The United Nations has ordered one of its former officials to repay $63.6 million personally, after he lost a vast amount of U.N. funds by entrusting them to a man he met at a party, according to court filings.
The huge financial penalty that the U.N. is seeking to impose on the former official, Vitaly Vanshelboim — once the second-in-command at the U.N.’s logistics agency — is the latest fallout from a scandal that The New York Times first reported last year.
Mr. Vanshelboim and his boss, seeking to raise their profile within the U.N., amassed millions for the organization by charging governments and other U.N. agencies extra for construction jobs. Then they invested about $60 million with companies all linked to a British businessman named David Kendrick, defying internal warnings and dangerously concentrating their risk.
The investments were meant to finance renewable energy and housing projects. But they went poorly, according to U.N. audit reports. An inquiry last year found that the U.N. had recouped only about 10 percent of its investment.
Hours after The Times reported on the disastrous investments, Mr. Vanshelboim’s boss, Grete Faremo, resigned.
Mr. Vanshelboim, who is Ukrainian, was fired by the U.N. in January, after an internal investigation. In a recent filing with the U.N.’s internal court system, Mr. Vanshelboim revealed other aspects of his punishment: He said he was fined a year’s salary and told to repay $63,626,806 personally. If he does not repay the money, the filings said, he will not be eligible for a U.N. pension.
Mr. Vanshelboim has asked the U.N.’s court system, which often handles personnel disputes, to overturn the firing, the fine and the order to repay. The court will hold a virtual hearing on the case early next year.
Mr. Vanshelboim declined to comment. He has not been charged with any crime
Much of Mr. Vanshelboim’s case is not public. The available documents do not say how the U.N. calculated what he owes.
Under U.N. rules, staff members who are found to be “willful, reckless or grossly negligent” can be made to reimburse “any financial loss suffered by the United Nations as a result of the staff member’s conduct.” In this case, Mr. Vanshelboim’s office invested $60 million, but got $6.2 million back. It also gave $3 million to a nonprofit run by the businessman’s daughter.
The businessman, Mr. Kendrick, has denied any wrongdoing. A lawyer for Mr. Kendrick said that his companies are still working on the projects funded by the U.N. and “very significant progress has been made.”
Stéphane Dujarric, a spokesman for Secretary General António Guterres of the U.N., declined to comment on the case, citing the internal dispute and what he said were criminal investigations in Denmark and Finland — the locations of U.N. offices that handled the investments.
A review by the accounting firm KPMG commissioned by the U.N. last year blamed the bad investments, in part, on a “culture of fear” that prevented underlings from raising questions about what Mr. Vanshelboim and Ms. Faremo were doing.
That was echoed by a former staff member who talked to The Times last year, who said the investments were a product of a U.N. culture in which bosses held unquestioned power. “What do you call it when you believe you’re God?” said Jonas Svensson, a former employee. In a statement to The Times on Tuesday, Ms. Faremo said she had not been fined or ordered to repay any funds to the U.N.
Since the scandal broke, the U.N. has shuttered the investment program that Mr. Vanshelboim and Ms. Faremo created, and required their logistics agency — the Office for Project Services — to give back money it had stockpiled.
The U.S. mission at the U.N. has demanded transparency about the findings of the internal investigations into Mr. Vanshelboim’s conduct and criticized the U.N. for not making more details about his case public.
“We welcome attempts to recover lost funds,” said Ambassador Chris Lu of the U.S. mission to the U.N., adding that the United States wants changes to the business model and governance of the Office for Project Services.