Ex-U.N. Official Spent Development Funds on Luxury Items, Probe Says

By Colum Lynch
Washington Post Staff Writer
Friday, March 27, 2009 5:17 PM

UNITED NATIONS -- A former U.N. official who oversaw reconstruction funds in Afghanistan diverted half a million dollars from roads, schools and clinics to fund his luxury lifestyle, according to a confidential internal U.N. investigation.

The U.N. Procurement Task Force accused Gary K. Helseth, an American who headed the U.N. Office for Project Services (UNOPS) in Afghanistan from 2002 to 2006, in December of using the funds for lavish purchases, including first-class flights to Las Vegas and meals in posh restaurants in Copenhagen, Dubai, Florence and New York. Helseth oversaw more than $1 billion in reconstruction funds contributed by the United States and other international donors after the fall of the Taliban.

The probe is a cautionary tale about the risks of lax U.N. financial controls in Afghanistan as the Obama administration presses for a more central role for the United Nations in coordinating rebuilding efforts there.

The task force alleged that Helseth improperly used hundreds of thousands of dollars in funds from the U.S. Agency for International Development (USAID) for rent, a home renovation and luxury items. It also said he stole $65,000 in cash from a U.N. safe and billed the United States and other international donors more than $60,000 for entertainment, including opulent parties at his Kabul residence where guests dined on Beluga caviar, Norwegian salmon and foie gras.

"Mr. Helseth routinely treated UNOPS and project money as his own personal bank account," according to the 180-page report, which recommends that the United Nations refer the case to U.S. and Afghan authorities for criminal prosecution and that Helseth repay the United Nations around $480,000.

Helseth acknowledged that USAID funds had been improperly used for some expenses but denied stealing the money, according to a 72-page rebuttal that his lawyer, Paul K. Charlton, presented to the task force in November. Helseth says he spent liberally to entertain potential donors and to boost staff morale in a place where U.N. workers were frequently targeted by terrorists, according to the document.

Helseth maintains that the investigators did not appreciate the challenges of running a massive reconstruction operation in a war-wracked country that lacked a modern banking system. "Mr. Helseth is not guilty of fraud or embezzlement," the response said. "The allegations the task force is investigating are at the least factually unsupported, and in large part are materially false and based on false assumptions."

Helseth, through his lawyer, declined a request for an interview, citing the confidential nature of the investigation.

The Helseth report was intended to be the first stage in a three-part investigation that would examine the "severe lack of accountability and oversight" of the money he managed. The task force was also probing whether an American security company, United States Protection and Investigations, inflated charges for services by as much as $1 million.

But sources say the probe has stalled since the task force was dissolved Dec. 31. The United Nations, meanwhile, has blocked the unit's chairman, Robert M. Appleton, from taking up an appointment as chief of the U.N. investigations division, which is supposed to inherit the task force's caseload.

Top U.N. officials applauded Appleton's work but cited the lack of female or non-U.S. candidates on the short list for the job. Appleton, a former federal prosecutor, declined to comment on the investigation.

UNOPS Deputy Executive Director Vitaly Vanshelboim acknowledged "serious issues in the past in terms of our financial performance and internal controls" in Afghanistan. Vanshelboim, who reined in Helseth's spending, said his agency has sought to "strengthen those financial controls dramatically."

UNOPS issued a statement Friday saying it intends to "reimburse" USAID and other donors for any misuse of funds. "UNOPS will rectify any problems revealed by this investigation and deal fairly with proven wrongdoers," according to the statement.

"Such misdeeds victimize both stakeholders and UNOPS itself," the statement said. "They betray UN values and breach the organization's fiduciary obligations to its partners. Worst of all, they divert funds intended to benefit deserving people in need."

Helseth arrived in Afghanistan in May 2002, six months after the U.S.-led overthrow of the Taliban. The son of a former U.S. diplomat who served in Afghanistan, Helseth was quickly promoted to head UNOPS's Afghan operations and opened a regional headquarters office in Dubai.

By the time he stepped down in 2006, Helseth had secured more than $850 million in USAID, World Bank and U.N. projects and had overseen more than 800 international staff members and thousands of local workers.

The task force report credits Helseth with helping to carry out vital road projects, including a $360 million USAID effort to rebuild secondary roads, and Afghanistan's landmark national and parliamentary elections, including the 2004 election of President Hamid Karzai.

But the operation was plagued by "record keeping [that] did not comply with even the most basic standards of international financial accounting," the task force said. By 2005, Helseth's office was distributing more than $1 million a day in cash and spending freely on such luxury items as $7,500 for Ethiopian furniture, nearly $10,000 for silk Afghan carpets and more than $2,200 for floral arrangements in Burma.

The most serious allegations stem from a rented Kabul house that Helseth renovated to make it suitable for entertaining foreign dignitaries and to provide secure accommodations for other U.N. employees. The task force alleged that Helseth improperly billed USAID and other donors $120,000 for the construction of additional living quarters -- including a $20,00 kitchen renovation charged to a U.S.-funded program to build women's dormitories at Kabul University. The money was never returned, the report said.

The task force said Helseth instructed a subordinate to take $65,000 in cash for him from a U.N. safe and fabricated a bogus lease indicating the money was paid to the property's landlord.

Helseth said the money was reimbursement for a personal investment in the home renovation, which he said benefited the United Nations.

He also charged USAID for more than $66,000 in sports equipment and billed that agency and the United Nations $30,000 for a Lexus. "Certainly USAID project money was never intended to be used to support a luxury car for Mr. Helseth or to furnish his office with extravagant items," the task force said. USAID did not respond to a request for comment.

Helseth disagreed. "The type of car a man drives says a lot about who he is and what he can accomplish," his response said.

He conceded that it was inappropriate to use USAID funds to pay for the gym equipment, the car and many other expenses. He blamed U.N. financial specialists for the lapse, adding that the organization's financial systems were "in such a state of disarray" that it would have been "impossible" to strictly comply with U.N. rules.

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