Grete Faremo, former UNOPS executive director at the opening of the UNEP Copenhagen Climate Centre, in Copenhagen, Denmark, April 26, 2022.RITZAU SCANPIX/Reuters
It was billed as a way to generate US$45-billion in assets for the world’s poorest – affordable housing and renewable energy for millions, their lives forever changed by the United Nations and its bold new investment scheme.
But on Sunday, Grete Faremo, the chief executive of the United Nations Office for Project Services (UNOPS), which championed the ambitious plan, suddenly resigned, in part because UNOPS had lent US$63-million to build houses and wind farms around the world with very little return on investment or even repayments.
It is rare for such a high-ranking UN leader to quit.
Now the UN agency is heavily out of pocket, and its second-in-command, Vitaly Vanshelboim, is being investigated by the UN’s office of internal oversight to unravel the circumstances surrounding a series of investments made with British businessman David Kendrick and several of his private companies, including SHS Holdings.
Another UN investigation is under way into a US$3.3-million UNOPS grant to the We Are the Oceans (WATO) conservation project. The money went to Mr. Kendrick’s daughter, Daisy Kendrick, who at the time was a university student, and was used to develop an ocean-themed online game that no longer exists, UNOPS confirmed.
In a public statement, UN Secretary-General Antonio Guterres accepted Ms. Faremo’s resignation on May 8.
“Jens Wandel of Denmark is being appointed as the Acting Executive Director, effective 9 May, while the Secretary-General launches a recruitment process,” the statement said.
Ms. Faremo informed UNOPS staff of her resignation via e-mail, which was forwarded to The Globe and Mail by a current staff member.
“Without knowing the full story, it happened on my watch. I acknowledge my responsibility and have decided to step down,” she wrote. “A shocking breach of trust hurts, and it has shaken the organization profoundly.”
But later that day, Jon Lidén, a former UNOPS communications manager, replied to the e-mail and 15 senior UNOPS leaders that Ms. Faremo’s farewell message was “disingenuous,” particularly after she ignored staff concerns regarding “suspect, unserious and not at all suitable” partners for UNOPS.
“My repeated protests against investing large amounts of money in the ‘We are the Oceans’ campaign and the group behind it – laid out in detail in at least one long email of how the campaign was unrealistic, meaningless as an advocacy campaign and dramatically over-priced – was the final trigger for my resignation from UNOPS in March 2017,” Mr. Lidén wrote.
He would not comment on his e-mail when asked by The Globe.
The e-mail outlined that UNOPS staff had raised numerous red flags about the loans to relatively unheard-of partners – loans that are now central to the UN investigations.
“The only mystery was that you did not see it right away. That is deeply troubling.”
Ms. Faremo, a former Norwegian defence minister, announced in March that she would be retiring, citing health reasons, and would be staying on until Sept. 30 to ensure a smooth transition. But as more details of the loans emerged, her position became untenable.
Mr. Vanshelboim, the chief executive of UNOPS’s Sustainable Infrastructure Impact Investments (S3i) initiative, “is currently on administrative leave due to an investigation into possible misconduct. We are unable to comment on this ongoing process for legal reasons,” UNOPS said in a statement.
Stephane Dujarric, a spokesman for Mr. Guterres, said his office is waiting for the outcome of the investigations to comment further.
The London law firm Carter-Ruck, representing Mr. Kendrick and his daughter, released statements saying the pair had done nothing wrong and that details of the UNOPS loans were confidential.
“Our clients strongly believe in the projects they are running and in their ability to deliver these, and regret the fact that they appear to have become, through no fault of their own, the targets of a campaign seeking to harm their reputations,” the law firm said.
Acting like a venture capital firm, UNOPS set up a pilot scheme to provide seed funding for large-scale affordable housing, renewable energy and health infrastructure projects, in line with the UN’s sustainable development goals.
Mr. Kendrick’s SHS Holdings would “seek to mobilize resources from third-party investors to fund the initiative,” according to an announcement in July, 2020.
But UNOPS eventually wrote off at least US$38.18-million in “bad and doubtful debt,” most of it related to SHS Holdings, according to its annual report released last July.
Mr. Kendrick said via his lawyer that the pandemic had hampered the delivery of projects and that SHS Holdings was “currently in a restructuring process with UNOPS regarding its loans.”
“SHS Holdings has already achieved a significant amount of progress and will continue to move forward on all of these projects in order to ensure their full success.”
Commissioner Akintunde Oyebode of the Ministry of Finance and Economic Development in Nigeria’s Ekiti state government told The Globe his government had never had any dealings with SHS Holdings despite a UNOPS announcement in July, 2020, that they had partnered to build 50,000 affordable homes.
“We were dealing with UNOPS, Vitaly, but he is no longer there. Now there’s no need to engage further. We will simply revert to other domestic options,” Mr. Oyebode said via WhatsApp.
But despite such setbacks, UNOPS continued to promote SHS Holdings and the housing project in Nigeria, as well as a plan to build 200,000 homes in Guinea. In January, 2021, UNOPS again published SHS Holding’s role in building 10,000 houses in Antigua and Barbuda.
A UNOPS spokesperson said the affordable housing scheme is under review. Requirements such as financing and land allocation were never met, and steps are under way to recover the tens of millions still owed, the spokesperson said.
UNOPS in a unique UN agency. It is self-financing, charging premiums to manage development projects for the UN, financial institutions and governments in some of the world’s toughest regions.
