← This Week in Global Development
This Week in Global Development
Inside the corruption scandal that tarnished the UN
00:32:03
This week, we take you inside a Devex exclusive: the $60 million fiasco at the United Nations, a complex story with an equally complex set of characters, including Vitaly Vanshelboim, whose rise and fall left a black mark on a key U.N. agency. Once...
Loading summary
Transcript29 lines
- [00:04]
A
My name is Adva Saldinger and you're listening to this Week in Global Development hosted by myself, Rumby Chikamba and David Ainsworth. I am excited to be joined by two of my colleagues today, Colm lynch and Anna Gavel. And we are going to spend a lot of today's episode talking about an investigation that I've been hearing about for months at devex. That column is just published. And so I'm excited to sort of learn more about the behind the scenes of how this story came to be. It included a prison visit. But Anna, I want to turn to you quickly first because we did have some breaking news this morning with a leadership change at the One Campaign, which is one of the top global advocacy organizations in the global development space. So Anna, maybe you can fill us in on what we heard there and who's going to be stepping in to helm the organization.
- [00:52]
B
Sure. So the big news is Mark Green, who was the former USAID administrator under the first Trump administration, will be taking over as president and CEO of the One Campaign. Indeed, Nwanelli will be returning to her family in Nigeria, though she'll continue working with One in terms of the board and a new board committee specifically focused on the nonprofits expansion into Africa. I think from what I've heard, it's a smart choice. You know, Mark Green has a lot of bipartisan credentials, but he's also got deep roots in development. You know, in addition to being at usaid, he was a four time member of Congress where he worked on initiatives such as PEPFAR and Millennium Challenge Corporation. It is interesting though, because for the second Trump administration, I'm sure you're aware if he was president of the Wilson center here in D.C. which was closed by the Trump administration along with USAID last year. But basically he does have widespread praise for being a bipartisan person in Washington. And I think that you will need that kind of gravitas in this very polarizing environment and in this difficult financial environment. And he's told us, he told us via, via email that, you know, we had last year, but this year really moving forward is going to be the most important. You know, and he talked about like demographic changes and technology and so forth. So there's a lot to, to that he'll be sinking his teeth into. But yeah, pretty big news for our community.
- [02:25]
A
Yeah. And you know, he was also a former US Ambassador in Tanzania and likes to tell many stories about that time of his life. I think he is someone who deeply cares about some of these issues as someone who's interviewed him several times over the years in the past. So I think it'll be interesting to see how that goes and what sort of impact that has, particularly in the US and in Congress and as we see things play out moving forward, because there's no shortage of debates and tension around a number of issues, including whether the administration's actually going to spend what Congress has appropriately. But Colm, I want to turn to you because you have this big investigation that has just published about Vitaly von Chilbh. And this is sort of a long saga. So I am going to let you walk us through this story of what happened. And this man who is facing, you know, accusations of bribery and money laundering and fighting extradition to the United States to sort of face those charges, which all sort of traces back quite, quite a few years ago to a moment in time when he was leading unops. So, Colm, can you sort of bring us into that story? What have you learned, what happened back then and where do things stand today?
