2 June 2022 –Mukesh Kapila
Following the widely aired scandal at United Nations Office for Project Services (UNOPS), its Executive Board held a crucial briefing in New York on 16 May. Ably chaired by its President, Ambassador Yoka Brandt of the Netherlands, Board members were updated by Mr Jens Wandel, Acting Executive Director.
Mr Wandel is an UN veteran brought out of retirement by the UN Secretary-General with an initial six-month mandate. His briefing tone and style were refreshing by contrast to that of the previous Executive Director, Grete Faremo, who was forced to resign in disgrace on 8th May.
What follows is a summary of the exchanges edited only for brevity and clarity. Mr Wandel admitted UNOPS’s problems: the “facts are many” but, in essence, “what is in front of us is a serious business failure and potential fraud”.
He said that there were “eight S3i projects amounting to US$63 million by the end of 2021. “It was early debt financing for five affordable housing and three renewable energy projects. Very important, 7 of these 8 projects are currently in default affecting Antigua and Barbuda, India, Ghana, Kenya, Mexico, Pakistan, and Finland.” The defaulted projects had been “reviewed by an expanded UNOPS executive advisory committee, called Engagement Acceptance Committee Plus, and approved by the Executive Director [Grete Faremo]. All were given to companies controlled by a Mr David Kendrick, a British national.” Mr Wandel added that the eighth loan was for a renewable energy project in Rajasthan, India alongside a Danish partner. This is under construction and, although risky and delayed, it is considered performing and not at default.
Mr Wandel reviewed the back-story. The governance design of UNOPS/S3i was originally done by Deloitte in 2016/17 with “a process including pre-vetting, integrity, due diligence, investment management team review, investment committee, and investment board, and an executive director approval process. BUT “the actual S3i decisions did not benefit from this design”.
He said that wrong decisions were taken when “the Deputy UNOPS Executive Director [Vitaly Vanshelboim] took up functions as S3i Chief Executive, Chief Investment Officer, and manager of day-to-day operations. So, what happened was a lack of segregation in these functions when the decisions were made. Finally, it has transpired that the Deputy Executive Director may have benefitted personally through engagement with Mr David Kendrick”.
So, Jens Wandel confirmed that mismanagement and fraud did happen, starting near the top of UNOPS. Furthermore, he said that decisions around S3i were made in violation of UNOPS rules, safeguards, and good practices. But he did not explain how that happened in broad daylight under the full gaze of the other Senior Leadership Team members: Honore Dainhi, Marianne de la Touche, Nick O’Regan, James Provenzano, and Peter Browne. And how UNOPS’s digital project management systems that require specific buttons to be pushed proactively at key stages by key officers were bypassed.
The Acting Executive Director then focused on what he considered key follow-up measures “to immediately stop the situation”.
Mr Wandel said that as “key staff inside UNOPS were witnesses to the OIOS [Office of Internal Oversight Services]” investigation and so, “with a view to secure speed and independence from UNOPS and myself”, he had recused himself, and “OHR [Office of Human Resources] and OLA [Office of Legal Affairs] in the UN Secretariat have taken over the disciplinary process and potential referral”. He went on to say that OLA was “reviewing the OIOS report and considering possible referrals to national authorities of one or more jurisdiction.”
Mr Wandel said that “OLA had taken full responsibility for recovering the money – as much as possible” and, “in practical terms”, they are “hiring one or more legal companies’, and “legal staff if criminal proceedings are to be undertaken”. UNOPS “will foot the bill and has put aside US$1 million [of donor funds, of course, originally intended to help the world’s poor]. This may also include criminal referrals to national authorities.“ He emphasised that the “UN has put on its own strongest legal muscle we have… and OLA has multi-jurisdictional competency”.
Mr Wandel went on to discuss the “essential question” of “which internal control failure led to the current situation and, equally importantly, have these failures contaminated other parts of UNOPS operations”. So, he had asked OIOS “in the shortest possible time” to lead “an independent audit of internal control systems and how that relates to oversight.” He added that he was concurrently running an internal process to ensure that “obvious gaps are controlled immediately.”
