Cash-for-Kim

For two of Paul Wolfowitz's most prominent critics, Mark Malloch Brown and Ad Melkert, the war over the World Bank presidency could not have come at a better time. Whatever else the ousting of Wolfowitz has achieved, it has done plenty to distract from the North Korea Cash-for-Kim scandal that just four months ago was threatening to engulf the United Nations agency piloted for the past eight years first by Malloch Brown and now largely by Melkert.

That agency is the U.N. Development Program, or UNDP, and especially in light of the U.N. system's sudden interest in ethics, it deserves a lot more attention. Run by Malloch Brown from 1999-2005, the UNDP is now home to Melkert--previously head of the ethics committee at the World Bank--who has worked since early 2006 as its hands-on manager and number two man to the often-traveling administrator, Kemal Dervis.

Despite its generic name, the UNDP is not just any old U.N. agency (or "programme," in U.N. parlance). It is the alpha in the U.N. alphabet soup, the U.N.'s flagship in the developing world. Its administrator is the third-highest-ranking official in the U.N. system, and the UNDP is angling to serve as top boss of all other U.N. agencies in the field. For years, the UNDP has enjoyed an image as the model of a modern, more efficient U.N.--product of the "reforms" and vast expansion of both its budget and braggadocio under Malloch Brown.

The reality is a lot less wholesome. Operating with even less transparency than the opaque U.N. Secretariat, and now channeling more than $5 billion per year worldwide in the name of development (at least $245 million of that contributed by U.S. taxpayers), the UNDP has made a practice of bunking with dictators from Algeria to Zimbabwe. It has done this while maintaining internal oversight controls lax enough to embarrass Enron in some cases. This January, in the Cash-for-Kim scandal, the UNDP got caught playing sugar daddy to North Korea's nuclear extortionist regime of Kim Jong Il. It further emerged that while forking over hard currency to Kim, UNDP officials in Pyongyang had been storing counterfeit U.S. banknotes in their own office safe.

What has not been disclosed until now is that the UNDP in Pyongyang was also busy shepherding and bankrolling "study tours" of the U.K. and Europe for North Korean arms experts, stocking Kim Jong Il's research libraries with specialized publications on global security matters, and dispensing funds on behalf of other U.N. agencies for such ventures as sending North Korean officials to a three-week conference on "statistics" in Iran. This went on even after North Korea's U.N.-denounced missile and nuclear bomb tests last year.

And though the U.N. has treated Cash for Kim as an anomaly (recently suspending UNDP operations in Pyongyang, but nowhere else), the program's odd activities hardly begin and end with North Korea. The UNDP is also supporting such endeavors as an upgrade for the state-owned national airline of Syria, a mullah-approved official youth group in Iran, and a network of women's groups in Burma that were recently accused of shaking down impoverished villagers for forced membership fees. In Zimbabwe, the UNDP is embroiled in unproven allegations that its vehicles have been used for smuggling from a diamond mining venture it has been supporting--which raises the question of why the UNDP is involved in diamond mining at all.

In defense of such dubious activities, plus many more (such as the time it got caught in 2005 bankrolling anti-Israel propaganda in Gaza), the UNDP has issued a stream of denials and prevarications--including the notion that one has to break a few eggs to make an omelette.

Such outrages are the natural result of the UNDP's ever expanding mission to plan every developing economy on the planet. UNDP programs are crammed with new-age U.N. jargon about "capacity building," "national partners," and "millennium development goals." What they're really talking about is old-style, top-down central planning, done by UNDP-ocrats in cahoots with their high-level counterparts in client governments. What the Soviet Union called five-year plans, the UNDP calls "Multi-Year Funding Frameworks."

Especially pernicious are the UNDP policies known as "country ownership" and "national execution." Under these arrangements, which account for the bulk of its projects worldwide, the UNDP turns over resources and on-site responsibility to client governments (charging "cost-recovery" fees in the process). The idea is that the UNDP, by encouraging client governments to design and run their own "development" projects, will persuade the likes of Zimbabwe's dictator, Robert Mugabe, or the Burmese military junta to shape up. Too often, especially in the most corrupt and repressive countries, the result is that the UNDP rolls over, shoveling money and materials into the hands of national officials, taking a cut for its services, and slapping on top a UNDP seal of good housekeeping. The specifics of many of these projects are shrouded from public view under such stock labels as "Energy and Environment," or "Capacity Building for Development Cooperation" (the name of the UNDP project that in January covered the $12,000-plus business class airfare for a North Korean official to attend a UNDP board meeting in New York).