- [03:40]
C
Yes, it is a long saga and it's hard to figure out where to start. But why don't I start by just explaining who Vitaly is and what he did at the un so Vitaly Van Chaban is a Ukrainian national who has been working for the UN for about 30 years, who had been, before he was fired in 2023, a rising star, always had a reputation as being extremely bright. He grew up in Ukraine during the Soviet Union, started working for the UN when they set up an office in Kiev back in the 1980s. So in the situation that we're focused on is sort of the time that he spent working at an organization called unops, which is the UN Office of Project Services. And it's sort of an obscure UN agency that does things like builds roads, builds bridges, does infrastructure projects, manages projects, all the sort of sort of kind of stuff that, you know, doesn't get a lot of attention within the UN system. But, you know, they have access to billions of dollars. They're working in projects all over the world. So there was an effort by this organization which traditionally just had a kind of fee for service model. They would be asked to build a road and they'd go build it and then they'd move on to the next thing. So they decided that they were wanted to get into the sort of world of impact investing. There was a lot of focus as the UN is moving towards trying to achieve a sustainable development goals, that they need more private sector money. They want to. And they've been promoting this idea of Doing more impact investing. So Mbaum and then the new head of unops, a Norwegian politician named Gretev Faramo, really decided to kind of get into the game. They had been reaching out to a number of businesses. They didn't have a lot of luck getting people to, to, you know, to agree to, you know, participate with them. They had a big pile of money, a couple hundred million dollars in the reserve that they wanted to use for investing. Didn't have a ton of experience, a lot of experience in this area, but they identified this one company or a series of companies run by a British businessman named David Kendric. Kendrick has set up this company called shs, which was basically designed to focus on framed around wind, you know, sort of renewable wind energy, low cost housing, all these things aimed at achieving the sustainable development goals. So the UN decided, UNOPS decided that they would put all their eggs in that one basket. They came up with like around $60 million. They put it in a whole series of kind of subsidiaries of Kendrick's companies. And they moved ahead with, and with a lot of ambition and recognizing there was quite a bit of risk. And it basically flopped. They lost all the money. It disappeared. Kendrick was having issues with, you know, kind of other businesses and any event, the money wasn't there. They, they returned a few million yet a few million of them of the money back to the un. But all these loans from the UN basically fell apart. So it began sort of an internal investigation. During the investigation, they learned that Van Chilbaum, who was the head of this program and also an Assistant Secretary General in the United nations, they found out that he had entered into, secretly into an agreement with Kendrick whereby he would get certain benefits and his family received certain benefits. He was given a $500,000 a year interest free line of credit furniture for his home that he used through this line of credit both in the US A Mercedes for his wife who was, you know, purportedly doing some work for, for Kendrick in the Ukraine. A number of other things. You know, the UN claimed that there was a $1.2 million sponsorship for Van Shalbaum's tennis playing son, who was a sort of prodigy in the European circuit at the time. And so this basically, you know, led to him being fired from the organization. There was a criminal referral, sort of pursued by the un. The issue was picked up by the Southern, the US Attorney from the Southern District of Manhattan. And they sometime last year basically sought his extradition to face criminal prosecution in the U.S. so that's where we find Kind of the situation. And so I had been trying to reach out to Vantelbaum. I had known him, you know, professionally. I had interviewed him over previous articles. The first time was a corruption case in Afghanistan involved in unops. And he had spoke to me on the record, presented himself as someone who was really trying to restore the integrity to unops. And I probably spoke to him a couple of times or exchanged emails a couple times over the years on various issues. When this broke, when he was dismissed, I reached out to him again. He said, look, I can't talk. You know, he felt like he was being scapegoated, but, you know, at some point I'll be willing to talk. And so I tried during the whole period of extradition, the effort to extradite him, to reach out to him through his personal email. Really didn't hear back anything, didn't expect to because I didn't know he had access to email or not. But on Christmas morning this year, I got an email from his son saying, you know, dad would like to talk to you. Can't do it over the phone because the prison won't allow international calls to the prison. So we decided I would go out and I would meet with him. There were some, you know, bureaucratic problems trying to arrange the interview. I didn't think it was going to happen. And so I started a correspondence with him, you know, in case we couldn't interview him directly. And then finally I, they, finally, the prison agreed to kind of an hour long interview, you know, separated by sort of plexiglass, you know, barrier. And I was able to talk to him. We had an interview on Valentine's Day this year. I've had.
- [09:44]
A
Can you tell us a little bit about what that experience was like going to this prison in Spain where he's facing extradition? What was like, what was it like to meet him in that environment?
