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Cablegate: (U) Usunesco ? Alarming New Information About

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Lucia A Keegan 09/27/2006 09:41:07 AM From DB/Inbox: Lucia A Keegan

Cable
Text:


C O N F I D E N T I A L PARIS 06435

SIPDIS
cxparis:
ACTION: UNESCO
INFO: POL ECON AMBU AMB AMBO DCM SCI

DISSEMINATION: UNESCOX
CHARGE: PROG

APPROVED: AMB:LOLIVER
DRAFTED: LEG:TMPEAY
CLEARED: DCM:AKOSS

VZCZCFRI668
OO RUEHC RUEHBR RUEHSO
DE RUEHFR #6435/01 2691456
ZNY CCCCC ZZH
O 261456Z SEP 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1692
INFO RUEHBR/AMEMBASSY BRASILIA 1677
RUEHSO/AMCONSUL SAO PAULO 0213

C O N F I D E N T I A L SECTION 01 OF 03 PARIS 006435

SIPDIS

FROM USMISSION UNESCO PARIS

DEPARTMENT FOR IO/UNESCO, IO/FO, WHA/BSC, L/UNA

E.O. 12958: DECL: 09/21/2016
TAGS: UNESCO SCUL BR
SUBJECT: (U) USUNESCO ? ALARMING NEW INFORMATION ABOUT
UNESCO?S BRASILIA FIELD OFFICE

REF: PARIS 6225 (notal)

Classified by DCM Andrew Koss, reasons 1.4 (b) and (d).

1. (U) This is an action request, please see para. 12.

2. (C) SUMMARY. In a private, off-the-record meeting with
John Parsons (please protect), the Director of UNESCO?s
Internal Oversight Service (IOS), Mission learned this week
of a variety of disturbing new allegations, as well as
unsettling new facts, that appear not only to widen the
scope of irregularities surrounding UNESCO?s Brasilia Field
Office (UBO) but also to heighten the stakes for UNESCO?s
Director-General, Executive Board Members, and UNESCO?s
reputation in how this problem is being addressed. We were
informed that the disturbing new information raises a
number of concerns, among them the following: the
possibility that UNESCO could become a respondent in a
Brazilian criminal prosecution; the specter of fraud or
money laundering resulting from tens of thousands of
alleged UBO travel missions that have been processed
through the field office?s travel agency; Brazilian
government pressure to blackball IOS Director Parsons and
force his resignation; and a deepening appearance of a
conflict of interest by UNESCO?s Deputy Director-General
(DDG), Marcio Barbosa (a Brazilian national) vis--vis his
oversight of the UBO issues.

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3. (C) SUMMARY (continued). As an Executive Board member,
the U.S. faces tough choices about how to respond
appropriately and responsibly to the UBO controversy within
the broader context of U.S.-Brazil bilateral relations.

4. (C) BACKGROUND. Among key issues for the upcoming
session of UNESCO?s Executive Board (EB), is item 24
entitled ?Report by the Director-General on the Re-
Orientation of the UNESCO Office in Brasilia.? An August
2006 UNESCO external auditor?s report suggests that a
number of issues remain unresolved. Reftel reported
Brazil?s Permanent Delegate?s recent meeting with
Ambassador Oliver to discuss the UBO. The message
delivered was that the Brazilian government views that the
irregularities attributed to the UBO have now been
sufficiently investigated, reported upon and brought under
control. Brazil therefore seeks to remove this issue
henceforth from further EB monitoring as a future EB agenda
item. As reported, this demarche backfired, only
strengthening Mission?s resolve to get an objective
assessment of the current situation regarding that field
office. Mission Legal Adviser?s subsequent telephone
conversation with the external auditor?s office affirmed
that there remain unanswered questions of potential
concern.

5. (C) CIVIL AND POTENTIAL CRIMINAL LIABILITY. We learned
that in addition to a pending civil lawsuit relating to
alleged malfeasance at UBO in which UNESCO is a respondent
that has asserted immunity from Brazilian legal
jurisdiction, prosecutors for the Federal District of
Brasilia have informed Parsons that they are contemplating
naming UNESCO as a respondent in a directly related
criminal prosecution. (Comment: This same information was
conveyed privately to the Mission?s Legal Adviser by the
Deputy External Auditor during a recent phone
conversation.) It is not yet clear how such an indictment
would be framed, but its issuance would constitute a major
embarrassment for UNESCO. Equally worrisome in this regard
is Parsons? claim that a Brazilian court recently ruled
that another UN organ, the UN Development Program (UNDP),
was not entitled to immunity from legal jurisdiction by
virtue of its international status. Parsons asserted that
the lawsuit against UNDP stems from that organization?s
alleged failure to pay social security contributions for
200 Brazilian employees. Parsons informed us that UNESCO
faces similar lawsuits (see para. 10) and could itself face
non-recognition of its immunity as an international
organization. (Comment: This recent Brazilian court
decision is directly at odds with the assurances provided
to the Mission?s DCM recently by UNESCO?s legal adviser
that he is confident UNESCO?s immunity would be respected
by Brazil?s courts.)

