A little-known United Nations agency decided to make an impact by doling out loans and grant money — all to a single family. It did not go well.
At the United Nations, two officials had a problem. The little-known agency they ran found itself with an extra US$61 million ($96 million), and they did not know what to do with it.
Then they met a man at a party.
Now they have US$25 million less.
In between was a baffling series of financial decisions in which experienced diplomats entrusted tens of millions of dollars, the agency's entire investment portfolio at the time, to a British businessman after meeting him at the party. They also gave his daughter US$3 million to produce a pop song, a video game and a website promoting awareness of environmental threats to the world's oceans.
Things did not go well.
Although UN auditors said the man's businesses defaulted on more than US$22 million in loans — all money meant to aid the developing world — the agency, the UN Office for Project Services, said in a statement last month that "funds are at risk, but to date, no funds have been lost." The agency added that it would "pursue all available legal remedies to protect its operations and assets, including the recovery of outstanding payments owed to" it.
The story of these misbegotten investments was, at times, surreal. There was a cameo by the Italian-born man about town who had introduced Donald Trump to a model named Melania Knauss, the future first lady. There was a concert in the UN's General Assembly hall as it sat nearly empty — where a Norwegian diplomat with a backing band crooned the ocean song ("Just a drop of rain / That's all I am").
But diplomats and former UN officials say the tale also demonstrates what critics say is a serious problem with the UN: a culture of impunity among some top leaders, who wield huge budgets with little outside oversight.
"What do you call it when you believe you're God?" said Jonas Svensson, who recently left the Office for Project Services. Svensson said his bosses had a rare combination of too little preparation and too much tolerance for risk — plus the power to see bad ideas through.
"Ambition and stupidity," Svensson said. "All the way into the wall."
This past week, a UN spokesperson, Stéphane Dujarric, said the institution had completed an internal investigation of the transactions in question, but he declined to say what the inquiry had found. He said that UN Secretary-General António Guterres would "take appropriate action on the findings of the investigation report once it has been reviewed and analysed."
The top official at the Office for Project Services, Grete Faremo of Norway, announced early Sunday that she was stepping down.
Faremo had previously planned to retire in September, but — in a letter to employees sent hours after this article was posted online — she said an interim replacement would be appointed "imminently."
"Without knowing the full story, it happened on my watch," Faremo wrote in a letter to the office's staff, which was obtained by The New York Times. She said she had informed Guterres of her decision Friday. "I acknowledge my responsibility and have decided to step down."
The second-highest-ranking official at the agency, Vitaly Vanshelboim of Ukraine, was placed on administrative leave because of the investigation. He declined to comment.
A London law firm representing the British businessman, David Kendrick, and his daughter, Daisy Kendrick, released statements saying the pair had done nothing wrong. The law firm said David Kendrick's companies had been hampered by the pandemic and decisions by foreign governments.
"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," wrote the law firm, Carter-Ruck.
The case has become the talk of the UN after a series of blog posts by Mukesh Kapila, a former UN official who is widely read by diplomats, and an article by news outlet Devex. The New York Times reconstructed the story of the lost millions using documents from UN auditors, business records and interviews with dozens of people in eight countries.
A party in New York
The party that began it all was held in 2015 in the antique-filled 5,000-square-foot New York apartment of Gloria Starr Kins — the 95-year-old editor and publisher of a diplomatic society magazine that covers UN parties and events.
It was hosted by Faremo, a former justice minister and defence minister of Norway. She had taken over the Office for Project Services in 2014 — and later said she had made it faster and less risk-averse: "More than 1,200 pages of rules went into the trash." Also in attendance was Vanshelboim, a UN veteran and financial whiz who describes himself on LinkedIn as a "SERIAL OVERACHIEVER."
Their agency was one of the UN's less glamorous: a kind of general contractor to the world. Other UN agencies hired it to build schools and roads, deliver medical equipment or perform other logistical tasks.