- [09:55]
C
Yeah, so, I mean, classic. I mean, you know, you go to the place, you see all the barriers, the walls, the, you know, you know, it looks like a regular prison when you go inside. It feels like, you know, a public high school or something. Very institutional, you know, lots of gray chairs, plastic chairs. You go into the room, it was kind of forest green. I mean, it was like sort of interviewing somebody. It was like basically what you see in the movies. You know, like you go in, you have a telephone and you talk through to the scream. He was pretty relaxed. You know, he seemed in good form. He made a remark that I thought was really interesting, which was, he was saying that, you know, I was asking him what conditions were like and he says, yeah, you know, it's not that awful, but you know, it's not that great. But he kind of compared it to what life was like during the Soviet Union in Kiev and you know, kind of the deprivations you have, the lack of sort of access to things. I mean, he was frustrated he didn't have access to a computer. He had to handwrite all of his, all of his letters to me were, were written and thankfully extremely clear handwriting. So what didn't have trouble reading it but you know, it was pretty relaxed. It was first time I'd seen him without a suit and tie. He was wearing kind of sweatpants and, you know, and a kind of one of those puffer jackets and you know, he was a little bit grayer than I remembered him. But he, you know, he seemed, he seemed pretty, you know, in fairly good shape.
- [11:30]
A
On May 20th and 21st, the journalists behind Devex Checkup, our global health newsletter, will be joined by leaders navigating the sector's toughest challenges, from closing funding gaps to harnessing AI to strengthening country led systems. If you're working to shape the future of global health, you don't want to miss Devex Impact House at wha Taking place on the sidelines of the World Health assembly in Geneva, we're convening leaders for two days of live journalism, candid interviews and curated conversations designed to go beyond the talking points. You'll hear directly from leaders ranging from ministers of health and heads of foundations to social entrepreneurs and tech leaders. The people actively determining whether the global health community can move from ambition to delivery, request to attend in person, register for on demand content and reach out if you want a partner or suggest a speaker. So you did that interview with him and where do things stand now? Sort of in his case or with this whole situation. There was obviously the internal investigation, there's this ongoing legal process. Where do things stand now?
- [12:30]
C
So it looks like, I mean the, it's going through the kind of judicial process in Spain and the High Court made a decision last year that they, you know, basically agreeing to extradite him. He has had some other options. He's still pursuing political asylum in Spain. He's also, you know, considering going through, you know, the un, the, the European Human Rights Commission to see whether he can pursue it that way. He doesn't have a lot of confidence that he's going to be able to resist, but it's kind of playing out and he has so far been losing all the legal battles. So Far he claims that the US shouldn't have jurisdiction over him because he didn't live in the United States. He was based. UNOPS was based in Copenhagen. The office that he ran running this project with Kendrick was based in Helsinki. And so he's saying that he didn't really have any connection to New York, but this case is clearly going through the New York office.
- [13:41]
A
Another question I have is, you know, you mentioned a number of other actors in this, and in the story, you talk about, you know, the leader of UNOPS at the time who was really pushing the organization to do this type of investment and sort of lean into impact investing. Sounds like was trying to raise the profile of unops. Has anyone else sort of faced any sort of disciplinary action or criminal charges or anything like that associated with this situation?
- [14:08]
C
Yeah. So nobody knows yet what's going on beyond that. The. The District Attorney's office has not really said anything public about this case. The only reason we know that they're seeking his extradition is because it's, you know, basically come out in the Spanish legal process. Right. That's how we all know about this. There is no indication. I mean, there have been some, you know, there's some issues brought up in some of the internal UN sort of review of the process, indicating that the head of the program may have some liability. Doesn't say anything about criminal liability because of her kind of being sort of excessively deferential to him. There isn't any evidence, I'm aware of, that anybody in the UN had anything along the lines of a kind of secret agreement with the company. You know, there's a lot of suspicion that it would be hard for others not to understand what was happening because, you know, generally it's hard to get through the bureaucracy without kind of understanding what's been happening. As far as Kendrick, I mean, I interviewed him very, very briefly. I had a hard time finding him, but finally got him on the phone. He wouldn't discuss any of those kind of questions whether, you know, you know, he might have exposure to a prosecution. He said he'd have more to say on this matter down the road and that he was engaged in sort of legal process with the UN to try and address some of these issues. So I wasn't able to get a clear picture from him. I mean, I would imagine that there's a likelihood that this could go farther, but I really don't have any evidence at this point that that's the case.
