannot fool all the people all the time.”
The ‘town hall’ rally
Fooling her staff is what she tried at the 29th March town hall open to 12,000 UNOPS personnel worldwide. It lasted about 1h 45mins. The extraordinarily-astute 130+ questions came from those toiling daily at the difficult frontlines of UNOPS work in all continents. It was abundantly clear that they were sceptical, disappointed, hurt, and angry, because they felt betrayed by Ms Faremo and her Senior Leadership Team (SLT).
A sample of the questions and answers suffices to illustrate the lame efforts of the UNOPS leadership to befuddle the attendees. What follows here is taken directly from the proceedings and quotes the actual words used, with edits and punctuations made only to shorten or clarify without changing the substantial meaning of what was said. Sabine Kania was the meeting’s excellent facilitator; she is to be complimented on enabling a comprehensive exchange.
In her opening remarks, Ms Faremo said that UNOPS was now in transition since her ‘retirement’ announcement. She also said that she does not know the full story of what went wrong (fraud and corruption) at UNOPS. Confidentiality meant she could not say more while the results of investigation were awaited. It was a convenient excuse to hide behind and avoid taking responsibility. It convinced no one and subsequent feedback was even more scathing.
Q: “What happened in S3i and why is Vitaly Vanshelboim on administrative leave?”
Ms Faremo did not answer the vital question on S3i. She parried by saying that S3i was being “re-set”. A law firm had been hired “to collect outstanding payments” from partner SHS. How much was “outstanding” was not mentioned.
Why Mr Vanshelboim was put on administrative leave was not stated but “investigations” were underway which “might be concluded by the end of April” . But no promises could be made on that.
Usually, in any credible process, we are told what offence a person is charged with and they are presumed innocent until proved guilty. But Ms Faremo has so comprehensively rubbished her deputy by innuendo while disappearing him, that he is already damned. This heaps all responsibility on to Mr Vanshelboim and side-steps any accountability of herself and her SLT for the biggest heist suffered by a UN agency for decades, and which occurred on her watch.
Q: “What is the result of the [US$9 million S3i equity investment in 2019 in renewable energy in Mexico], and is it working?”
Nick O’Regan, Director of Implementation Practices and Standards, gave no facts and figures. What was the rate of return on the investment? How many people benefitted? How much renewable energy was produced at what cost? Instead, a flatulent response referenced scorecards, S3i proof of concept, policy and framework changes, government challenges, learning “lot of lessons”, and “exit strategies”.
The investment was made in a windfarm “facing closure”. How was that a prudent business decision? If a failing company’s debts were paid, is that the type of thing UNOPS should do? How were risks managed? UNOPS walked away from the unviable project as a “development decision”. What is meant by that? On sustainability – the centrepiece of S3i – Mr O’Regan was not sure – only that “to our knowledge” the project was still continuing.
Q. “Who signed the engagement with SHS on [850,000 units of affordable housing]?”
Ms Faremo avoided admitting that she herself did so. Instead, she obfuscated that the legally binding agreements were signed by “the Executive Office”. Was someone else there using her signature and seal?
She said that the engagement followed “normal procedures”, therefore trying to shield herself and blame her own appointed subordinates who presumably put the papers up to her.
Contrary to what Ms Faremo said, the engagement did NOT follow UNOPS standard procedures. First, these agreements were never uploaded in oneUNOPS and cleared through UNOPS’s existing mechanisms. Second, UNOPS rules on competitive processes and advance payments were clearly violated. Finally, red flags raised as part of the diligence process were wilfully ignored.
Why was Ms Faremo not being truthful?
Q. “Have the S3i investigations affected delivery [of the sustainable housing]?”
Ms Faremo admitted that S3i/SHS had made “very little progress” AND that was “not linked to the investigation”. In short, the initiative was failing even before it started; and no one in UNOPS can say if any houses, anywhere, have ever been built.
So, where did the multi-million investment disappear? Ms Faremo did not address this central question to which UNOPS staff, donors, and wider public seek answers. If she genuinely does not know, perhaps her level of mismanagement or connivance with fraud and corruption has reached stratospheric heights.
Q: “Has the UN Secretary General contacted Grete after reading the blog posts and what actions will he take?”
Ms Faremo replied, “No”, the SG had not been in touch with her. But “OIOS are aware of all the blogs and… they are best placed to address this”.
That is correct. Other information confirms that the UN Secretary General Antonio Guterres and Deputy Secretary General Amina Mohammed are distancing themselves from Ms Faremo, as there is an obvious political risk to them from upward contamination.