That job was huge and vital. But at the UN, prestige came from standing at lecterns — giving grants and giving orders. Their office did neither.
But that was set to change.
"I wanted to move away from being the silent partner," Faremo later wrote.
Faremo's agency had stockpiled tens of millions of dollars in excess fees paid to it by other UN agencies, and now she and Vanshelboim wanted to lend out the money, like a bank, to fund profit-making projects in the developing world. Instead of a humdrum contracting hub, they would run a revolutionary in-house investment firm.
But they had not found someone to lend to. That was the point of the party.
Then, through the door came Paolo Zampolli, a man who makes introductions.
One of the UN's best-known characters, Zampolli is an Italian American businessman who also is an ambassador for the Caribbean island of Dominica. And he has long nurtured the dream of something bigger: having his own UN-approved conservation group called We Are the Oceans, or WATO.
"WATO is the NATO of the oceans," Zampolli said. (He means that it would be an alliance of like-minded governments, not that it would be armed.)
When he was a modelling executive, Zampolli introduced Trump to the future first lady. At the time of the party, he was making introductions for David Kendrick, the British businessman, who was selling a system for building fast, cheap, sturdy homes in the developing world. And if making the introductions worked?
"Could that bring me money? Yes, of course," Zampolli said. "That's called real estate."
At that party, it worked. David Kendrick and his daughter met Faremo and Vanshelboim there, according to Zampolli and an employee of David Kendrick's at the time who was present, Ramy Azoury. Faremo said she did not recall whom she met at the party, but a photo from the event shows her holding a business card for David Kendrick's company.
Later, using the acronym for the Office for Project Services, Zampolli said, "David came to me and said, 'Paolo, these UNOPS people are very interested. They can invest.'"
In 2017, the UN agency gave a US$3 million grant to a conservation group run by Daisy Kendrick, who was a recent college graduate.
But Zampolli said he was never paid a finder's fee. In fact, Zampolli said he now regretted making the introduction at all. Daisy Kendrick, it turned out, had named her group We Are the Oceans.
His name.
"I was truly used," Zampolli said.
Singing about the ocean
The UN agency declined to say how — out of all the world's environmental groups — it had chosen Daisy Kendrick's group for such a large grant. She had set up her New York-based group as a nonprofit a year earlier but never obtained approval from the IRS for a tax exemption as a charity.
Daisy Kendrick signed incorporation papers that seemed to give an inaccurate picture of the group's leadership. Azoury and Starr Kins — two other people who were at the 2015 party — were both listed as directors, but both said in recent interviews that they had no connection to the group, did not know their names had been used and had known Daisy Kendrick only in passing.
"They stole my name," Starr Kins said. "She knows I am well-known, and she used me."
Daisy Kendrick's group produced events, a website, ocean-themed games by the makers of Angry Birds and a pop song about the ocean that was recorded by British singer Joss Stone. The UN agency said its internal investigations group had started a review of the partnership with Daisy Kendrick's group.
Her father also seemed to play a major role behind the scenes, according to people who dealt with the group. When Stone signed a recording agreement, the agreement assigned control of the song — and the right to sell it — to a for-profit company that David Kendrick was a director of, according to a copy of the contract provided by Stone. The company paid for the band that accompanied Stone.
Stone said she had agreed to record the song for free, believing it was a fundraiser for the UN.
Daisy Kendrick's lawyers said in a statement that We Are the Oceans 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."
Svensson, the former employee at the Office for Project Services, said his bosses were focused on arranging a performance of the song by Faremo. He said she wanted to sing it in the UN's cavernous hall during a 2017 conference about the oceans. They flew in a backing band from Britain, he said.
"Whatever it takes," he remembered a supervisor saying.
Faremo sang. But, Svensson said, an earlier speaker ran so far over time that the hall was largely empty. Svensson said he planned to include a video of the performance in a documentary he is making about the UN.