- [15:51]
B
I think if I could chime in what was really interesting also about one of the aspects of column stories is that now UNOPS very much kind of portrays this as a one off individual failure, not a systemic failure with the organization. There's a website where you can track their reforms. They're apparently almost done with this comprehensive plan of other changes as well. And so it's kind of this affair that it was a one time thing, it's over, we've moved on. And UNOPS does continue to get contracts, it's working in, in Gaza and Ukraine and so forth. So. But you know, I think one of the, the biggest things is it's no longer doing this impact investing model. It was a pretty bold experiment I think at the time. You know, I mean it went against the grain of a traditional UN model. You know, it went against the grain from the get go because you know, they were fee for service and so they were a self financing entity within U.N. they broadened out. You know, they work with governments, MTBs, other U.N. agencies. But going kind of going into this bold experiment, it was bold, it ended in failure. But I think it's, it's an interesting thing where now there, I'm sure that there's a lot of lessons learned but that's not how it's portrayed at the moment. And so, but I do think it's quite a black eye on the UN and this experiment, this larger experiment in impact investing. And so I think that's why this story really has a lot of legs. Even it started when I started at Devex four years ago. So to call it a saga is not hyperbole. But anyway, kudos to column and to everyone for cranking out this investigation.
- [17:39]
C
I mean just one thing on that, one thing that struck me is that I was listening to the executive board of unops. We have the member states and talking and deciding the future of the organization and they, you know, they all seem to have kind of moved on. They're, they're perfectly happy with the, the sort of conclusion in UNOPS that they put this behind them. And I mean you had the Ukrainian, a Ukrainian diplomat talking, you know, sort of glowingly about the role that they're playing trying to help them restore energy in Ukraine. You have the United States speaking very positively about unops. And I think they like UNOPS because they don't have this kind of normative advocacy kind of role that sort of annoys this administration and that, you know, you just get them to do a job and they do it and they're, they're involved in trying to, you know, help, you know, Basically implement the US ceasefire in Gaza by providing services. There are key players in this effort by the UN to establish a kind of channel for a corridor, maritime corridor in the Strait of Hormuz. You know, they do a lot of things that the US likes. And you know, despite all the US criticism of like, you know, of corruption and the un, all these things, they don't really, they're not really targeting UNOPS in that way.
- [19:03]
A
Yeah, it's interesting. I mean, in some respects it seems like there's so many dimensions to this story, right? Because one of the pieces of it is this initiative that was probably somewhat ill conceived and took on too much risk and maybe didn't, you know, you talked to a lot of sort of whistleblowers that you or folks who worked there at the time who were raising concerns that maybe weren't listened to. And I think, you know, I don't know, there's different interpretations who know, you know, do people get caught up in the excitement of trying something different, of trying to bring in the private sector? You know, that in my conversations with folks sort of in the, in the, you know, private investor impact investor space, sometimes the UN tries things in impact investing with good intentions and it just doesn't always work. And so I think the UN has thought about that. In some ways there are people at the UN who are thinking about what role they need to play. And there are some agencies that are effectively raising money in capital markets and players in that space, like ifad comes to mind in the agriculture space. So it's not that it could never work. It just seemed like this was maybe not the best particular example. But I do think it's interesting that you talk about the perception of UNOPS and sort of people feeling like this is a chapter that's been put behind it. I guess, you know, maybe zooming out a little bit more because even if you knops, isn't facing the ire of the US government these days, a lot of other parts of the UN are. And I'm curious how this type of thing, which inevitably, if it comes as the court proceedings play out, comes back up, how that impacts the sort of perception of the UN and plays into these sort of broader debates about how the UN should evolve, how UN agencies should work together, how many UN agencies there should be, and the US UN relationship.
