U.S. Requests U.N. Watchdog Office Probe Contracts Issue in Controversial Good-Government Unit

NEW YORK — The message that came from the United States mission at the United Nations on Monday was dramatic. Addressed to the head of the U.N.'s watchdog Office of Internal Oversight Services (OIOS), Inga-Britt Ahlenius, it warned of "alleged improprieties relating to the award of consulting contracts," and "reports of threatened retaliation against staff members who had brought those improprieties to light."

The letter asked OIOS to conduct a "comprehensive review" of the issue in a little known division of the U.N. that claims to be helping combat corruption and build good government — but is now wallowing in turmoil over the contracts issue and over its alleged abuse of nearly $5 million in Greek government funds that were originally intended to help in the anti-corruption fight.

It is a special challenge for Guido Bertucci, the director of that U.N. body, known as the Division of Public Administration and Development Management (DPADM), who has been accused In the past, in secret U.N. documents, of being "fully aware" of the failings of the Greek-funded project, and doing little about it.

Bertucci's division is part of the U.N.'s Department of Economic and Social Affairs (DESA), and at the time the charges against Bertucci were made by U.N. auditors, in draft versions of their report, DESA officials strongly rejected them. The charges never became public, and disappeared from the final version of the auditors' report.

Now Bertucci is involved in another controversy, after FOX News last week posted a document that U.N. sources said was evidence that the director had violated internal rules to award a consulting contract worth more than $30,000 to Catherine Elizabeth Gazzoli, a freelance Internet designer. DESA officials, speaking on background, have strenuously denied FOX News' interpretation of the document.

Until she suddenly erased the specific dates from her personal Web site, Gazzoli had publicized the fact that she was currently working on five different U.N. projects virtually simultaneously, including three with Bertucci's division. The total amount Gazzoli has earned from Bertucci's division is unknown, but one payment record obtained by FOX News showed she received more than $118,000 on Feb. 25, 2005, in a lump-sum payment for short term consultancy.
Bertucci's management of his division is back in the spotlight. This week, the watchdog OIOS was expected to issue a report on the original Greek project, known as the United Nations Thessaloniki Centre (UNTC) for Public Service Professionalism. That report would go to top U.N. officials and will also be available to the Greek government. But now, FOX News has learned, the anticipated report will not be delivered as scheduled, since DESA has failed to respond to its findings.

But already, in an official letter to a Greek Cabinet Minister written last month, the U.N.'s outgoing Under Secretary-General for Management, Christopher Burnham, agreed that the Greek protests "had raised important issues and significant questions about the management practices of the United Nations."

Burnham, who has since left the U.N. for the private sector, added his belief that the audit would provide the Greek government "with the ability to pursue accountability for the misuse or mismanagement of resources" entrusted to the U.N.

Originally created in 1999 by the U.N. and the Greeks, the Thessaloniki project, known in U.N. parlance as UNTC, was originally intended to strengthen public administration in various Balkan countries, and help to combat corruption. The U.N.-Greek agreement, however, was not ratified for three years. By 2003, the Greeks were already demanding an investigation of the way the first $1.1 million of their money was being spent.

FOX News has discovered that UNTC then went through a 46-day investigation by U.N. auditors in early 2003. In their subsequent draft report, the auditors were at times scathing about the work carried on by UNTC's chief employees in Thessaloniki, and declared that "80 percent of the Project's financial and staffing resources were spent on activities, publications, training materials, and presentations related to the spread of e-government," which was never part of the UNTC objectives.

Many of the costs for the e-government work were born by the European Union and various unspecified private companies — and no records were kept of the funds. Some of the money was later tracked into personal bank accounts.

The auditors found that much of UNTC's spending involved expensive efforts such as unauthorized junkets — 19 in all — to such places as Venice, St. Petersburg, Shanghai, the Iranian city of Shiraz, and Orlando. Other money went on conferences, such as a July, 2002 "Capacity Building Workshop on governance and Public Administration for Sustainable Development," which cost $112,000.

UNTC also hired a variety of consultants, and the auditors later declared in the draft report that more than 50 percent of the consulting agreements "could not be directly linked to specific project activities or objectives."

In an internal draft document dated Nov. 1, 2003, U.N. auditors concluded that "it was possible for DESA to detect the irregular character of the Project's cooperation with third parties at an early stage." In a subsequent request that the U.N. open a fraud investigation, auditors declared that DPADM director Bertucci himself was "fully aware that the project staff were not performing, the objectives of the project were not being met, and DESA were not providing the Project with adequate backstopping."

The auditors also said Bertucci did nothing about the activities of his top Thessaloniki employees even after staffers told him how badly the project was being mismanaged. Bertucci himself was not charged by the auditors with anything fraudulent.