"I agreed to sing this due to my background as a singer," Faremo said in a written statement last week. Despite the delayed start, she said, "there was still a crowd in the hall."
Loans under scrutiny
The next year, in 2018, the Office for Project Services announced it was making its first loans. Over the next two years, according to UN records, it lent US$8.8 million to a company investing in a wind farm in Mexico and US$15 million to another company for renewable energy projects. A further US$35 million went to build housing in Antigua, Ghana, India, Kenya and Pakistan, projects overseen by a third company.
Business records show that all three companies appear to be connected to David Kendrick. He owns two of them through a family office in the British territory of Gibraltar. The third, based in Spain, does not list an owner in its corporate records — but its directors are longtime associates of David Kendrick, and its email address leads to a company that he appears to own half of. UN auditors and David Kendrick's lawyers both referred to the three companies as if they were a single entity.
David Kendrick is a 58-year-old British native who has listed addresses in Spain, according to public records, and he is associated with more than a dozen interlocking companies in multiple countries, mostly in the world of construction. One video, from a project in Antigua in 2014, shows him saying, "I don't build houses. I'm inspired to build communities."
It is difficult to get a complete picture of his finances. But at least some of his businesses have struggled at times; UN auditors said one of David Kendrick's companies had lost US$20.2 million in 2017 and US$14.9 million in 2018.
The UN auditors said officials had chosen David Kendrick's companies because they believed his building technology "allowed for quickly built, high-quality and earthquake- and hurricane-resistant homes." Faremo approved the loans, the auditors found.
Still, the auditors raised alarms that the Office for Project Services had concentrated all of its risk in one place. They wrote in July 2020 that they were "of the view that UNOPS did not follow a sound and transparent method in selecting a partner."
Just a few months after that, the agency began trying to get its money back, without providing any public reason for doing so. In October 2020, according to UN reports, David Kendrick's companies agreed to return millions lent for the wind farm and the renewable energy projects. But they did not follow through on returning the money.
Months went by.
Finally, according to a UN audit report last year, one of David Kendrick's companies admitted it had used the UN's loan to pay off other loans: "A large portion of the US$15 million deposit had been used to discharge its preexisting debts and liabilities," the auditors' report said. The UN auditors said last year that David Kendrick's companies had made some small payments, but the auditors expected the UN agency to lose US$22 million.
The other loans, which were intended to fund affordable housing projects, are still officially pending. But the U.N. said that, so far, no houses had been completed.
"Not a single housing project has been built," said P.K. Sarpong, a spokesperson for the government of Ghana, where the UN loans were supposed to allow work to begin on 200,000 homes. Top officials in Ghana helped announce the deal, but after "the pomp and pageantry, they didn't hear about the project again," Sarpong said.
David Kendrick's lawyers said that his companies were in the process of restructuring their loans from the UN agency and that "no funds have been lost."
The financial mess threatens to undermine the broader trust of the UN's member countries in the institution at a time when the UN is seeking millions of dollars to deal with the war in Ukraine and surging food prices. Finland, for example, had pledged US$20 million to support the Office for Project Services' investments, which were run out of an office in Helsinki, the country's capital. But Finland has since suspended its funding, according to diplomats and a statement from its Foreign Ministry.
"They are investing money that the United States and other countries have provided," Christopher P. Lu, a senior official at the US mission to the UN, said of the agency. "So they need to be good stewards of our money."
But the UN is a place where accountability often comes slowly and in secret. It was unclear when, if ever, the UN would release the results of the investigation that it said this past week had been completed.
If there are to be broader reforms at the Office for Project Services, they would come from its executive board — a group of diplomats from UN member states. After the losses, the board in February demanded an "independent comprehensive evaluation" of what had happened.
It is due in June. June 2024.
This article originally appeared in The New York Times.
Written by: David A. Fahrenthold and Farnaz Fassihi
© 2022 THE NEW YORK TIMES