- [20:53]
C
Yeah, I get the feeling, and maybe this changes now that the article has come out. But you know, my sense is that the whole issue around this UNOPS scandal is basically not part of the conversation. Right. And even for the U.S. like, I don't know that the U.S. will look at this and say, hmm, how do we, you know, how do we support impact investing in a way that's, you know, that, that works. Right. I mean, I think the US has its position as basically we want cuts, cuts, cuts, cuts. And you know, and then UNOPS is kind of funny because it's not that they really want. I mean, you know, there's a discussion about whether to merge UNOPS with undp, and the Americans are not opposing that, but they want to make sure that the work that UNOPS does isn't diluted. Right. And that they want to be able to keep working with them. So there's that. But then when you come into sort of discussions about what US broader priorities are, it is basically they want to cut. Right? And so, you know, there was, I mean, Lisa Miolin and I wrote a piece last week about the US effort to try to, you know, condition US Treaty bound financial obligations, the UN to a whole series of conditions. And those include, you know, cutting peacekeeping, which already has already been cut like another 10%, finding other areas in the budget where, and programs where they can, you know, reduce the percent, the amount of money that the UN is paying in staff benefits and that sort of thing, you know, lowering, you know, salaries for UN officials, that sort of thing. So I mean, the US is pretty much as this, you know, political goal, which is to keep demonstrating that they can tighten the belt, but not entirely clear that they are deep in the weeds in terms of trying to find solutions that actually make the UN more effective. Their general sense is like, we want, you know, on the development side, we want the private sector more involved. We want more of this sort of thing. We want, but we want this as a vehicle so we can get access to, you know, critical resources that we need to make, you know, to, to sort of clear the way for US investment in, in the Global south in a way that isn't constraining in any way and doesn't place and doesn't, you know, it has kind of a low sort of level of regulatory requirements, low taxation, that sort of thing. So, you know, on the one hand, cut, cut, cut, and on the other hand, you know, open the door for, you know, our businesses to be able to engage in profitable activities around the world.
- [23:36]
A
Yeah, and I covered the House Appropriations Committee markup of their, you know, foreign assistance bill last week. It's now called the National Security Department of State and Related Programs Bill. And in that bill proposed slashing assessed funding to the UN by $1.8 billion in the FY27 budget. And that would eliminate support for the UN regular budget. It would bar money from going to the World Health Organization, to unrwa, to the UN Human Rights Council and others. And so I think this sort of cut, cut, cut debate over UN financing is definitely something we'll be watching. I know you from New York and me from here in D.C. but something worth keeping an eye on how some of that plays out and how much funding is really even at play to be conditional under. Under the sort of document that you found. Is there anything else in sort of reporting this Vitaly story that stood out to you, Colm, or any other sort of takeaways or things you're walking away with, either, you know, about this situation or the details of the story itself or any. Anything else from your conversations with him?
- [24:43]
C
Yeah, I mean, this doesn't surprise me. I've written a lot about UN investigations and corruption cases in the past, but what I find is, like, how timid UN internal oversight is. So, you know, you have these. You have, like, you know, in this case, you know, there was a whistleblower who came forward in 2019, before the UN before, you know, started like, actually spending money, raising current concerns about, you know, the fact that there was one company that was involved and that, you know, we needed to sort of look at that. And it started a kind of informal inquiry by the UN Internal Oversight Office. And they kind of, you know, I think just kind of moved. They, you know, looked at it sort of superficially looked at the complaint, asked some questions to the UNOV's own internal investigator, but then basically dropped it. And so they didn't really pick it up again until after, you know, all of these projects went into default, and they had very little option but to. To investigate the case. So there were, you know, there were opportunities to sort of nip this in the bud, which weren't taken. So I think that really shows some shortcomings of the kind of internal oversight process. I mean, part of it has to do with that. It's not a purely independent internal oversight process. You know, they are under the Secretary General's authority, and they have a tradition of, you know, doing some investigations which are quite tough, but, you know, often if it's politically sensitive, you know, they don't go there. So I think that's kind of one area that I would. I would point to.
- [26:23]
A
Great. Anna, any other takeaways on your side?
- [26:26]
B
As much as I love the story, I think I'll take A break from reading it? No, it's, it's, it is an interesting.
- [26:32]
A
And just so folks understand, what were the timelines here? How many months, which often is three months.
