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. Last Updated: 07/27/2016

UNDP Office Snared in Fraud Probe

An internal UN investigation has uncovered a case of long-running fraud in the Moscow office of the United Nations Development Program that may have cost the organization $1.2 million.

UNDP auditors believe a group of staff members stole funds by forging contracts, tender documents, invoices and payment orders over a four-year period, the UNDP said Tuesday.

"The investigation is ongoing, but a preliminary accounting suggests that about $1.2 million in UNDP project funds was stolen between 2000 and 2004," said a UNDP spokesman. "The culprits are believed to be a group of staff members who worked in the office's operations division. All the suspects were local staff who left UNDP before the theft was discovered."

Stefan Vassilev, the head of the UNDP's Russia office since 2003, has been suspended from his duties until the probe is complete. Bulgarian-born Vassilev has been questioned as a witness in the investigation, said a UN source familiar with the situation.

Neither Vassilev nor his deputy, acting head Kaarina Immonen, was available for comment on Tuesday.

About 40 people work in the UNDP's Moscow office, six in the operations division, which deals with financial issues.

Since opening in 1997, the office has channeled more than $56 million into projects promoting democracy, poverty reduction and economic development.

Nobody has been fired as a result of the investigation, said Victoria Zotikova, UNDP spokeswoman in Russia.

Tatyana Gorlach, the head of the operations division and a longtime employee in the Russia office, quit in April before the probe began, Zotikova said. Several other employees have also left, she said, without elaborating.

There are four suspects, all of them local staff, said the UN source, who requested anonymity because he was not authorized to speak on the issue.

The Russian government has responded "positively" to a request for assistance from national law enforcement agencies, the UNDP said, and the City Prosecutor's Office is cooperating with the investigation.

A spokesman for the city police said he knew nothing about the UNDP investigation. The prosecutor's office could not be reached for comment.

"This appears to be a sophisticated operation that has been difficult to detect," said William Orme, UNDP spokesman in New York. "Unfortunately, we detected it only this year."

Zotikova said the probe was expected to be completed in a month. Internal audits are carried out regularly, she said.

The problem of missing cash plagues the United Nations. More than $300 million in UN funds has been wasted or stolen in the past 10 years, according to the UN's internal watchdog.

In one well-known case, a senior member of the UN Mission in Kosovo embezzled $4.3 million, which he transferred to a bank account in Gibraltar. He was later arrested and sentenced to 3 1/2-years in prison by a German court.

Over the past seven years, the UNDP has spent $56 million on Russian projects. Zotikova said $18 million was spent in 2004 alone. Last year, the organization began a program to boost the economy of the North Caucasus.

Zotikova said that the Moscow office was expected to get a new head, as Vassilev was not returning.