USUNECO: INTERNAL OVERSIGHT FINDS SERIOUS

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 008509

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CORRECTION - ADDITIONAL TAGS

E.O. 12958: DECL: 12/16/15
TAGS: UNESCO FR BR PK SZ JO
SUBJECT: USUNECO: INTERNAL OVERSIGHT FINDS SERIOUS
PROBLEMS IN BRASILIA OFFICE, POTENTIAL PROBLEMS IN
ISLAMABAD, BUT NONE IN AMMAN.



1. After receiving a series of e-mails from the UNESCO
Iraq office based in Amman alleging mismanagement and
corruption, the DCM met December 13 with John Parsons
(strictly protect),a UK national who heads UNESCO's
office of internal oversight. (Note: Parsons spent a
year in Washington on secondment to the GAO and is very
complimentary of US oversight methods.) Parsons
assured the DCM that they have inspected the UNESCO
Amman office and found no serious irregularities. He
did say that they are concerned about possible problems
in the Islamabad office, but didn't elaborate. What
was of greatest concern to Parsons was the situation in
the UNESCO Brasilia office from where he had just
returned. Parsons repeated some of the less sensitive
information at a Geneva group meeting on December 15.


2. Allegations of misconduct and mismanagement at the
UNESCO Brasilia office have been floating around UNESCO
for a number of months. In September, Director General
Matsuura forced the early retirement of the office's
director, Jorge Wertheim, an Argentine national married
to a Brazilian. Parsons confirmed that he has been
under pressure from the Deputy Director General Macio
Barbosa, a Brazilian national, not to investigate too
closely.


3. What Parsons found during his inspection was that
the Government of Brazil was essentially using the
Brasilia UNESCO office as a "front" to deliver services
and get around its own cap on the hiring of civil
servants. The GOB was providing USD 120 million per
year, while UNESCO's contribution was USD 300,000. The
whole Brazil operation had over 3,000 employees. Of
the GOB's contribution, 53% was going to the Ministry
of Health to pay for programs such as the training of
nurses and doctors-an area, Parsons pointed out, that
is totally outside of UNESCO's mandate. (The UNESCO
Brasilia office is no longer working with the Ministry
of Health.) The UNESCO Brasilia office was charging
overhead on the GOB funds that amounted to USD 5-6
million per year and that could be spent at Wertheim's
discretion. (Note: In September, before Wertheim was
fired, there was an elaborate exhibit at UNESCO
headquarters on the work of the Brasilia office;
Parsons confirmed that it was funded from the overhead
charges and cost USD 85,000.)


4. Parsons asserted that Brazilian labor laws do not
permit the type of hiring that was being done, but that
UNESCO and UNDP were hiding behind diplomatic immunity
to violate those laws and avoid paying social charges.
In the Dec. 15 Geneva Group meeting, Parsons added that
both Wertheim and UNESCO face legal action. He said
that UNESCO faces potential financial liabilities for
these unpaid charges and that individuals in Brazil are
taking UNESCO to court over unpaid charges. At this
point UNESCO is seeking protection through its own
immunity. Parsons also noted that the external auditor
may not be able to certify the organization's finances
because of potential liabilities


5. The UNESCO office has now been significantly
downsized and will be engaging in smaller, meaningful
technical cooperation, not projects that go on year
after year.


6. Meanwhile, Wertheim is now involved with a new
development agency run by the Ibero-American states
(note: Parsons said this is a new organization but
didn't have details) and is offering his new
organization's services to the GOB. This position also
gives Wertheim diplomatic immunity. Parsons says that
if Brazilian prosecutors bring charges against
Wertheim, DG Matsuura may retroactively lift Wertheim's
immunity.


7. The Brasilia office is now being run by a Canadian
while the position of director is being competed.
Parsons passed on one more piece of disturbing news.
He said that Deputy Director General Barbosa has stated
that no Amcit should be hired as a field office
director in Latin America. (Comment: If true, this is
totally unacceptable. We are also concerned because we
are aware of at least two qualified Amcits who have
applied for the Brasilia job.)


8. Parsons also discussed efforts to implement Volcker
Commission reforms that he expanded upon at the Geneva
Group meeting. He said he had been stymied in his
attempts to implement a hot line because senior
secretariat officials, such as Francoise Riviere, the

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DG's chef de cabinet, felt that this was culturally
inappropriate in France. He mentioned that he was also
working with human resources on ethics training and
financial disclosure. He also seeks to establish an
ethics office at UNESCO and said that there will be
zero tolerance for irregularities.


9. Other items Parsons mentioned during the Geneva
Group meeting include:
--by the end of this year all field offices will have
been audited
--he is concerned about extra-budgetary funds, donors
need assurance their projects will be well managed
-- risk areas at headquarters include the building
renovation and unliquidated obligations of USD 57
million.
-- after field audits two days are spent training staff
on management controls
-- that a UN code of conduct will be issued with
examples
-- his team is evenly divided between auditors and
program evaluators


10. At his meeting with the DCM, Parsons repeated a
request he made earlier this year for TDY assistance
from the GAO.
OLIVER