Over the years, this approach proved lucrative, with millions in profits every year. UNOPS reserves from surplus revenue reached US$286-million by the end of 2020 and were used to invest in ambitious projects to address the UN’s sustainable development goals.
Andrea Paras, an associate professor in the University of Guelph’s political science department, told The Globe that impact investing in fragile states has become a new form of foreign aid delivery that is gaining support from UN multilaterals and NGOs.
“I get why UNOPS would pursue this model – it has a lot of potential and does change the structure of aid. But then again, here comes another scandal in a long line of scandals that plagues the UN,” she said.
UNOPS was set up as the UN’s procurement hub for infrastructure projects. Over time it grew to become a multifaceted agency running a portfolio worth US$3.4-billion. It does everything on the development spectrum – from gender empowerment to fixing bridges to law and order.
But its ethos does not sit well with others in the UN. In July last year, the UN’s Advisory Committee reported that UNOPS was overcharging member states and donors. It requested that UNOPS offer more transparency in its budgets and pricing structures.
Canada relies on UNOPS for aid projects such as building health facilities in Haiti and improving the rule of law for Palestinian citizens in the West Bank. Since 2010 Global Affairs Canada has spent $325-million with UNOPS, department spokeswoman Geneviève Tremblay said in an e-mail.
“Canada takes all allegations of corruption very seriously,” Ms. Tremblay said. “Officials will continue to ensure that appropriate accountability and due diligence measures are in place for Canadian-funded initiatives involving UNOPS.”
No Canadian funding is part of the current UN investigations, she added.
Central to those investigations is why UNOPS invested so heavily with the Kendricks. But also why senior leaders ignored staff concerns about the loans.
In an April 9, 2019, e-mail provided to The Globe, the then-director of UNOPS’ auditing and investigation team, Paul Lucas, wrote to the then-director of the UN’s Office of Internal Oversight Services (OIOS), Ben Swanson. Mr. Lucas said 18 senior leaders supported the Kendrick loans and dismissed staff concerns regarding SHS Holdings. UNOPS did not dispute the authenticity of the e-mail.
“Legal said “we have never done more due diligence, than we have for this initiative”. Perhaps the UN is at a lower benchmark than Fortune 500, but that statement nonetheless says something,” he wrote. “Ultimately, we have no proof of misconduct: flags, risks, concerns; but no proof of financial irregularities.”
Mr. Lucas joined the World Bank this December. He did not answer e-mails or return calls.
“Given OIOS’ involvement in the matter it would be entirely inappropriate to comment,” Mr. Swanson wrote in an e-mail to The Globe. He has since been promoted to assistant secretary-general of OIOS.
But this assessment is a far cry from the UN Board of Auditors report released in July, 2021, that highlighted “deficiencies in partnership diversification” – the result of investing so heavily with SHS Holdings. Another concern was the fact UNOPS had poured US$8.8-million into a debt-stricken Mexican wind farm that was also linked to Mr. Kendrick.
“No professional appraisal was conducted on the status or fair value of the underlying asset,” it states.
UNOPS disputed that claim and said due diligence and independent experts supported the investment. But by October, 2020, when the loan defaulted, UNOPS disinvested from the wind farm project.
Mr. Kendrick said “regressive governmental policies and actions, such as in Mexico,” have delayed SHS Holdings’ progress.
The Board of Auditors also found that a large portion of a US$15-million loan to SHS Holdings in February, 2020, went to pay off the company’s other debts. The UNOPS spokesperson said the agency learned of this in April, 2021. The use of investments to discharge pre-existing debts is a clear breach of agreement and is not condoned in any way, UNOPS said.
It was not just investment choices that caught the board’s attention. UNOPS bookkeeping erroneously listed Finnish government funds as revenue rather than “non-exchange transactions,” such as paying rent and the cost of running its headquarters in Helsinki. This “affects the credibility of (its) financial statements,” the report stated.
UNOPS said it was “merely a misclassification” that was later rectified.
Finland suspended its US$20-million in support to UNOPS until a thorough investigation had been completed, it said in an April statement.
Another element to the investigation is the role of Milan-born ambassador for Dominica to the UN Paolo Zampolli. In September, 2016, when launching the UNOPS investment program, Mr. Zampolli hosted the event at his luxury New York apartment. Senior leaders such as Ms. Faremo and Mr. Vanshelboim posed for photos and rubbed shoulders with socialites and models such as Petra Nemcova.
Also in attendance was Daisy Kendrick, who in April, 2017, launched her UNOPS-funded ocean conservation project.
“UNOPS awarded a grant to WATO through an entirely legitimate process,” her lawyer wrote.
Mr. Zampolli, a former model agent, told The Globe he first met David Kendrick on holiday in Antigua. He said they discussed building a hotel together.
Mr. Zampolli’s wife, Brazilian model Amanda Ungaro, the UN ambassador for Grenada, secured an internship for Ms. Kendrick at the Grenada mission in New York in 2015. Ms. Kendrick told numerous media outlets that it was during this internship that she was inspired to protect the oceans.
However, Mr. Zampolli claims he is the founder of We Are The Oceans and that, while she was an intern at WATO, Ms. Kendrick applied for lucrative contracts with UNOPS without his consent. Ms. Kendrick, then a Northeastern University student in Boston, was regularly labelled as WATO’s founder and director in reports from 2017.
“I have not spoken to Kendrick for several years,” Mr. Zampolli said. “I did not make any money from UNOPS.”