UN Pension Accused of ‘Massive Fraud’

The fund CEO allegedly tampered with documents and attempted to hire a 90-year-old, according to UN staff and union heads.

Major conflict has erupted at the $54 billion United Nations (UN) pension fund, as union officials counter attempts at a governance overhaul with accusations that the CEO may have committed “massive fraud.”   

In a March 31 meeting, UN staff and union representatives detailed allegations against senior fund management, including tampering with documents, undisclosed conflicts of interest, splitting a contract into two parts to avoid oversight, and allowing certain employees to work beyond the mandated retirement age.

UN pension fund CEO Sergio Arvizú called the accusations “a malicious campaign.”

“These are not already-investigated cases, but allegations of fraud” brought by whistleblowers, said Ibrahima Faye, employee representative to the UN Joint Staff Pension Fund, at the meeting. “There are four categories: Human resource irregularities, pertaining to promotion and vacancy management; procurement-related irregularities, project management, and cases of conflict of interest.”

One of the staffing issues Faye brought up concerned CEO Sergio Arvizú’s alleged attempt to create a short-term post at the pension fund for “person who is almost 100 years of age,” and had served as a reference for Arvizú during his own hiring. The organization’s mandated retirement age is currently 62. “That person was so old,” Faye said, “we are asking ourselves, ‘What kind of work would he be doing?’” UN CEO and Ban Ki MoonCEO Sergio Arvizú & Secretary General Ban Ki-moon (Source: UN)

The pension’s executive office brought the allegations to the UN’s Office of Internal Oversight Services on March 13, according to Faye, a former journalist and project manager with Senegal’s Ministry of Finance and Economy. Faye and his associates met with the oversight division’s audit director the day before the meeting.

“Our responsibility as staff representatives is not to investigate fraud or to be part of the process,” he noted. “That’s why we decided to contact the office of internal oversight services and give them the allegations we have received so far.”

CEO Arvizú called the accusations “a malicious campaign” in a March 30 letter to participants. “I want to assure you that all accusations floating [around] are unfounded and that the fund continues to be in a very sound financial position.”

The pension fund did not respond to CIO’s request to further discuss the claims or remark on them. Because they concern internal operations, the alleged instances of fraud could not be verified via public documents.

The meeting invitation—a copy of which CIO obtained—centered on the fraud allegations, but roughly half the discussion concerned efforts to centralize the fund’s byzantine governance structure.  

Currently, the pension’s administrative and investment divisions operate independently. The CEO oversees benefits and operations, while the investment division reports directly to a representative of UN Secretary General Ban Ki-moon

        UN Pension Fund Governance Structure        

  UN Gov

(Source: UN Audit Report: Governance and Oversight of Investments of the UNJSPF)

According to UN records, Arvizú proposed policy changes last year under which authority over a swath of financial and management practices would shift from the secretary general to the CEO’s office. These include internal staffing, service procurement, entering into contracts covering future budget periods, preparing and revising the organization’s budget, and authorizing special remittances and cash advances. 

The revised rules would “better motivate and further develop our already highly-skilled staff,” Arvizú wrote in his recent letter. He said the changes would allow for added promotion opportunities, exemptions from relocation requirements, retirement age extensions, and streamlining of job classifications.

Since Arvizú first proposed the revised policy, organizations representing the 33 member groups covered by the UN pension fund have fiercely battled its human resources aspects.

These organizations launched an online petition last May calling on the secretary general to block the reforms and “insist that any changes to how the fund manages its staff be negotiated with the staff unions first so they can ensure the right checks and balances are put in place.” It has since been signed by more than 13,000 people.

The labor committee's “statement was seen as personal defamation, not based on facts, a continued spread of misinformation, and that it had not been helpful in making progress in the matter.” —Report to the UN General Assembly

Likewise, a committee covering UN staff unions issued a statement during the fund’s 2014 annual board meeting accusing the CEO of “union-busting” and nepotism, according to a UN report.

“Friends of the CEO and his entourage, who could easily have been replaced, have been retained beyond retirement, and posts have been kept vacant for extended periods so that favorites could be brought in on temporary assignment without a real competitive process,” the committee stated. They declared that the fund’s 60,000 active participants were “also concerned about the dire relations between the fund’s staff and their management, which have plunged staff morale at the fund and led staff to view their management with distrust.” 

The pension’s governing bodies reportedly expressed their strong displeasure with the labor committee’s account, calling it unnecessary, wholly inaccurate, and unfortunate. “The statement was seen as personal defamation, not based on facts, a continued spread of misinformation, and that it had not been helpful in making progress in the matter,” a report to the UN General Assembly stated.  

Union representatives reiterated their position at the March 30 meeting, characterizing the CEO’s proposal as a power-grab. 

“The new policy and rules would attempt to concentrate power in the hands of one man: the CEO,” Michelle Rockcliffe, a staff representative to the union, told the meeting attendees who had gathered at UN headquarters. “The rules decrease oversight and dangerously increase flexibility in financial areas.”

Rockcliffe described two-and-a-half decades of internal struggle over governance reform. “Who knew that the staff of this pension fund would still be in the position of fighting attempts to keep our pension fund from privatization and streamlining? Some chiefs have been telling their staff, ‘We are not the UN. We are a financial institution.’ But I guess this is why some of our retired colleagues still call it the ‘tension fund.’”

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