Ruth Wedgwood on Former Diplomats with Financial (Conflicts of?) Interest

Ruth Wedgwood’s new column at Forbes.com takes up the uncomfortable question of Peter Galbraith and his financial dealings with regard to Kurdish autonomy, oilfields, and Galbraith’s consulting deal with a Norwegian company that could conceivably pay him somewhere up to $100 million.  That discussion is very important and fraught with issues – Galbraith has not been a US diplomat for many years, yet it is obvious that his importance to the transaction is not just that he once was a diplomat but that his credibility today straddles some weird line of public/private.  James Galbraith takes up his brother Peter’s defense in the comments.

There is unlikely to be any American statute or conflict rule that covers this situation, since it has been years since he was employed as a U.S. diplomat. He may become a wealthy man unlikely to slow down in his adventures abroad.

Yet there is a gnawing sense that by choosing to stake a private financial claim of this magnitude — in a triple play where he was publicly working for the Kurds, and yet privately working for the DNO oil company and himself — this savvy former diplomat could prejudice America’s role as a credible broker in diplomacy and reconstruction.

In this post, however, I want to point to the last third of the column, which shifts from Galbraith to the broader question and, in particular, the question of conflicts of interest involving former UN actors.  The column gives two examples from the UN mission in Kosovo.

The same problem has arisen — on a smaller scale but also with crucial stakes — in the newly-declared independent state of Kosovo. After the 1999 NATO military campaign that defeated Slobodan Milosevic, the United Nations set up an international administration in Kosovo to assist in building a modern state, with huge sums from the European Union and other international donors. The U.N. transitional mission has continued — even after independence — because of political disagreements over recognition of the new state.

But international officials in the U.N. mission have begun to switch hats with an ease and nonchalance that would curdle the blood of any ordinary conflict-of-interest lawyer. Two examples should suffice. The chief legal advisor to the U.N. mission — who acted as de facto law-maker in Kosovo during almost eight years of international governance — has now changed horses, representing Kosovo’s prime minister, without any cooling-off period, in negotiations against the ongoing U.N. mission.

So, too, the former deputy special representative of the U.N. Secretary General — who supervised the privatization of the energy and transportation sectors in Kosovo– has gone to work for the main political rival of the prime minister, a former military leader of the Kosovo Liberation Army named Ramush Haradinaj, as an “advisor.” Haradinaj is believed to have a major stake in the privatized companies.

The UN’s peculiar vulnerability to such public-private conflicts has been on public display since the Oil-for-Food scandal.  Massive amounts of money flowing through the accounts of an organization lacking even rudimentary fiscal controls, oversight, monitoring, even basic accounting, quite apart from any actor having the ability to enforce rules … as one senior Secretariat executive remarked as it unfolded, may the UN never be entrusted with this kind of fiscal responsibility again.  And that is assuming (heroically at best) that UN staff were not involved in helping themselves and that the problems were all just “innocent” book-keeping problems.

The problems have not gone away as the budgets for certain expensive activities increase, but the ability to have either fiscal accounting or accountability has certainly not improved – nor, on any reasonable analysis of the UN as an institution, is that even possible, given the conditions of interest group capture of anything important at the UN.  The secular growth of the UN peacekeeping budget has already yielded major procurement scandals.  As with all these things, the UN staff involved exit to their home countries, which protect them from legal process or extradition to wherever one would extradite those accused of stealing from organizations like the UN.

Meaning, there is no clearly established judicial mechanism even for basic embezzlement (the Manhattan District Attorney sought indictments in some cases, on grounds that have never received the careful legal analysis that they ought to on issues of international organization immunity and when the organization can waive it, and many other issues of jurisdiction and procedure).  The power of the UN staff associations (including in related international organizations such as the World Bank) along with the bureaucratic unease of the UN bosses at anything that might constitute internal discipline even for stealing money ensure in this, as in so much, that nothing much happens.  The Secretariat under Annan, pressured by the Oil for Food scandal, did not oppose the Manhattan DA from seeking to assert jurisdiction in these instances, but the substantial legal issues underlying all this have yet to be examined comprehensively (if there’s something out there on this, I’d be grateful to know, but I have not seen anything).