In late 2021, Ms Faremo did not renew her role of chair of the UN’s high level Committee on Management, an appointment of the Secretary-general. Other information suggests that Ms Faremo was urged to go earlier to save UN embarrassment but this had to be balanced with the embarrassment to Norway (her country of nationality), which is an important donor. The optics would not look good if a UN Undersecretary-General (who had held no less than four Norwegian government ministerial portfolios) was summarily jettisoned.
In contrast, unfortunate Ukraine is not important, and Vitaly can be sacrificed, not just because he probably did wrong but because he is the useful fall guy for Grete. So, a face-saving compromise was to give Ms Faremo a six-month extension and declare UNOPS to be in “transition”. Potentially, this allows her ample opportunity to supervise the clean-up and bury the wrongs under the carpet.
Meanwhile, OIOS appears to be aware of the blog posts but there is no assurance that action will be taken against the SLT and other senior members of UNOPS who appear to be associated with the fraudulent scheme. This is extremely concerning as OIOS has taken many years to act on these matters. It is also important to note that, back in 2019, OIOS could have stopped the transfer of almost US$60 million as it would have been clear that, once transferred, the money could be lost for ever. Perhaps Assistant Secretary-General Ben Swanson at OIOS could explain what were his considerations for letting the transfer take place notwithstanding the numerous red flags raised at the time (no competitive selection, upfront payments to various special purpose vehicles belonging to a company with no track record, no collateral, no description of how the money would be spent, etc).
Q: “The WATO project seemed weird to many of us at the time. Can you please clarify what happened?”
Ms Faremo treated us to a long lecture on the world as it was in 2015-17 after the adoption of the SDGs, Paris Agreement on Climate Change, Addis Conference on Financing for Development, neglected needs of SIDS (Small Island Developing States), Oceans Conference, plastic pollution, the challenge of mobilising resources, and the role of youth and social media. She concluded that this was “how WATO was presented to me”.
She did not say how she was suddenly introduced to an unknown organisation with no track record. But her pretty tale revealed more about her personally than she wanted. She referred to pressure from the UNOPS Board chair of the time (who, as a politician, she wanted to please?) and saw a market niche for UNOPS because there was no UN agency that “owns” SDG14.
Ms Faremo, an instinctive opportunist to her core, saw a chance to shine through personal leadership. UNOPS was just a tool for her ambition, never mind that UNOPS, an executing agency, has no primary mandate for any SDG and nor for taking on the burden of raising “trillions” (as she said) for development.
The ED did not explain what professional judgement she exercised on allocating US$5 million to an unknown group to make a song and video game. But it was, as she acknowledged, an “attractive opportunity”. For whom?
Ms Faremo clearly admitted that the “ambition we had failed”. And “we were not ready for it, and the follow up was not what I expected”. Why did it take her so long to acknowledge this? Because of increasingly visibility on the problem she tried to keep hidden? That there was something fishy in the UNOPS/WATO relationship was also admitted by Ms Faremo: “This is also…linked… with ongoing investigation”.
Q: “Why did it take so many years and public shaming for the Executive Office to finally address the programmes that came through WATO?”
Ms Faremo said the “challenges regarding WATO (‘We are the Oceans’) had been addressed over multiple years. But she did not reveal how that had been done or what funds had been lost – and who benefitted – from the evidently failed enterprise. She continued, “…this has been a pain point… Since, this is also now part of an active investigation, I cannot go into further details. And I accept that the trust in this initiative and going beyond the initiative is low. But it is also linked to something, the investigation of the S3i chief executive…”
Ms Faremo has, therefore, acknowledged that the WATO and S3i/SHS mishaps and investigations are linked. It does raise the obvious question that if WATO mis-steps had been addressed over “multiple years”, why were they allowed to recur, under her gaze, in the much-larger S3i/SHS venture?
Q: “In UNOPS we have many review processes that are pedantic to the extreme for small projects and expenditures for a few thousand dollars. I would like to ask Grete why, for WATO and S3i, it was allowed to bypass every control in the organisation for multi-million projects? Who is taking responsibility for this?”
Kudos to Ms Faremo for accepting that she obviously had ultimate “responsibility for what has happened in UNOPS over the eight years that I have been here.” She also said that “broken trust is really hard”.
But she did not answer the specific question on why WATO and S3i were privileged by her. She referenced Vitaly Vanshelboim who “wrote and approved many of our rules and policies..” and who, “as an individual”, had “too much power being the ECPO, COO, and DED”. A truly powerful hoarder of many acronyms! Furthermore, she complained that “all units reporting to the same individual as Legal, Finance, Operations etc” was not right especially “where decisions by exception” became “too important”.
That has been common knowledge among UNOPS staff and was often talked about. What was not answered by Ms Faremo is why she, as Executive Director, bestowed so many acronyms one person and why she did not properly supervise her own Deputy? Was she afraid of Vitaly for some reason, to have allowed him so much scope over so many years?
