DEMARCHE DELIVERED:UNDP ACTIVITIES IN NORTH

S E C R E T USUN NEW YORK 002273

SIPDIS

SIPDIS

E.O. 12958: DECL: 12/20/2016
TAGS: EAID KFPC KN KNNP KUNR PINR PREL UNDP
SUBJECT: DEMARCHE DELIVERED:UNDP ACTIVITIES IN NORTH
KOREA/MISLEADING ACTIONS BY UNDP DURING DEMARCHE.

REF: A. STATE 183533

Classified By: Acting Permanent Representative Alejandro D. Wolff
per reasons 1.4 (b) and (d)


1. (S) Summary. Ambassador Wallace met with Kemal Dervis,
Administrator of UNDP, on Tuesday, December 19, to deliver a
demarche regarding UNDP activities in North Korea (DPRK).
Ambassador Wolff was scheduled to deliver the demarche with
Ambassador Wallace, but was unable to attend due to a last
minute meeting of the P-5 on Iran. Mr. Dervis was accompanied
by his Deputy Chief of Staff, Douglas Keh and Mr. Bruce
Jenks, Assistant Administrator and Director of UNDP's Bureau
for Resources and Strategic Partnerships (BRSP). Per reftel,
Ambassador Wallace delivered verbatim the demarche talking
points regarding UNDP's lack of programme oversight, which
has resulted in the counterfeiting of U.S. currency and
unauthorized hard currency transfers of millions of dollars.
Per reftel, Ambassador Wallace requested an immediate audit
and investigation of UNDP activities in the DPRK as well as
copies of previously conducted audits. Mr. Dervis stated his
intention to respond to Mission requests for information by
Thursday, December 21st. End Summary. Comment. USUN has
reason to believe that during the demarche, Mr. Dervis' staff
deliberately obstructed an opportunity for the UNDP
Controller, Mr. Darshak Shah, to participate in the
discussion with Mr. Dervis in order to avoid discussing
issues previously discussed with the Controller and
Treasurer, Ms. Julie-Anne Mejia. Mr. Dervis indicated during
the discussion that Mr. Shah was in Dervis' suite and left
his office to ask Mr. Shah to join the meeting. From first
hand observation, it appears that Mr. Dervis deliberately
misled USUN by asserting that Mr. Shah was no longer in the
building. See paras. 5 and 6. End Comment.


2. (S) Dervis expressed his regret that Ambassador Wallace
and UNDP had encountered difficulties in meeting. Mr. Dervis
explained that he wanted Ambassador Wolff and Ambassador
Wallace to meet with his deputy, Associate Administrator Ad
Melkert, not because he was avoiding a meeting with U.S.
officials, but because Melkert deals exclusively with the
operational activities of UNDP, while Mr. Dervis heads the
larger United Nations Development Group (UNDG) and focuses on
the issues raised in that context. Ambassador Wallace stated
that he insisted on meeting with Mr. Dervis because he was
instructed to demarche Mr. Dervis personally, via the highest
levels of the U.S. Government. Ambassador Wallace further
underscored the importance of this matter to the U.S.
Government by stating the he would read verbatim from the
demarche given the fact that the demarche had been carefully
crafted.


3. (S) In response to the demarche, Mr. Dervis noted that as
head of UNDP he has less authority over the program and
activities of UNDP than people thought and very little
authority over other entities in the DPRK and other
countries. He added that the best way to effect change in
UNDP policies was through the Executive Board, stating that
if enough Member States expressed concern over UNDP
activities in the DPRK, then UNDP would be forced to curtail
its activities. Dervis also noted that the problem with any
type of humanitarian aid, is that since money is fungible it
can always be diverted to a military program regardless of
precautions. Ambassador Wallace assured Mr. Dervis that the
currency problem with UN agencies in the DPRK went well
beyond money being fungible; it was a systematic diversion of
very large amounts.


4. (S) Ambassador Wallace asked Mr. Dervis to explain why
UNDP programme audits seemed to either be non-existent or
unavailable to member states. Mr. Dervis stated that it is
against UNDP policy to make internal audits available.
Internal audits are "management tools of the organization"
and are conducted on a variety of issues ranging from
harassment to financial impropriety and that they may contain
personal information which could be inappropriate to share
with other entities. Ambassador Wallace questioned how member
states were to be assured that UNDP was conducting oversight
of their programmes if audits were not made available.
Ambassador Wallace continued by noting that UNDP's current
policy of not sharing internal audit information was
absolutely untenable and non-sustainable, especially with
respect to the DPRK, as interest in regard to this matter was
very high and would only grow over time. Ambassador Wallace
stated that the U.S. Government and USUN had taken
extraordinary and meticulous steps in preparing the demarche,
as the assertions related to the UNDP program are
significant. Ambassador Wallace added that the U.S.
Government is very focused on this issue and therefore needs
UNDP to take action to address the matter. Ambassador Wallace
requested that UNDP deliver copies of the most recent audits
and evaluations of the UNDP programme in the DPRK as soon as
possible.




5. (S) After learning that USUN had engaged in previous
demarches of the Controller, Mr. Darshak Shah, Mr. Dervis
requested his presence to answer additional questions about
UNDP policy and practice. Mr. Dervis and the other
participants claimed that they were not aware that USUN had
met with Mr. Shah on four separate occasions since August to
discuss this issue. USUN has dealt extensively with Mr. Shah,
as he was the primary point of contact for Mission demarches
concerning hard currency transactions in the DPRK, but he has
proven unable and unwilling to provide comprehensive and
consistent information on expenditures and audits of the UNDP
programme in the DPRK.


6. (S) Mr. Dervis and his Deputy Chief of Staff, Douglas Keh,
left the office to bring Mr. Shah into Administrator Dervis'
Office to participate in the discussions. Notably, a USUN
officer saw Mr. Shah, Mr. Keh and Mr. Dervis talking outside
of the office door. When Mr. Dervis and Mr. Keh re-entered
Mr. Dervis' office, Mr. Dervis informed Ambassador Wallace
that while Mr. Shah had been present earlier, he had left the
building to return to his own office down the street and was
unavailable. Unbeknownst to them, participating USUN officers
had met Mr. Shah on previous occasions and had introduced
Ambassador Wallace to Mr. Shah before the meeting, when USUN
officers and Mr. Shah happened to enter Mr. Dervis' office
suite at the same time. In addition, USUN saw Mr. Shah in
Dervis' suite upon leaving the meeting. When Ambassador
Wallace exited Dervis' office, Mr. Shah darted into an
adjacent office. Comment. USUN can only assume that Dervis
deliberately sought to prevent Mr. Shah's participation in
the meeting in order to avoid having him respond to
outstanding questions and explain his obfuscation during
previous meetings with USUN. End Comment.


7. (S) Because of the Controllers absence, USUN was unable to
garner firm information on UNDP's expenditures and audit
policies. Mr. Dervis did however, note that there was an
increase in the allocation to UNDP's audit office (OAPR) of
25.8 percent in the last year and that UNDP is trying to give
the office of OAPR as much resources as possible. As for the
availability of audit reports, Administrator Dervis' office
will provide what preliminary information they have by
December 21st.
WOLFF