UNOPS head resigns after probe into agency’s loans to British businessman, his daughter

Anjali Sharma

GG News Bureau

UNITED NATIONS, 10^th May. Head of the UNOPS, the United Nations Office for Project Services, Grete Fareno on Sunday has resigned as the agency’s Executive Director after a probe into financial mismanagement, a questionable loans awarded to a British businessman David Kendrick, 58, and his daughter Daisy Kendrick, 27 under Ms. Fareno, according to a note issued by UN Spokesman’s office in New York.

Grete Faremo, joined the UN agency as the executive director in 2014, said she told U.N. Secretary-General António Guterres on Friday that she would step down immediately.

UN Office of Internal Oversight Services, or OIOS, has completed an independent investigation into questionable loans that UNOPS made.

Ms. Faremo earlier said she would retire in September, cited health and family reasons.

OIOS, the Oversight office was probing into how UNOPS made a series of loans to a company called SHS Holdings to build affordable homes in low-income nations despite of having little record of  delivering such projects.

According to the investigation by OIOS, So far, no houses have been built, and UNOPS is owed tens of millions of dollars that it said it is trying to recover.

Some $3 million in UNOPS funds was given to a group run by the 23 year-old daughter Daisy Kendrick of SHS Holdings’ owner, David Kendrick, so she could produce a song and video game about ocean conservation, according to OIOS probe.

Faremo wrote in an email sent to UNOPS staff over the weekend, quoted by Devex stated “I wanted to honour the integrity of an UN investigation. We still await the outcome. The last months have been an extreme burden on all,”  “Without knowing the full story, it happened on my watch. I acknowledge my responsibility and have decided to step down.”

UN OIOS is investigating Sustainable Investments in Infrastructure and Innovation, or S3i, the UNOPS impact-investing initiative that invested some $63 million for the affordable housing project, two wind farms — one in Mexico and in India.

Faremo has said she placed Vitaly Vanshelboim, S3i’s chief executive and UNOPS’ second-highest-ranking official, on administrative leave in December after she learned about the OIOS investigation.

She wrote that she had been working with UNOPS leadership and U.N. officials “to frame the independent, transparent Evaluation needed to address any serious issue identified in S3i.”

“A shocking breach of trust hurts, and it has shaken the organization profoundly,” Faremo wrote in her email, blaming Vanshelboim.

He is a subject of the U.N. investigation, though Faremo is not.

Faremo, a former Norwegian government minister, has faced increasing pressure to step down over the last few months.

Her resignation came as The New York Times published more details on Sunday on how senior UNOPS officials came to do business with David Kendrick.

UNOPS said in a statement that  it did not have access to the U.N. OIOS investigation report and was still waiting to hear its findings.

The case has raised a number of questions around UNOPS and its business model.

The agency often touts that it is the only U.N. entity that is self-financing, and it works to attract private-sector capital to bring investment to developing markets.

UNOPS’ net assets stood at $286 million, far exceeding the minimum threshold established by its executive board at the end of 2020.

In February, Christopher Lu, the U.S. ambassador for U.N. management and reform, questioned UNOPS’ large reserves along with its bad debt allowance, which he noted represents 40% of funds invested via S3i through December 2020.

Mr. Lu said in an interview with Devex that “UNOPS likes to say they are a self-financing organization. They are not,” prior to Faremo’s resignation.

“Their organization is financed by fees imposed on other U.N. agencies which in turn are being funded by member states. This is indirectly and, frankly, directly the money of the United States and other countries.”

“We believe there is sufficient information to conclude that high-level UNOPS officials were involved in and approved of these problematic projects and that clear warning signals were missed, which in our minds suggest significant lapses in oversight,” Lu continued.

“There needs to be, clearly, a reexamination of the agency’s mission, its working processes, and its investments,” he said. “It’s our hope whoever replaces the current executive director has those qualifications.”

In a Twitter thread Sunday after Faremo’s announcement, Lu demanded a “full briefing” by UNOPS, saying that the executive board of which the United States is a member would “aggressively press UNOPS for answers to our questions.”

He called for the results of the U.N. investigation to be made public.

UN spokesperson Stephane Dujarric on Monday in New York said that the U.N. Secretary General, António Guterres, would ‘take appropriate action on the findings of the investigation report once it has been reviewed and analyzed.’

Mr. Guterres said in a note issued on Sunday by the spokesman’s office in New York that he has accepted the resignation of Grete Faremo, the Executive Director of the United UNOPS.

Ms. Faremo’s resignation was effective as of yesterday, it stated.
It said that the Secretary-General is grateful for Ms. Faremo’s commitment and dedicated service to the Organization.
Mr. Jens Wandel of Denmark is being appointed as the Acting Executive Director, effective today, while the Secretary-General launches a recruitment process, in consultation with the UNOPS Executive Board, to find a successor to Ms. Faremo, the noted said.

Mr. Wandel was Special Adviser to the Secretary-General on Reforms in which he oversaw three “reform streams” — sustainable development, peace and security, and management aimed at “transforming the UN into a more effective, nimble and fit for purpose Organization.”

He will be granted all the necessary support to ensure a smooth transition, the note added.

UNOPS is based in Copenhagen, while S3i’s offices are based in Helsinki. Finland suspended its funding to S3i in light of the U.N. investigation.