Finally, in a complete reversal of Ms Faremo’s position, Mr Wandel confessed to: “shortcomings or even failures of control bodies in communications with the Board”. In short, he admitted that that the previous Executive Director and the Senior Leadership Team (still in position) had lied to the Board. He referred to his other UN reform experiences and more sound practices to accept that, in future, the Board may want “more direct access to the oversight system and welcomed co-constructing something.”
Member states were angry
In response, the United States (largest bilateral contributor to UNOPS) said they had many concerns. Did the “leadership failure” at UNOPS mean there were “several bad apples” and are the investigations looking at them?” Mr Wandel replied that he had seen the OIOS report, and although he did not rule out taking more disciplinary action, he did not know yet.
The US spoke again later to emphasise the importance of “a full investigation looking at the entire UNOPS business model”, especially when “you, Mr Wendel, talk about leadership failures, lack of internal controls, conflict-of-interest, it is hard to see how that would simply be limited to one part of the [UNOPS] operation [i.e S3i] “. For example, the problems with UNOPS largest non-S3i project on medical supplies in Mexico. Hence, the US contended that “entire audit, investigation [of UNOPS] is necessary”.
The US went on to say: “we got here because UNOPS charges such high fees to other UN agencies, that they created such a large reserve. Should excess fees be rebated to member states and other UN agencies? I am mystified when you say that UNOPS is self-financing. It is not – as it is funded from taxpayer dollars”. On the secret OIOS report, if the Executive Director a.i. had seen it, why should not the Executive Board chair, at least?
Finally, on the S3i funds, the US said it was concerned about distortions put out by UNOPS in April that those funds were not lost although at risk. “But what we have heard from you today is that these are seven projects on which no work had been done and you are seeking recovery. That, to me, suggests that the money is lost. If that is the case, we need to know if another significant write-off is about to happen.”
Finland (host country for the S3i initiative) expected urgent action with priority to “transparent communication and proactive information sharing”, as UNOPS ability in this area had been “very poor.” She also emphasised the importance of “knowing the facts” as it was difficult to respond without that. This was “an UNOPS obligation”, and Finland had “decided to suspend our funding [to S3i]”.
Finland had requested the UNSG to receive the OIOS report. As that was proving difficult, she requested UNOPS to conduct a full -but independent – investigation into S3i including internal diligence and controls, decision-making, risk management, and overall results. “This is because we need a comprehensive picture of what has happened, how did it happen and why, and what may follow”. We “also need assurances that no other members of the Senior Leadership Team were implicated in wrong-doing or conflict-of-interest.”
Finland reminded that “one key fact is that decisions taken by the former ED [Grete Faremo] “regarding WATO and Sustainable Housing Solutions were based on advice and recommendations provided by the group of senior management. Therefore, all involved need to be held accountable”. Finland also demands that UNOPS “makes available internal reports on the case” such as the “outcome of the investigations from UNOPS’s own Internal Audit and Investigations Group [IAIG], with briefing to the Executive Board.”
Sweden said that it took the “allegations very seriously” which were a reputational risk “not just for UNOPS but for the UN”. It was also “hugely damaging in a donor country like Sweden”. It demanded “transparency and clarity” and “strong whistleblower function and protection needs to be ensured”. The UNOPS relationship with its Board needed “to be based on trust and mutual responsibility that UNOPS had failed”, thereby creating “a considerable gap in trust”. The organisational culture around checks and balances also needed to be tackled as well as “cracks in the current governance provision”. In relation to S3i, “we would like to see “how decisions could allow investment in a single private holding company. All those involved in such decisions including UNOPS senior management must be held accountable”. Sweden also wanted to see the internal UNOPS IAIS and the UN OIOS reports.