Ms Faremo went on to claim credit for later management reforms “distributing our authority”. However, these appear more like the culmination of a long power struggle between two individuals which simply led to the transfer of Vitaly’s power to her own self, with critical functions such as legal, finance, ethics, audit and investigations now reporting to her.
Q: “Claiming that the situation with Jim [Provenzano’s] son is not a conflict of interest nor nepotism is shocking. When you are the General Counsel in an organisation, you need to be a role model of integrity. If UNOPS does not sanction him then I am sorry but our leadership really has zero morality. When will Jim Provenzano be placed on admin leave?”
Ms Faremo said that after Jim had raised the matter with her, the Ethics Office recommended to her to allow the arrangement, provided that no UNOPS funds went to Jim’s son and Mr Provenzano recused himself from all innovation-related decisions. In practice, we have learnt elsewhere how the Legal Counsel was able to continue pulling the strings through his own appointees.
Ms Faremo appears to have ignored her inner moral compass, or perhaps she has none? She could only plead, “I approved, and I can only ask for your trust”.
Q: “UNOPS has always placed great emphasis on integrity and ethical behaviour and, in particular, avoidance of conflicts of interest, and perceived conflicts of interest. UNOPS colleagues around the world work very hard to be aligned with our principles and they avoid situations where even the perception of conflict of interest could cause UNOPS reputational damage. Unfortunately, recent allegations call into question if these principles are applied equally to all personnel. If you could think of three key things we need to do to uphold UN values and our mandate at all times and irrespective of level and location, what would that be?
Ms Faremo’s response was a master class in avoidance. She said that “we don’t know the true picture” and asked for “trust in UN processes and called for “support to each other”.
Marianne de la Touche (CFO and Administration Director) sensed that the Executive Director’s non-response was not going to cut the mustard and acknowledged that the “trust issue” existed and needed change to a few “ways of working”. That also meant work “on our culture”.
In short a full re-set is needed at UNOPS.
Q: Don’t you think that re-shuffling of the SLT is needed to survive the next six months?
Ms Faremo was brazen in her response. She said “no” because the SLT was “effective” and UNOPS enjoyed great success under their leadership.
Q: “What do we tell many partners, donors, and stakeholders who are now questioning us at the frontlines how UNOPS spends their funds?”
Nick O’Regan, Director of Implementation Practices and Standards, did not answer the specific question at all. Those who enquired were to be told, in essence, to back off and wait patiently until UN processes took their course, according to an unspecified timetable. And yes, provision for a write-off had been made. In short, multi-millions in donor and client funds were confirmed to be under risk of loss.
Q: “It is vital now that communications are transparent, honest, open, and frequent to rebuild trust. Will the organisation bring in a crisis management team …?”
Peter Browne, Communications Director, confirmed that they would get “external support that is more familiar with this type of situation”.
In other words, a PR firm will be brought in to spin the unavoidable and uncomfortable stuff that would not go away, and to polish the battered image of Ms Faremo. Inevitably, this would be paid out of donor and client funds by diversion from the work on SDGs that is so close to the UNOPS heart.
Q: “Will Grete lead us on to September or will the new ED may step in before, and how is the recruitment working?”
Ms Faremo informed that consultations between the Executive Office of the UN Secretary General and the UNOPS Executive Board were happening and Member States will be asked to nominate candidates i.e. normal practice will be followed. The UNSG is aiming to have the candidate “ready to come by October 1st”
That leaves open the desirable possibility of the new ED arriving earlier, and thus hastening Ms Faremo’s leisurely departure, currently set at 30th September.
Q: “While there is an investigation going on, on what foundations has the ED already made her judgement on Vitaly [based on what she has said that she felt let down] and pointed at Vitaly [and also Vitaly’s ‘misconduct’ referenced by others in the SLT]?”
Ms Faremo refused to answer this perceptive question, the implication of which is that despite her strong and repeated plea to respect the UN OIOS investigation and allow it to do its work, she had already condemned Mr Vanshelboim without even a perception of objective justice. A practice that is not unfamiliar with some of the autocratic regimes on our planet.
Q: “[Back to WATO and S3i]: How much has been invested in the WATO song and video game? How much money has been lost in S3i? How many social houses have actually been built as part of S3i?”
A book-keeping answer was provided by Ms de la Touche on the financial queries. No money has been officially recognised as lost “on S3i side” because the losses have not been brought to book yet. Some payments are expected back from the Mexican wind farm partner but it “has been quite some time now” and “we are taking legal action to get that money back”. But she confessed that she did not know if they would get it back.
