UNOPS chief resigns amid probe into agency's questionable loans

The embattled head of the United Nations Office for Project Services has resigned as details of possible financial mismanagement under her leadership were brought to light by Devex and The New York Times in recent weeks.

Grete Faremo, who took over as the executive director of the agency in 2014, said she told U.N. Secretary-General António Guterres on Friday that she would step down immediately.

The announcement comes as the U.N.’s Office of Internal Oversight Services, or OIOS, has completed an independent investigation into questionable loans that UNOPS made. Faremo previously said she would retire in September, citing health and family reasons.

Last month, Devex was the first to report on the United Nations’ probe into how UNOPS made a series of loans to a company called SHS Holdings to build affordable homes in low-income nations — despite it having little record delivering such projects. So far, no houses have been built, and UNOPS is owed tens of millions of dollars that it says it is trying to recover. At least $3 million in UNOPS funds also went to a group run by the then-22-year-old daughter of SHS Holdings’ owner, David Kendrick, so she could produce a song and video game about ocean conservation.

“I wanted to honour the integrity of an UN investigation. We still await the outcome. The last months have been an extreme burden on all,” Faremo wrote in an email sent to UNOPS staff over the weekend, which Devex obtained. “Without knowing the full story, it happened on my watch. I acknowledge my responsibility and have decided to step down.”

Devex previously reported that the U.N. leadership had asked Faremo to resign.

At the center of the U.N. investigation is Sustainable Investments in Infrastructure and Innovation, or S3i, the UNOPS impact-investing initiative that invested some $63 million for the affordable housing project, along with two wind farms — one in Mexico and another in India. Faremo has said she placed Vitaly Vanshelboim, S3i’s chief executive and UNOPS’ second-highest-ranking official, on administrative leave in December after learning of the OIOS investigation.

Faremo also wrote that she had been working with UNOPS leadership and U.N. officials “to frame the independent, transparent Evaluation needed to address any serious issue identified in S3i.”

“A shocking breach of trust hurts, and it has shaken the organization profoundly,” Faremo wrote in her email, appearing to blame Vanshelboim. He is a subject of the U.N. investigation, though Faremo is not — leading some UNOPS staffers and contractors to ask whether Vanshelboim is being thrown under the bus and whether Faremo really did not know what was happening. 

Faremo, a former Norwegian government minister, has faced increasing pressure to step down over the last few months. Her resignation comes as The New York Times published more details Sunday on how senior UNOPS officials came to do business with Kendrick.

In a statement, UNOPS said it did not have access to the U.N. OIOS investigation report and was still waiting to hear its findings.

The case has brought attention to a number of questions around UNOPS and its business model. The agency often touts that it is the only U.N. entity that is self-financing, and it works to attract private-sector capital to bring investment to developing markets. At the end of 2020, UNOPS’ net assets stood at $286 million, far exceeding the minimum threshold established by its executive board. In February, Christopher Lu, the U.S. ambassador for U.N. management and reform, questioned UNOPS’ large reserves along with its bad debt allowance, which he noted represents 40% of funds invested via S3i through December 2020.

“UNOPS likes to say they are a self-financing organization. They are not,” Lu said in an interview with Devex last week, prior to Faremo’s resignation. “Their organization is financed by fees imposed on other U.N. agencies which in turn are being funded by member states. This is indirectly and, frankly, directly the money of the United States and other countries.”

“We believe there is sufficient information to conclude that high-level UNOPS officials were involved in and approved of these problematic projects and that clear warning signals were missed, which in our minds suggest significant lapses in oversight,” Lu continued.

“There needs to be, clearly, a reexamination of the agency’s mission, its working processes, and its investments,” he said. “It’s our hope whoever replaces the current executive director has those qualifications.”

In a Twitter thread Sunday after Faremo’s announcement, Lu demanded a “full briefing” by UNOPS, saying that the executive board — of which the United States is a member — would “aggressively press UNOPS for answers to our questions.” He also called for the results of the U.N. investigation to be made public.

UNOPS is based in Copenhagen, while S3i’s offices are based in Helsinki. ​​Last month, Finland suspended its funding to S3i in light of the U.N. investigation.

Meanwhile, Jens Wandel has been appointed as UNOPS’ acting executive director effective Monday, the U.N. said in a statement. Wandel will serve in the role while the U.N. Secretary-General launches a recruitment process for a permanent successor to Faremo with the help of UNOPS’ executive board.  

Wandel most recently served as special adviser to the U.N. secretary-general on reforms, in which he oversaw three “reform streams” — sustainable development, peace and security, and management — aimed at “transforming the UN into a more effective, nimble and fit for purpose Organization.” Wandel, who is from Denmark, was also a senior leader within the United Nations Development Programme for several years.

Shabtai Gold contributed reporting.

Update, May 9, 2022: This article has been updated to reflect an additional comment from Christopher Lu.

If you have a tip for Devex, our newsroom can be reached at editor@devex.com.