U.N. to Examine Relief Agencies' Pay in N. Korea

U.S. Charges That Workers' Salaries Go to Rulers

UNITED NATIONS, Jan. 19 -- U.N. Secretary General Ban Ki Moon on Friday ordered a broad inquiry into the financial practices of most of the United Nations' chief relief agencies, after a U.S. charge that the world body was inadvertently channeling foreign currency into the hands of North Korea's rulers.

Mark D. Wallace, the U.S. representative to the United Nations for management and reform, accused the U.N. Development Program in a letter Tuesday of violating rules by hiring North Korean government officials to carry out most of its work and by paying salaries in cash into an account controlled by the Pyongyang leadership. He called for an independent "forensic" audit of its operations in North Korea, citing concern that the U.N. payments could be diverted to unnamed illicit activities.

Development program officials denied they had violated U.N. rules and noted that it is impossible to work in a totalitarian state such as North Korea without pumping foreign currency into the economy. They said all U.N. agencies are required to pay their local staff through a government paymaster.

But the development agency's associate administrator, Ad Melkert, announced on Friday that the agency will halt all cash payments for its North Korean workers by March 1. He also echoed U.S. calls for an outside investigation, saying "a full, independent external audit is in order to make sure that we really understand what it means to work in a country like North Korea." Development program officials said they are also ending the practice of allowing the North Korean government to recruit local staff.

The U.N. development agency employs four international workers and 16 North Koreans in a program that costs $2 million to $3 million a year, including $100,000 in local salaries. The workers carry out activities such as delivering food or giving advice on trade activities.

Some U.N. officials said the United States is unfairly targeting the development program, noting that two other U.N. agencies headed by U.S. political appointees -- the U.N. Children's Fund and the World Food Program -- had engaged in similar practices in North Korea. One senior U.N. official, who spoke on the condition of anonymity, said the report was viewed by many at the world body as an effort to discredit Mark Malloch Brown, a former U.N. Development Program administrator. Malloch Brown, who later served as chief of staff to then-Secretary General Kofi Annan, frequently criticized John R. Bolton, then-U.S. ambassador to the United Nations. "This is payback," the official said.

Wallace, a political appointee who served as Bolton's top adviser on U.N. reform, began questioning development program officials about their North Korea efforts in mid-December. He said the program "has been systematically perverted for the benefit of the Kim Jong Il regime -- rather than the people of North Korea." The program, he added, has "for years operated in blatant violation of U.N. rules [and] served as a steady and large source of hard currency" for the government.

He also raised concern about the United Nations' payment of nearly $12,000 to fly a North Korean official in business class to New York to attend a meeting of the development program's board of directors. Melkert later assured Wallace that the agency would no longer "reimburse government officials travel or other costs for attending board meetings."

The contents of his letter were first reported by Fox News and the Wall Street Journal's opinion page.

During the Cold War, the United Nations routinely relied on handpicked Soviet bloc officials to carry out relief work and paid their salaries directly to the government. The United Nations continued that practice in China, Vietnam and Cuba until recently.

"We used people that were provided by the government for all support staff" in North Korea, said Catherine Bertini, a former executive director of the World Food Program. "That was not the only country. It was also done in China."

But the practice is being phased out everywhere but North Korea. "The essential way North Korea operates has not changed," Melkert said.