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Audit spurs closure of U.N. office in N. Korea

The Baltimore Sun

WASHINGTON --The United Nations Development Programme office in Pyongyang, North Korea, sits in a Soviet-style compound. Like clockwork, a North Korean official wearing a standard-issue dark windbreaker and slacks would come to the door each business day.

He would take a manila envelope stuffed with cash -- a healthy portion of the U.N.'s disbursements for aid projects in the country -- and leave without ever providing receipts.

According to sources at the U.N., this went on for years, resulting in the transfer of up to $150 million in hard foreign currency to the Kim Jong Il government at a time when the United States was trying to keep the North Korean government from receiving hard currency as part of its sanctions against the Kim regime.

"At the end, we were being used completely as an ATM for the regime," said one U.N. official with extensive knowledge of the program. "We were completely a cash cow, the only cash cow in town. The money was going to the regime whenever they wanted it."

Last week, the development program, known as UNDP, quietly suspended operations in North Korea, saying it could not operate under guidelines imposed by its executive board in January that prohibited payments in hard currency and forbade the employment of local workers hand-picked by the North Korean government.

But some diplomats suspect the timing of the suspension was heavily influenced by a looming audit that could have proved embarrassing to the U.N.

Documents obtained by the Chicago Tribune indicate that as early as last May, top UNDP officials at headquarters in New York were informed in writing of significant problems relating to the agency's use of hard foreign currency in North Korea, and that such use violated U.N. regulations that local expenses be paid in local currency. No action was taken for months.

Then, under pressure from the United States, U.N. Secretary General Ban Ki Moon on Jan. 19 ordered an audit of all U.N. operations in North Korea to be completed within 90 days, or by mid-April.

The Board of Auditors, the U.N. body tasked with the audit, made no movement on the audit for 40 days after Ban's order. It sent out its notification letter for the beginning of the audit the same day the development program announced the closure of its office -- March 1.

That timing, combined with past concerns about the UNDP's transparency, has raised suspicions that suspending operations would be a way to hamstring the audit, the results of which may prove damning to the organization.

"The office was closed precisely for that reason," said another U.N. official with extensive knowledge of the program. "With no operations in place, first of all, you have no claim to get auditors into the country. Second, it will take months and months to get documentation out of the office there, to transfer to somewhere else like New York."

All this occurs against the backdrop of intensifying talks with Pyongyang over its nuclear weapons capacity, the most recent of which took place last week in New York. Last month, the U.S. and four other nations signed a deal with North Korea promising aid in exchange for the shutting down of a nuclear reactor and a series of steps toward disarmament and normalized relations.

A spokesman for the U.S. mission to the U.N., Richard Grenell, said the U.S. supports the audit going forward to find out the extent of the problems at the UNDP office in Pyongyang. North Korean officials could not be reached.

Despite the closure of the UNDP office in North Korea, the audit is moving ahead. U.N. officials say they expect the audited documents to show not only the hard currency transfers to representatives of Kim's government, but also the inability of staff on the ground to confirm that the money was going to its programs.

The UNDP, whose mission is to help the country develop economically, was one of several U.N. agencies operating in North Korea, including UNICEF and the World Health Organization. The United Nations is one of few channels for foreign aid in the secretive, authoritarian country.

One of the UNDP projects, sources said, involved the purchase of 300 computers for Kim Il Sung University. The computers supposedly arrived in Pyongyang, but the international staff was not allowed to see the equipment it had donated.

Finally, after a month and a half of pressuring their North Korean handlers, staffers were led to a room in which two computers sat. They were told the others were packed in boxes, which they were not allowed to open.

And while the UNDP's programs -- which have included projects such as "Human Resource Upgrading to Support Air Traffic Services" and "Strengthening of the Institute for Garment Technology" -- cost anywhere from $3 million to $8 million a year total, the development program also acted as the administrative officer for all the U.N. agencies and wrote checks for tens of millions of dollars worth of programming every year.

The UNDP's financial officer and its treasurer in Pyongyang, who issued those checks, were both North Korean.

U.N. officials privately describe a scene that played out at the agency's compound each day.

A driver in a U.N.-issued Toyota Corolla would pull out of the compound's gate, taking U.N. checks to the bank. A short time later the driver, a North Korean employed by UNDP, would return with manila envelopes stuffed with tens of thousands of dollars in hard currency.

Then the windbreaker-clad North Korean official would show up and take the cash away.

UNDP spokesman David Morrison said the use of hard currency and the hiring of staff through local governments was standard practice in authoritarian countries like North Korea. Morrison said his understanding was that the agency had never had problems with site visits, and that in 2005 its staff had visited 10 of its 11 monitorable projects.

The agency was complying with the audit, Morrison said, "in order to take away even the perception that anything was untoward."

The first phase of the audit is scheduled to begin tomorrow in New York. It remains unclear whether the auditors will attempt to visit North Korea. It is possible that even if the UNDP office were still open, Pyongyang would not have granted them visas.

Even with its limited scope, the audit could yield significant revelations about how the agency worked in a dictatorial, tightly controlled society.

"There wasn't a snowball's chance in hell that they'd allow us to see what they did with all the cash they received," said a member of the diplomatic community in New York. "But UNDP headquarters and the country office should be able to tell us what kinds of checks they were making, were they paid in cash [and] what, who, where the money was going to."

Bay Fang writes for the Chicago Tribune.

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