U.N. agency accused of funneling millions to Kim

UNITED NATIONS — The United States accused a U.N. agency of funneling millions of dollars in cash aid to North Korean leader Kim Jong Il and questioned if the funds had been used for other activities including nuclear weapons development, U.S. officials said Friday.

U.S. deputy ambassador Mark Wallace charged that the U.N. Development Program in North Korea operated "in blatant violation of U.N. rules" for years. He demanded an immediate outside audit, focusing on concerns that Pyongyang converted development funds "to its own illicit purposes."

The program, known as UNDP, said the use of cash for its operations in North Korea "in difficult circumstances" was approved by its executive board. Following the U.N. imposition of sanctions against North Korea in October for conducting a nuclear test, UNDP said it was taking measures to prevent "unintended consequences" of the program's activities.

UNDP Associate Administrator Ad Melkert disputed allegations that the agency violated U.N. rules, insisting it followed UNDP financial rules. Nonetheless, he said that by March 1, all hard currency payments to the government, national partners, local staff and suppliers would be replaced by payments in North Korean won.

The North Korean won is not a hard currency that can be easily used to buy luxury goods or weapons parts — but Melkert stressed that the only place to buy the local currency was from the country's central bank.

Neither the U.S. nor UNDP would give a figure of how much money was involved, but Melkert said it wasn't hundreds of millions of dollars. In a Jan. 5 letter to Wallace, he said, from 2001 to 2005, UNDP spent an average of $2.3 million annually on both program and administration, including approximately $100,000 annually on local salaries.

U.N. Secretary-General Ban Ki-moon called for an urgent "external inquiry" into U.N. funds and programs around the globe, U.N. spokeswoman Michele Montas said. Many of the agencies — like UNDP — operate semi-independently and have their own boards.

Montas said the external audits will cover all funds and programs including the U.N. Children's Fund, the U.N. refugee agency, the World Food Program and the World Health Organization.

An exchange of letters between Wallace and senior UNDP officials goes back to November and was first reported by the Wall Street Journal.

U.S. officials said they first received indications there might be some irregularities in UNDP's North Korea program in the second half of 2006, and raised concerns that the cash might be misused, possibly for Pyongyang's nuclear program.