Wednesday, January 25, 2006

Is the UN Becoming More Like the Pentagon?

This week's news of cost overruns and corruption in the UN Peacekeeping office have a familiar ring. Earlier this week, eight UN officials involved in procurement in the peacekeeping division were placed on administrative leave, and the draft of a forthcoming report on fraud and mismanagement estimates that over $298 million may be lost or unaccounted for as a result of irregularities in the peacekeeping offices. The FT reports:

The unofficial report, seen by the Financial Times, paints a damning picture of poor or bypassed financial controls, insufficient oversight by senior management, as well as a revolving door of employment between UN procurement staff, and the private companies whose services the UN hires.

The scale and allegedly systematic nature of wrongdoing has raised fears of a scandal as large if not larger than the Iraqi oil-for-food programme affair, which may hit even closer to UN headquarters.

The $298m figure, almost a third of the $1bn of contracts examined, was removed from a subsequent final document, as were references to named companies and officials. UN member states will be officially sent the final version.

Christopher Burnham, the UN's head of management, acknowledged on Monday that the cost of fraud and mismanagement in peacekeeping procurement could go into the "tens of millions of dollars", and the figure was likely to rise over coming months.


Of course, similar problems--involving larger sums of money (remember the $9 billion unaccounted for?)-- have plagued U.S. reconstruction efforts in Iraq. Today's NYTimes reports that new findings of the Special Inspector General for Iraq Reconstruction reveal widespread financial mismanagement:

The audit, released yesterday by the office of the Special Inspector General for Iraq Reconstruction, expands on its previous findings of fraud, incompetence and confusion as the American occupation poured money into training and rebuilding programs in 2003 and 2004. The audit uncovers problems in an area that includes half the land mass in Iraq, with new findings in the southern and central provinces of Anbar, Karbala, Najaf, Wasit, Babil, and Qadisiya. The special inspector reports to the secretary of defense and the secretary of state.
Agents from the inspector general's office found that the living and working quarters of American occupation officials were awash in shrink-wrapped stacks of $100 bills, colloquially known as bricks.


One official kept $2 million in a bathroom safe, another more than half a million dollars in an unlocked footlocker. One contractor received more than $100,000 to completely refurbish an Olympic pool but only polished the pumps; even so, local American officials certified the work as completed. More than 2,000 contracts ranging in value from a few thousand dollars to more than half a million, some $88 million in all, were examined by agents from the inspector general's office. The report says that in some cases the agents found clear indications of potential fraud and that investigations into those cases are continuing.

Some of those cases are expected to intersect with the investigations of four Americans who have been arrested on bribery, theft, weapons and conspiracy charges for what federal prosecutors say was a scheme to steer reconstruction projects to an American contractor working out of the southern city of Hilla, which served as a kind of provincial capital for a vast swath of Iraq under the Coalition Provisional Authority.

But much of the material in the latest audit is new, and the portrait it paints of abandoned rebuilding projects, nonexistent paperwork and cash routinely taken from the main vault in Hilla without even a log to keep track of the transactions is likely to raise major new questions about how the provisional authority did its business and accounted for huge expenditures of Iraqi and American money.

"What's sad about it is that, considering the destruction in the country, with looting and so on, we needed every dollar for reconstruction," said Wayne White, a former State Department official whose responsibilities included Iraq from 2003 to 2005, and who is now at the Middle East Institute, a research organization. Instead, Mr. White said, large amounts of that money may have been wasted or stolen, with strong indications that the chaos in Hilla might have been repeated at other provisional authority outposts.

Others had a similar reaction. "It does not surprise me at all," said a Defense Department official who worked in Hilla and other parts of the country, who spoke anonymously because he said he feared retribution from the Bush administration. He predicted that similar problems would turn up in the major southern city of Basra and elsewhere in the dangerous desert wasteland of Anbar province. "It's a disaster," the official said of problems with contracting in Anbar. No records were kept as money came and went from the main vault at the Hilla compound, and inside it was often stashed haphazardly in a filing cabinet.


The news of widespread financial mismanagement in post-conflict situations, where creation of civil institutions with strong controls on public expenditures is vitally important to successful transitions to stable governance, is particularly troubling. The difference between the UN and US situations is that any mismanagement at the UN -- no matter if it is uncovered and punished -- may be used by some Member States (particularly the US) as an excuse not to support some necessary programs. US Ambassador John Bolton has already hinted as much. By contrast, mismanagement of US programs is unlikely to affect much of anything, since the Republican-controlled Congress appears disinclined to look to closely at how US taxpayers money has been spent in a war effort it heartily supported. In order for criticism of UN practices to be taken seriously, the US needs to set the best example for the international community. The UN needs better oversight; so, apparently, does the US government.

It all puts me in mind of a memorable, cynical quote from the movie Syriana (which, though a flawed film, has an interesting take on Washington lawyers) about the Foreign Corrupt Practices Act:

Corruption ain't nothing more than government intrusion into market efficiencies in the form of regulation. That's Milton Friedman. He got a goddamn Nobel Prize. We have laws against it precisely so we can get away with it. Corruption is our protection. Corruption is what keeps us safe and warm. Corruption is why you and I are prancing around here instead of fighting each other for scraps of meat out in the streets. Corruption is why we win.

Let's hope not.

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