6. (C) TRAVEL SERVICE IRREGULARITIES. Parsons reported that
in a period of less than a year, UBO paid some $60 million
for travel services, allegedly involving 30,000 (thirty
thousand) travel missions for its employees. We further
learned that of these paid travel missions, there has been
an average of one thousand cancellations per month.
Parsons raised the rhetorical question whether the
suspiciously high number of travel missions and
cancellations had become a form of ?money laundering.?
This observation resonates with the UNESCO external
auditor?s most recent report noting critically that the
agency selected by UBO to handle such travel services was
chosen without competitive bidding and moreover that since
2001 UBO has defied the auditor?s repeated recommendation
that this travel service contract be opened for competitive
bidding.

7. (C) GOB EFFORT TO BLACKBALL IOS AND THWART
INVESTIGATION. We learned from Parsons that the GoB has
launched a full-scale campaign to smear Parsons? name and
reputation to such a degree that he is actively seeking to
leave his post by year?s end. Three members of his staff
have informed him of their imminent departure as well,
resulting from their refusal to be targets of a Brazilian
vendetta for having competently conducted a needed
investigation into palpable irregularities. By year?s end,
the IOS office could be completely decimated. Parsons
asked whether we could help to arrange for an American to
replace him (he is a UK national). He proposed that he
change positions with the American who currently heads
OSCE?s oversight office in Vienna. (Comment: Parsons, who
did an excursion tour at the GAO, is a good friend of the
U.S. and it would be in our interest to help him find
onward employment.)

8. (C) AMERICAN SELECTED TO HEAD UBO REJECTED BY BRAZIL.
Due to the irregularities that have come to light at UBO,
the former UBO director (an Argentine national) was forced
to resign and was to have been replaced by a USAID
employee, Richard Goughnour, who was selected by UNESCO DG
Matsuura. Parsons told us that the Brazilian government
has taken the highly unusual step of denying him agrement.
It is not clear whether the DG is seeking a reversal of
Brasilia?s opposition, but for the moment the post is still
vacant. In the meantime, Parsons said, the UBO is being
run by a temporary director who is not up to the management
tasks of restructuring UBO?s operations.

9. (C) CONTINGENT LIABILITIES. In addition to the lawsuit
against UNESCO seeking breach of contract damages arising
from the UBO, there are other contingent liabilities
relating to lawsuits brought by some 45 contractors who
allege that UBO has not made required social security
contributions.

10. (C) APPARENT CONFLICT OF INTERST FOR THE DEPUTY
DIRECTOR-GENERAL. Parsons reported that DDG Barbosa has so
far failed to recuse himself from making senior level
decisions regarding the UBO, and, worse, has in fact
approved retroactively irregularities cited by the auditors
and even visited a previously unauthorized satellite office
of the UBO. Parsons also told us that Barbosa unilaterally
lowered the overhead charges on extra budgetary funds
received by the Sao Paolo office from five to three
percent, thereby causing a loss of over $600,000 to UNESCO.

11. (C) COMMENT. The combined effect of these various
strands of actual and/or apparent irregularities has cast
an even darker cloud over the Brasilia field office. This
cloud, if anything, would seem to compel more urgent and
closer Executive Board ?due diligence? scrutiny and
continued monitoring in the interest of Member States?
oversight responsibilities and UNESCO?s reputation. It
seems increasingly clear that there remain a number of
serious matters that need to be fixed at that office,
despite the Brazilian government?s objections and its
preference that they be minimized. At the same time, on
other important UNESCO issues (such as the education sector
reform initiative being implemented by the ADG for
Education, an American), we need Brazil?s support in order
to achieve important USG goals for UNESCO. We also need to
walk a fine line with Barbosa, who has been a great help to
the U.S. during the on-going review of the UNESCO science
sector. In addition, the effect of a hard-ball approach on
the Brasilia office could affect our bilateral relations
with Brazil. We thus need to calibrate carefully how we
play this issue, bearing in mind that the Executive Board
meetings begin on September 26. At the last Executive
Board few other states supported us; most of our allies
were conveniently out of the room or had gone home when
this issue came up late in the evening. The Brazilians and
Uruguayans pushed back hard. We would expect the
Venezuelans to join them this time.

12. (C) ACTION REQUEST. In view of the foregoing
discussion, please review previously drafted guidance on
this issue and inform Mission soonest how firmly we should
push at the EB meeting to uncover the full extent of
irregularities at UBO and what recommendations we should
put forward and/or support to resolve those concerns in a
credible, effective way. At a minimum, the Mission
believes that we should support retention of the UBO issue
on the EB agenda for further monitoring and reporting at
the spring Board meeting and not in one year as the present
draft proposes.

OLIVER

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