Norway reiterated the need and urgency for access to all reports and information. Also, whether the scope of the S3i enquiry and audit could be extended to other UNOPS areas in a thorough and comprehensive manner? Relating to the need for confidence -rebuilding, Norway expected a comprehensive review of the UNOPS pricing model “including granular details on the risk increment and the framework regulating this”, as well as “clarity on the margins charged”.
Denmark raised questions around another UNOPS-hosted project, the Sanitation and Hygiene Fund previously known as the ‘Water Supply and Sanitation Collaborative Council’. Apparently, an audit in February 2021 had raised serious questions around corruption and mismanagement highlighting the need to scrutinise other areas of UNOPS work.
Kenya demanded to urgently see all enquiry reports and said, “we must have transparency and oversight”. Affordable housing was a key Kenyan development priority and its agreement with UNOPS had been to build 100,000 houses in stages. Kenyan leaders had told this to their citizens and the latter were not in the mood for the minutae of what went wrong. Besides, Kenya had already incurred expenses from its own resources as part of the deal. With no houses built, was this to be wasted?
Furthermore, Kenya said that “what is so offensive about what has happened in UNOPS” is creating a serious threat for “defunding development” by feeding into the “strong politics in legislatures around the world against UN development funding because of concerns over its predictability and reliability”. Hence, we needed to “take strong action on UNOPS.”
The United Kingdom echoed previous comments around transparency, accountability, leadership, and management within UNOPS and its internal control mechanisms. However, “fears around that had already borne fruit” because UK ministers had asked “to reassess the relationship with UNOPS moving forward”. The UK also wanted to see all reports as well as the TORs of the OIOS investigation into UNOPS internal controls, along with a timeline for its conclusion. Also requested were timelines for the OHR and OLA investigations and resulting actions. The UK emphasised that its trust and that of the Board “had taken a significant hit”. How would that be addressed?
New Zealand followed-up on transparency and trust matters and said it was “very concerned” that UNOPS had not flagged relevant issues more prominently in its reporting to the Board. She said that if you look at recent Board papers, these are not mentioned, and that creates the “perception that UNOPS has been trying to hide these issues from the Board.” New Zealand noted that allegations had been made “across the entirety of UNOPS work, well beyond S3i and we would like to see them, and impropriety of misconduct investigated”. She also asked to “review how S3i fitted into UNOPS’s mandate” as it was “an odd model not necessarily in accord with UNOPS business. Should UNOPS be doing this kind of work?” New Zealand also asked for UNOPS to confirm its whistle-blower policies and protections.
Mexico also referred to trust and transparency, and tabled its grave concern over its own huge project with UNOPS around healthcare and medical procurement and wondered if that been “infected” by S3i’s problems?
The Netherlands echoed concerns over the impact of S3i problems on other UNOPS programmes and questioned if S3i fitted into the UNOPS mandate. There were also key questions around whether internal controls, especially audit and investigations, were sufficiently independent? And was the whistleblower function “functioning as it should have been?” The Netherlands also raised concerns on the Board’s role and the “red flags that had not emerged” from UNOPS reports. Under these circumstances, how could the Board’s supervisory function be executed properly?
Germany also took the concerns raised “very seriously” including reputational risks to “UNOPS and the entire UN.” It expected “UNOPS management to act proactively to take responsibility for the ongoing allegations and any omissions that occurred”. Also, “to develop quick management responses, and fill governance gaps” to prevent future recurrence. Germany reiterated the critical need to gain access to the OIOS report.
Bangladesh reminded members about UNOPS’s original mandate for peace and sustainable development and, thereby, to create better lives. “Earning profit was never its goal, and it never should be”. He reiterated the need for access to all documents as well as “whistleblower safety”.
Canada emphasised that “we look forward on how we limit the damage” and that must include independent reviews and proper information to all stakeholders.
