UN REITERATES PLEA FOR U.S. HELP TO RELEASE

UNCLAS USUN NEW YORK 002211

SIPDIS

SIPDIS

FOR IO/UNP:CEDMONDSON AND L/DL:CLIGHT

E.O. 12958: N/A
TAGS: OFDP UN WE JA
SUBJECT: UN REITERATES PLEA FOR U.S. HELP TO RELEASE
BLOCKED FUNDS

REF: A. BROWN/WILCOX EMAIL--11/07/06

B. WILCOX/LIGHT/BROWN EMAIL--11/07/06

C. STATE 7911

D. BROWN/WILCOX/LIGHT EMAILS--10/19/06

E. WILCOX/EDMONDSON EMAIL--09/11/06

F. WILCOX/LIGHT EMAIL--07/06/06

G. LIGHT/WILCOX EMAIL--05/31/06

H. USUN 255


1. This is an action request. Please see para 7.


2. On November 7 (refs A-B),the UN's Office of Legal
Affairs (OLA) provided USUN with copies of correspondence
between the UN Development Program (UNDP) and Bank Leumi,
concerning UNDP's effort to secure the return of
$1,842,543.50, which UNDP had tried to transfer to the
Palestinian Economic Council for Development and
Reconstruction (PECDAR) through Bank Leumi on July 5, 2005.
In November 2005, UNDP requested U.S. assistance in securing
the release of these funds, which the Bank of New York is
holding in a non-interest bearing account pursuant to a
judgment entered against the Palestinian Authority and the
PLO. The Japanese government provided these funds for two
UNDP projects in the West Bank, and because the Bank of New
York has frozen them, UNDP cannot use them for the
humanitarian purposes for which the Japanese government
provided them. According to OLA, the Japanese government
recently began pressuring UNDP to secure the return of the
funds, suggesting that the delay in UNDP's implementation
could call in question Japan's willingness to provide future
donations.


3. In response to UNDP's request for U.S. assistance in
securing the release of these funds and per ref C, USUN and L
held a conference call with OLA on March 3, 2006, during
which OLA was advised that the most expeditious way for UNDP
to recover its funds would be to seek a refund from Bank
Leumi. (Note: The transfer request document indicates that
it is not valid after 180 days. USUN advised OLA that
because Bank Leumi did not successfully transfer the funds
within 180 days, UNDP, as a depositor whose instructions were
not carried out, should assert its legal right to the return
of its funds. End Note.) OLA was also advised to consider
hiring a lawyer in Israel to seek additional information on
its remedies under Israeli law.


4. USUN followed up regularly with OLA by phone (refs D-G),
and was told that OLA had advised UNDP to seek a remedy from
Bank Leumi. USUN asked OLA to provide us with copies of
UNDP's correspondence with Bank Leumi so the United States
could help if Bank Leumi declined UNDP's request for a refund.


5. On October 18, 2006, Bank Leumi declined UNDP's request,
advising that the Bank of New York has blocked the transfers
for two reasons: (1) an interim order by a U.S. court that
the funds should be held pending judgment; and (2) a block by
the U.S. Department of Treasury's Office of Foreign Assets
Control relating to PECDAR. (Comment: The UN has never
asked USUN about the OFAC block to which the Bank of New York
referred. USUN understands that OFAC blocked funds of the
Palestinian National Authority in April 2006; the Bank of New
York's letter might have referred to that order. End
Comment.) In discussions with OLA immediately thereafter,
USUN expressed concern (per ref C-F) that UNDP's request to
Bank Leumi did not pose the correct question and suggested
that UNDP submit a revised request to Bank Leumi,
articulating the correct legal basis for its request for a
refund.


6. In a November 8 telcon, OLA renewed UNDP's request for
U.S. assistance, arguing that UNDP's correspondence with Bank
Leumi shows that Bank Leumi will not refund UNDP's money.
Even though the text of UNDP's request to Bank Leumi does not
specifically assert its legal rights as a depositor, OLA
argued that having UNDP submit a revised request to Bank
Leumi would be fruitless. To seek to compel Bank Leumi to
act, OLA said UNDP would have to initiate civil proceedings
in Israel. OLA reiterated its contention that the
Headquarters Agreement obligates the United States to
intervene either with the Bank of New York or with the
appropriate U.S. court to secure the return of UNDP's funds.
They acknowledged that another option would be for UNDP to
sue Bank Leumi in Israel to recover its funds, but said that
option would be time consuming and would not necessarily
succeed.


7. During that conversation, USUN agreed to seek additional
guidance from the Department. Begin Action Request: USUN
seeks instructions from Department as to whether USUN should


advise OLA again that UNDP should submit another written
request to Bank Leumi, seeking return of its funds. If that
is still the recommended course of action, USUN suggests
providing a draft text of the request that UNDP should send
to Bank Leumi. End Action Request.
BOLTON