The CFO also said that they had received some ”interest” from “some of our projects’. But she did not elucidate on the commercial justification for UNOPS agreeing to a post facto reduction of loan interests from 10% to less than 1%.
On the S3i housing loans, “the value has been reduced in our books” but “we are talking to our partners and trying to see if we can restructure the loans”. “Restructuring loans” in financial terminology includes agreeing with a borrower judged unable to re-pay, the level of the ‘haircut’ the lender will endure i.e. the loss to be suffered. Ms de la Touche admitted the possibility of “losing US$20 million up to US$60 million”.
No answer was forthcoming on the social houses built. This suggests that the number is probably close to zero.
On WATO, Ms de la Touche said that “we disbursed US$3 million” and expect US$300,000 to come back. Other information suggests that the CFO is economical with the truth; the US$300,000 “advance” is unaccounted-for, and extremely unlikely to be recovered.
Q: “How was the payment of almost, or allegedly US$60 million to a company of unreliable reputation even possible? I work in finance and understand how payments work and how many approvals we need for even a small payment…”
Ms de la Touche said that “we have done some due diligence”. So, the CFO admitted that full diligence had not been done (or ignored).
Ms de la Touche went on to say that it was true that “we were working with a partner that had set up a new SPV [Special Purpose Vehicle] – so they were a new company [SHS]”. This was a clear admission that UNOPS/S3i made a remarkably risky decision to invest tens of millions in a specially-created enterprise with no track record. The CFO provided no reasoning for why such an unusual decision was taken without a competitive selection process and without any of the usual safeguards to protect UNOPS funds and interests.
Q: “How are we going to make sure that this does not happen again? What are the mitigation measures to be put in place and how can we make sure that we do not [inaudible] people who have been involved in this case?”
Nick O’Regan’s response added nothing new beyond re-arranging the furniture, creating new committees, and hiring new staff at S3i. The questioner’s second point on wider UNOPS learning and sanctions against previously involved staff was ignored; Ms Faremo had already said earlier that there would no changes at SLT, or alterations in structure and procedures.
Q: My first UNOPS boss used to say that civil servants should not even give the impression of a conflict of interest. We are now seeing the son of an SLT director benefitting from one of UNOPS’s innovation activities. and we see pictures of our senior leadership engaging in extravagant parties in New York in the presence of top models and entrepreneurs with a shady past, paid for with our reserves money. Do you agree that we have a problem with ethics in UNOPS? This will affect our reputation for years. When can we see action to address these cases and a clear change of course?”
Ms Faremo admitted to “attending receptions, parties and meetings in different contexts”, and, “in hindsight, some of those events might look different to what they were…”
She struck a defiant note in saying that there would be no change in course, even after the WATO and S3i experiences going “wrong”, and that she would not stop taking new initiatives and risks.
Q: “Why does UNOPS have the highest reserves among all the UN agencies. UN agencies should not be [self] benefit driven. However, UNOPS fees are constantly changing and often we do not know how to justify them. How can we make sure we are doing business the way it should be done for a UN agency?”
Ms de la Touche explained, reasonably enough, that prudent risk management in a self-financing $3.4 billion agency needed the US$ 138 million that the operational reserve is now set at. But she acknowledged that it was “true that we are piling up surpluses in last years and we need to adjust”. She promised to look into pricing and, having abolished the non-transparent “risk increment”, she said that “our minimum price will decrease, and there will more direct and explicable correlation with budget recovery needs”. She admitted that “we are not seen as transparent by our partners”.
Why it has taken so long to get to this moment of self-awareness is not clear. Presumably, only when the outrage at UNOPS charges got too loud. Ms de la Touche was unable to justify the massive S3i reserve of $105 million (siphoned off from the accumulated windfalls from past profiteering).
Q: Do you think that this S3i issue was the result of years and years of not making wrong doers accountable? And how are we ensuing this is not happening in Mexico – such a high risk visible project in a region that has already had many accountability issues in the past?”
Ms Faremo chanted the same old mantras as per her defensive “lines to take”, and added nothing new.
The perceptive and courageous questioning by staff can only be applauded. They deserved much clearer and honest responses than the Faremo regime, tottering through its last days, could provide.
“ This is not the first crisis that UNOPS has faced, said Nick O’Regan. Of course not, but it will not be the last if the promised re-set of S3i is not extended to the senior levels of the rest of UNOPS.
Such a re-set cannot be expected from the current Executive Director, Grete Faremo, who is busy covering up, misleading staff and other stakeholders, and deflecting responsibility for the consequences of her policies and actions onto others doing her bidding.
Only a new top leadership, and a firmer grip by the Executive Board can reclaim UNOPS as a principled, trustworthy UN agency. Sooner the better.