OIOS is probing UNOPS that loaned $61million to David Kendrick, 58, and his daughter Daisy Kendrick, 27

for charitable projects – including house building in developing countries and producing a song Joss Stone sang,  after they met UN officials and diplomats at the party in New York

 

Ms Kendrick and her company We Are The Oceans were given $3million to produce a pop song performed by Joss Stone, who was not paid for singing

The UN agency also gave Ms Kendrick, who interned at the UN after graduating Northeastern University in Boston, the $3 million to create an ocean-themed video game by the makers of Angry Birds and a website raising awareness about environmental threats to oceans, reported the New York Times.

UN auditors found that Mr. Kendrick’s businesses have failed to pay back more than $22 million to the organization, money which is meant for aid, and the repayments are overdue, according to The New York Times.

But they said that they have paid back $40million to the UN.

UNOPS said that ‘funds are at risk, but to date, no funds have been lost’. It said it would ‘pursue all available legal remedies to protect its operations and assets, including the recovery of outstanding payments’.

Lawyers from the London law firm Carter-Ruck, which is representing Mr Kendrick and his daughter Ms Kendrick, said their clients deny any wrongdoing and no official investigation into the clients has been notified to them. The lawyers also said their clients intend to honor all obligations.

 

Mr. Kendrick and his daughter were introduced to UN officials at a party in the Upper East Side apartment of magazine editor Gloria Starr Kins in 2015 by Paulo Zampolli, an Italian-born businessman who claims he introduced former US President Donald Trump to his third wife Melania.

 

It was after this party, hosted by UNOPS head Grete Faremo, that the agency loaned $58.8 million – the agency’s entire investment portfolio at the time – to three companies appearing to be connected to Mr.

Kendrick between 2018 and 2020 under a UN scheme called S31.

 

These investments included lending $8.8million to a business investing in a wind farm in Mexico, $35 million to building housing in developing countries and $15million to a company for renewable energy projects.

 

UN auditors raised alarms that the UN agency had concentrated its loans on one person, wrote in a report that Mr. Kendrick’s companies had admitted to using the UN’s loans to pay off other loans.

 

The auditors report said that ‘A large portion of the $15 million deposit had been used to discharge its pre-existing debts and liabilities.”

 

Mr. Kendrick’s companies had agreed to return the millions lent by the UN for the sustainable energy projects, were therefore not able follow through and auditors said they expected the UN agency to lose $22 million.

The ties between the Kendrick father and daughter duo and the UN Office for Project Services came to light, Grete Faremo said she would step down from her position.

Gloria Starr Kins, and Paolo Zampolli attend We Are The Oceans And Save Our Shark Coalition in New York City in 2016.

Paulo Zampolli, who introduced Mr. Kendrick to UN officials at the New York party, has his own U.N.-approved conservation group called We Are the Oceans, or WATO.

Zampolli, serves an ambassador for Dominica, said he was never paid a finder’s fee after introducing Mr. Kendrick and his daughter to UN officials.

He said he regretted introducing the father and daughter to officials because Ms Kendrick decided to name her group We Are The Oceans as well.

‘I was truly used,’ Zampolli told the New York Times.

UNOPS has declined to explain why it chose to invest $3million in Ms Kendrick’s organization, which at the time was only a year old and had not obtained approval from the Internal Revenue Service for a tax exemption as a charity.

The London law firm Carter-Ruck, which is representing Mr Kendrick and his daughter Ms Kendrick, said their clients had done nothing wrong.

‘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 told the newspaper.

Mr. Kendrick’s lawyers said SHS Holdings ‘was never granted any money by UNOPS but simply borrowed money from UNOPS on commercial terms’, added ‘It is not a contractor of UNOPS as has sometimes been wrongly suggested and its relationship to UNOPS is simply one of borrower to lender.

‘The process whereby these agreements were concluded was entirely appropriate and legitimate, and UNOPS has never suggested otherwise.’

The lawyers added: ‘Contrary to what has been sometimes suggested, and as UNOPS itself has made clear in its press release on 17 April 2022 in relation to S3I ‘to date, no funds have been lost’ by UNOPS.

Ms Kendrick’s lawyers said her organisation had ‘delivered on all of its promises to the UN’ and that ‘the rates paid to all Wato’s participants were at all times legitimate and fair’.

They added: ‘Unops awarded a grant to Wato through an entirely legitimate process. Wato set out their proposal to Unops for music, gaming and social media campaigns for the oceans, which were considered and approved by Unops.

‘All of Wato’s activities, budgets and projects were also pre-approved by Unops, and the rates paid to all Wato’s participants were at all times legitimate and fair.’

The lawyers added that the pandemic had negatively impacted some S3I projects, adding: ‘SHS Holdings is in a restructuring process with UNOPS regarding its loans and this process is critical to ensure the commercial viability of all the projects SHS Holdings is committed to.’

‘The implementation of [the company’s] projects has been less swift than originally anticipated as a direct result of the Covid-19 pandemic and restrictions, which could not possibly have been anticipated and over which SHS Holdings clearly had no control.’

The lawyers added: ‘In spite of these unforeseen and substantial challenges, SHS Holdings has already achieved a significant amount of progress and will continue to move forwards on all of these projects in order to ensure their full success… In all cases, SHS Holdings is confident that it will deliver all of its key targets for the benefit of all the parties and the local communities involved.’