For an outsider, following the more than $5 billion that flows yearly through the UNDP system is like tracking Osama bin Laden through the caves of Tora Bora. Headquartered in New York, across the street from the landmark U.N. complex, the UNDP serves as the U.N.'s main development shop and coordinating network around the globe, employing 7,355 staff plus a host of consultants. The UNDP has offices in 135 countries, programs in 165; and in many capitals its resident representatives have long doubled as emissaries of the U.N. secretary general. (That's why a UNDP mission chief in Ghana was able to help Kojo Annan, son of former Secretary General Kofi Annan, clear a Mercedes duty-free through customs in 1998 under false use of his father's name.) In dispensing funds worldwide--currently $3.7 billion annually for its own projects, and $1.5 billion on behalf of other U.N. agencies--the UNDP handles more than one-quarter of the entire U.N. system's $20 billion annual budget.

To raise money, the UNDP relies not only on "core" donations from member states, but according to its comptroller also operates more than 600 trust funds, some thematic, some country specific, some project specific. None are particularly transparent. There are so-called public-private partnerships, in-kind donations, collaborations and cooperative arrangements with other U.N. outfits, NGOs, and foundations. In effect, the UNDP offers itself as a black box into which donors with almost any aim can contribute money from almost anywhere and have it used under the UNDP label for almost anything they might want to earmark, as long as the UNDP agrees--and apparently it often does. For instance, last year's jaunts abroad for North Korean arms experts were pet projects of the UNDP, the North Korean government, and donors in Sweden and Germany.

Murk pervades this maze. The UNDP does not make its internal audit reports available even to the 36 member states on its own executive board (which mixes democracies such as the United States and Britain with a gang of thugocracies currently including Algeria, China, Russia, Kazakhstan, Pakistan, Guyana, and Belarus, as well as, of course, North Korea). What does seep out is not promising. The U.N.'s largely toothless "external" Board of Auditors, in a report released last year, expressed generic concern at "the increase in project expenditure not audited," and noted that among the nationally executed projects in 2004 and 2005 that were audited, reports for some $1 billion worth of spending were submitted late. As of mid-2006, more than one-quarter of these audit reports had yet to be submitted at all.

The UNDP's country offices have websites on which they post generic lists of "sustainable" goals and programs, but stunningly little is disclosed in the way of project details, and almost nothing about spending. At the UNDP's New York press office, staffers can be pleasant and work long hours, but often appear to have trouble obtaining information themselves. In response to pointed queries, the UNDP provided some documentation for two of the 30 projects underway last year in North Korea--including the "disarmament" project described above--then suddenly found it impossible to lay their hands on any more. The UNDP provides no regular press briefings. This month, the UNDP finally announced a financial "disclosure" policy. It is modeled on Annan's farcically empty measures introduced last year for the U.N. Secretariat, in which there is no requirement to disclose anything to anyone outside the U.N.

Then there's Mark Malloch Brown and the upmarket house he has been renting for years on the suburban New York estate of hedge fund tycoon George Soros--for whom Malloch Brown has now gone to work. Reporters queried Malloch Brown in 2005 about potential conflicts of interest in renting from Soros while running a UNDP that by his own admission was collaborating "extensively" with Soros's network of foundations. Malloch Brown's response was not to provide documentation on what he claimed was an arm's length arrangement. Instead, he denounced reporters for their "bile."

Last year, persistent questioning by Matthew Russell Lee of the Inner City Press finally extracted from the UNDP the information that a book about its own history, commissioned in 2004 by Malloch Brown, had cost the organization $737,000 (including such items as salary and travel money for the author, and purchase of copies from the publisher). The book was a paean to the UNDP, and to Malloch Brown in particular, describing his reforms as a model "of efficiency and effectiveness."

This is the institution and ethos that were at risk of exposure when Cash for Kim hit the headlines. Secretary General Ban Ki-moon, in a brief flash of wisdom, promised an independent audit of the entire U.N. system. But within days, a classic U.N. cover-up had begun. Ban scaled back the inquiry to include only U.N. agencies in Pyongyang, and turned over the job to the housebroken U.N. Board of Auditors, who are expected to deliver their overdue report any day now. The auditors did not visit North Korea. They never even asked for visas.

And so, here we all are, four months later, having heard from U.N. officialdom plenty about the pay package of Paul Wolfowitz's com panion at the World Bank, but almost nothing more about the UNDP. At the U.N., they call this development.