So, for example, among those who still study the UN (and haven’t yet departed for the Elysian fields of international criminal law and the Coolness of Tribunals, in which Publicists and Scholars, and Not Diplomats From Libya, Hold Sway) as an organization, how many can actually describe the Office of Internal Oversight Services and why it frankly has trouble doing what it was supposed to do?  (It has some openings, by the way, check out UNJobs; this link probably won’t stay current.)  Some basic knowledge of these accounting, or lack of accountability, structures is necessary to understand the UN as a “really existing organization” rather than merely as a platonic ideal.

Leaving aside illegality and embezzlement, Professor Wedgwood’s column observes that understood or not, the OIOS issued a report in connection with these tempting, but highly problematic even if not prohibited, situations of senior officials zipping through the revolving public-private door:

An investigation by a U.N. watchdog office — called the Office of Internal Oversight Services — recently concluded that ordinary fiscal and auditing controls for UN-funded privatization projects were wanting. The energy sector aid package has a budget estimated at 500 million Euros, and with a local ”facilitation fee” of 1%, a maiden aunt could begin to worry.

Inconceivably, the United Nations appears to lack any conflict-of-interest rule that forbids such a revolving door of self-interest.

U.N. Secretary-General Ban Ki-Moon has made ethics the touchstone for his tenure in office. Certainly, he should promulgate a ban on such seamless acts of commercial reincarnation.

“Inconceivably”?  In the world of international organizations, rather more like the norm.  Ban Ki-Moon made personal ethics the touchstone of his office insofar as he said so initially and then took the highly admirable step of releasing his own financial statements – but it was a big fizzle when it came to the rest of the bureaucracy, and that was that.  HIs personal financial ethics are impeccable; the rest of the UN community, however, places little value on financial rectitude by its leader and pines for a Secretary General who is a rock star, like Annan; the whispers and rumors have it that they would not be sorry to see him replaced.  It is hard to see him being able to promulgate such a ban on such conflicts, and in any case there is no clear mechanism for enforcing such a thing.  The newly-multilateral “friend of everyone” United States (which, in a world in which it took multilateral institutions seriously, might be thought to have a greater, rather than lesser, interest in UN financial rectitude because it believes in the institution and believes that it matters) – is likely to put less “hegemonic” pressure on the UN, preferring to go along with the consensus fundamentally shaped by countries with more at stake in rent-seeking than rectitude.

But it can be said, in the organization’s defense, that the UN has had to address the problems of being a fiscal player, rather than a diplomatic operation without its hands operating the till, only in the last dozen years or so.  I myself think that the problem is as the Annan-era senior UN executive said, please don’t give us amounts like that to manage, we can’t do it.  Correct.  But the natural desire of any organization to have larger and larger amounts flow into, and through, its accounts ensures that it will never say no and will affirmatively seek such funds.

But there is a much larger issue here.  Is the UN both being tasked with, and volunteering to take on, matters that are beyond its practical capacity?  Countries, including the United States, have reasons of their own to want to unload certain politically difficult, but also large budgetary, matters on the UN – such as managing the Oil for Food program.  The UN does not want to say no, in large part because it sees taking on these tasks as a way of extending its legitimacy to a wider and wider range of activities.  But the reasons why everyone would in principle like the UN to get involved does not mean that it has the capacity to so without either mucking up the accounts, overspending, or straight up embezzlement, or all three, and nothing in successive rounds of UN reform of internal fiscal oversight in twenty-five years has altered that conclusion.

What happens instead is that as the previous round of UN fiscal reform agencies fails to perform as advertised, a new layer is created – with predictable results another few years down the road, and then a new agency.  Nothing and no one in the institution has any vested desire to see effective fiscal control; “reform” measures are undertaken almost entirely as a sop to the United States, with predictable internal adherence.  And, well, bonus points to Professor Wedgwood for the “maiden aunt” reference.