Ukraine’s interesting intervention was that he was “at a loss” because he did not have everything needed to offer proper oversight as a Board member “because we lack basic access to the most important pieces of information in spite of the volumes of gibberish that we hear. I am also concerned that I may be witnessing a tunnel-style investigation that may “end up with a couple of scapegoats for the failure of the entire system.” But these misdeeds could not have been conducted by one or two persons acting by themselves and given the “seriousness of the failures of the system, we must have a broader look.”
Ukraine added that he was “sure that requests from the Ukraine Prosecutor-General on the UNOPS issue will be coming.” He added that it would be easier and more safe for him to say that “I have seen nothing because UNOPS never let me see anything. But would that be a responsible attitude for a Board member”? He concluded that if we don’t see the investigation reports it “does not make any sense for us to meet, and exchange very important statements. We also need a real legal framework, not a reference to a UN General Assembly resolution”.
Peru focused on restoring trust and necessary short-, medium- and long-term stages that lay ahead. That meant “understanding the full panorama” through getting complete information. She added that UNOPS “has just been reacting to the situation while a real strategy needed responses”. That also required a complete audit of UNOPS.
Mr Wandel claimed that he had never, in his long experience, seen the situation he now faced at UNOPS. He admitted that the UNOPS “special purpose vehicles had been unusual and very risky.” He also committed to re-evaluate the losses from S3i that he admitted could be as much as US$58 million. For programme countries that had suffered due to non-delivery, he would open country-level discussions. (The Board President emphasised in her later conclusions that S3i was to be frozen, and no new investments would be made).
The Acting ED saw this meeting as “a chance to move forward” and sought the Board’s guidance. He assured them that he had told the Board all he knew but noted their further questions. As he discovered more details, he would respond.
Mr Wandel undertook to consult with and involve the Board in solutions and next steps and provide timetables for actions. That included ensuring independent reviews in requested areas. He confessed his problem with the mechanics for doing that, and he would make proposals to the Board President and Bureau for consideration. He wanted the Board to feel that “we are making progress” when they met for the formal Board meeting starting 6June.
To give due credit to Mr Wandel, he used well his long experience in the rituals of the UN system. By handling the Board with a show of candour and openness, he sought to press all their buttons.
However, the Board has already been badly betrayed by the UNOPS senior leadership. And, from the sharpness of their questions, the members who had been made to look so naïve by Ms Faremo were not in the mood to be taken-in by the smooth-talking Mr Wandel. Neither were they going to be pacified by a few new titbits. Nor were they going to be divided, as evident from the remarkable consensus around critical issues.
This was a good Board briefing with Member States in the driving seat. They were not reticent in raising the major concerns reflected in our previous writings. That is what a Board should be for: seeking transparent and evidence-backed accountability, and not being fobbed-off by fake assurances without verifiable facts and figures. Wherever the UNOPS story eventually ends, the agency will never be the same again.
So, if Mr Wandel really wants to ”re-set and redeem UNOPS”, he will have to come out with much more concrete information than was evident in this briefing. His excuse that he had only been in the job for a week will not carry further.
Member States said that they were submitting detailed written questions to which they expected written answers. For example, a deeply embarrassed Finland felt conned by UNOPS deliberately withholding information and perhaps even lying to get it to host S3i. Unsurprisingly, Finland was now almost incandescent with rage. Its letter to Mr Wendel asked for written responses to the following:
“When were UNOPS senior leadership informed about the wrong-doings and misconduct? Could you share the records of the UNOPS senior leadership and Engagement Acceptance Committee and other documents? Which date did UNOPS internal audit initiate its investigation on the matter? How does the investigation timeline correspond with the negotiations with Finland? Were the wrong-doings already known by the UNOPS leadership while negotiating with the Finnish government related to the funding to the S3i Helsinki office? What was the reason why Finland was not informed about these matters and investigations until April this year despite the obligation to do so in our co-operation agreements? Were the decisions taken by the former Executive Director regarding the WATO initiative based on the advice and recommendations of the senior management team and engagement acceptance committee? We emphasise the need to ensure that all involved in the decisions carry their responsibility and are held accountable.”