In their petition for a U.N. fraud investigation, put forward in January 2004, the auditors declared that the potential risks they saw in the UNTC case could involve "financing illegal activities, financial fraud and money laundering, abuse of the U.N. name, logo and seal; smuggling using U.N. travel documents, damaging the political reputation of the U.N. and of the government of Greece."

After a delay of months, DESA officials responded to the draft audit report by declaring that they had not, in fact, known what was going on in Thessaloniki, and that proper oversight of the project had been impeded by an extensive turnover in headquarters supervisors. They also rejected one of the auditors' key suggestions, that Greek government officials be seconded to the project to help ensure that it finally met its aims.

A subsequent U.N. fraud investigation declared that it found no basis for criminal charges in the case. The U.N. investigations unit at the time was headed by Barbara Dixon, who left the U.N. under a cloud this summer after a U.N. tribunal found that she had pursued the firing of an employee with "malice" aforethought, and suggested that she be made personally responsible for paying the employee two years worth of back wages.

The so-called "finalized" version of the OIOS audit, incorporating DESA's observations, was finished in May 2004. It found that the top U.N. employee in Thessaloniki (who was not named in the report) had siphoned more than $145,000 into a personal bank account and spent another $145,000 on junkets and contracts for third parties, while wasting hundreds of thousands of dollars in other funds.

(By that time, the U.N. had fired the employee, by declining to renew his contract when it expired In March 2004.)

The "finalized" version of the U.N.'s audit, when completed in May 2004, made no specific mention of Bertucci. It included DESA's claim that it was "completely unaware" of the project's unauthorized activities, added e-government to UNTC's goals, rejected the incorporation of Greek government officials in the project, and signaled that UNTC would continue in operation.
But eventually, all sides agreed that the project should be shut down by March 31, 2006 — except that it apparently wasn't. In its current complaint, the Greek government has charged that UNTC kept operating for nine additional months, at a cost of $16,000 per month, and demanded money back. DESA officials told FOX News on background that the project had definitely ended in October.

But another DPADM project, this one based in Italy and named the Center for Administrative Innovation in the Euro-Mediterranean Region, or CAIMED, is still going to this day. The Greek government has charged that CAIMED was launched in 2002 to compete with the Greek project at Thessaloniki, and that rather than oversee the Greek project properly, the effort of Bertucci's division went into supporting the Italian project. DESA officials have denied that charge.
CAIMED says on its Web site that its Web operator is Gazzoli. Gazzoli also cites her role in the project on her personal Web site, but recently erased the dates of her most recent personal consultancy with DPADM involving CAIMED.

Gazzoli has not yet answered a series of questions about her contracts with DPADM, sent by Fox News via email more than a week ago.

According to her Web site before its recent alteration, Gazzoli's consulting relationship with the U.N. began in 2001.

DPADM Director Bertucci has not yet answered a series of questions sent to him by FOX News.

On background, however, DESA officials have taken issue with a FOX News report that the appearance of Bertucci's name as "advisor" — a DESA term signifying direct oversight by a staff member who provides technical backstopping — on a project involving contract payment to Gazzoli for web portal work In Africa was in apparent violation of U.N. rules concerning such payments.

According to the DESA officials, the document in question was merely a "tracking document" to monitor budget and expenditures by project, and the appearance of Bertucci's name was "meaningless." According to one of the officials, the director's name was merely a default designation common to DPADM projects that signified when no adviser at all had been assigned to them. By implication, Bertucci himself would be unaware of its use.

Other officials familiar with DPADM procedures, however, scoffed at that explanation. The document, known as a Project Annual Work Plan (AWP), is "fundamental" to establishing accountability in the division, one official said. Moreover, as director of the division, the official added, Bertucci's name had "over-ride authority," meaning that he could supersede other officials in his department. Consequently, his name normally could not be used without his permission, and indeed normally required countersigning by other senior DPADM officials.
The contract bearing Bertucci's name as "adviser" was entitled "Implementation of the Peace and Security Agenda of the African Union." Given the nature of the contract referred to in the work plan, the FOX News sources said, the normal "adviser" on Internet projects in DPADM is a senior division official named Haiyan Qian, who is entitled "Chief of Branch." In a brief telephone interview with FOX News, Qian confirmed that her area of responsibility in the department Involved "knowledge management and development."

What will happen next In regard to DPADM is unclear. At the time the U.S. mission sent its note of alarm to her regarding the "alleged Improprieties" in the division, the head of OIOS was traveling abroad. It remained to be seen if the U.N. watchdog would consider the latest troubles in that division to be, as the U.S. put it, "an important and urgent matter."