- [26:40]
B
Yeah. And thousands of miles in columns case. And, you know, lots of hours of not just, you know, obviously columns. Writing is great, but. Is great. But there's also documents, not just interviews that are involved. There's lots of digging that's involved in these things. There's lots of just hours and weeks of fact checking to make sure everything is buttoned up. So there's just a lot to go through. And it's, it's, you know, again, kudos to Column and the team that really worked on this. And, and yeah, I mean, I think it does to Column's point that he, he ended on which is, you know, there were red flags that were raised throughout this process. And it did seem though, like, again, everyone has a different story, everyone has a different version of the events that took place, but there definitely was this rush to let's make money, let's, you know, break the mold, prestige, profit and so forth. And you know, again, throughout this, this process, there were people who were saying, okay, wait, slow down. But again, everyone in terms of the process has a very different take on it. So I would just end by saying, you know, I think Column did a very thorough job of, of wading through all of those, those tit for tat accusations. And, and it is just really an interesting, fundamentally at. At its crux for me, this experiment that, you know, really just failed spectacularly. And what it says, you know, about this cast of characters, but the UN in general.
- [28:09]
C
Yeah. I mean, one of the issues was that, you know, unomps, they do procurement, they buy a lot, they work with contractors and consultants. They have a whole system of due diligence and that sort of thing. Right. And so if, you know, we had access to a lot of the documents that, that hadn't been revealed before. And in that, you see kind of some of the discussions with the, the leadership as they're sort of planning to go through with this. And so like we mentioned that one of the red flags was that it was one guy and all of the companies that were getting these contracts were under the same person or were controlled by the same person. But, you know, there was a kind of conversations internally about, we'll do the, you know, does the due diligence strategy we have for procurement, does that really make sense in this environment? And the view was that we're entering an area which is inherently risky and if we lose money, we lose money. But the idea is that, you know, at some point it get, you get paid off when you have a win. And also the notion that, you know, everybody knew that all of these companies were controlled by the same person, but they thought that that was a plus. The idea is like, you know, we're not going to open this up for competition. We have a partner and we have a platform that we're going to use and we're going to focus on doing all this work with this one business partner. And that was sort of seen. You know, some of, some of the people in UNOMS had previous prior experience in the private sector and they were comfortable with that. And they were also comfortable with the idea that they could lose money on it. But, you know, the idea was you need, you know, you need to play the game. And this is a game that is highly risky. And they kind of understood it and they went forward and they got burned by it.
- [29:58]
A
Look, it would probably be a very different story if it turned out to be a good bet. Right, right, right. If it had, if it had paid off. You know, I think it sounds like maybe some of their risk analysis was, was different than some others might have had just in terms of making all the investments through a single company and things like that. But, you know, I think not to say that all these big bets are bad in this case. It just, it really didn't. And you know, I mean, they acknowledge the risk that they would lose money, which every sort of private sector investor is going to be familiar with. And you do have to often take risks to make money.
- [30:33]
C
One thing Anna was mentioning that, you know, writing this story, you know, it's a long story, so that takes a certain amount of time. But for me, and I think for the rest of the team, the hardest part was just like how to organize all the documents and how to fact check the story. And it was, was there was a lot of documents. We got a lot of stuff and
- [30:54]
A
thousands of pages of documents.
- [30:57]
C
Yeah, yeah, yeah, yeah. So it's basically, you know, if you haven't properly footnoted during the writing a sentence, whether it's paraphrased or whether it's a quote from a document, then you have to remember, you know, which of the hundreds of documents that you have was that in. Right. So. So that took a little time to square that.
- [31:15]
B
Don't mess with our copy editors. There's no.
- [31:18]
C
They did a lot of work. It was a lot of work on this.
- [31:21]
A
Yeah. And they, and they deserve a shout out often. They're the ones who often do a lot, a lot of work for us without much credit. So I highly recommend that everyone take some time to read the full piece, pour yourself a cup of coffee, give yourself some time to sit down with it. But it's well worth the read. Colm, thanks so much for coming on today and sharing your insights on this story. Anna, thank you for joining us as well. This has been this week in global Development.
- [31:46]
C
Thanks for having me.