How is Mr Wandel going to respond to this and many other questions sent by donors? How committed is he in pursuing accountability for the wrong-doings that go well beyond Mr Vanshelboim and Ms Faremo to implicate the whole of the Senior Leadership Team? As Ukraine said, such wrong-doings could not have been executed by just one or two people. That is why many countries have made clear that they want to see wider accountability.
The omens for Mr Wandel acting comprehensively on this are mixed. Some critics question if he is sincere or , as just an “establishment person” using his vast experience to continue the cover-up that Ms Faremo started. They point to the fact that the Acting ED has surrounded himself with the same Faremo-appointed coterie – Senior Leadership Team and directors – that spawned the original misdeeds.
Mr Wandel also has long-established friendships with several of the actors involved. Principal among them is Chief Legal Counsel James Provenzano, a mastermind of the original S3i dodgy design for which he provided dubious legal cover. Can Mr Provenzano be relied on to provide honest answers to Finland, USA, and other countries when, by doing so, he is very likely to incriminate his own self? Does Mr Wandel not think that it hardly generates confidence in himself if he is seen as captive of the same vested interests that he must now hold accountable, as required by his mandate?
Mr Wandel’s letter of 28th May to the Board President, Ms Brandt indicates the hurdles ahead for legal action and fund recovery via OLA, and personnel accountability via OHR. Step 1 of the process seeks “complete handover of material from UNOPS.” What are the prospects for that, noting that Legal Counsel Mr Provenzano is hoarding them along with his SLT colleagues? Finland and other member states have also demanded to see key documents pertaining to the misconduct, misdeeds, and potential fraud-enabling decisions in which the same senior staff were involved through their acts of omission or commission. Will they really co-operate honestly to make their own records available?
Much was said by Board members around the secret OIOS report. The pressure on the UN Secretary-General is intense and he will not be able to sit on it for too long. Not least because he is at serious risk of feeding the “defunding UN” movement, as a consequence. Already, the US, EU, UK, Finland, Global Fund, and several other donors have cut back or suspended their funding to UNOPS.
For example, a recent delegation from UNOPS HQ went to Brussels and returned to Copenhagen with the clear message of “suspension of payments related to ongoing projects” and “no signature of new engagements until the European Commission sees the results of … e.g., independent review, and assurances on the reliability of UNOPS oversight, control, and audit processes.”
Does Mr Wandel really think that his inherited team of, especially, – Mr Provenzano, Ms de la Touche, and Mr Dainhi – the central characters that enabled the potential fraud at the top of the agency – now have credibility and trust in the eyes of donors? Mr Wandel needs to decide whether he wishes to preside over a rapidly de-funded agency that is set to dis-integrate unless he has the courage to take the necessary action to be rid of his friends. He can do that by putting them on administrative leave (as happened to Mr Vanshelboim) while they are independently investigated. Or there also appears to be a prima facie case for their separation on grounds of poor performance, evident in the fact that UNOPS has been much reduced in the eyes of the world, under their own “senior leadership”.
Of course, in a professionally competent and independent investigation, the communications, and computers of all SLT members would have been seized by now before their owners destroyed or tampered with them. But OIOS is hardly independent – it initially refused to conduct the investigation and referred the case back to UNOPS’s own discredited IAIG. Subsequently, when it came back, it further delayed it as long as possible and limited its scope, described aptly by Ukraine as a “tunnel-style investigation”.
Mr Wandel was right when he said that ”history does not stop because we messed up”. He may also note the lesson that a new history cannot be made without fully revealing the old on and coming to terms with it. Brushing inconvenient histories under the carpet never works because, sooner or later, they emerge to taint the future.
Thus, UNOPS will remain tainted until every stone is turned over, and light is shed into every nook and cranny where its shabby secrets are hiding. Mr Wandel can do that if he really is the honest and sincere servant of the United Nations, as he claims. If he does, he will both make history and emerge on the right side of it. Otherwise, he too will become just another ignoble footnote alongside Grete Faremo.