A plan to build 100,000 homes in Ghana launched with much optimism in 2018, described by Ghanaian President Nana Akufo-Addo as “ushering into existence a new dawn for Ghana and our citizens.” The homes were meant to be affordable, sustainable, and environmentally sound — fitted with energy-efficient solar rooftops, built with local materials, and using local expertise.
Behind the project — part of a global operation that would eventually invest $63 million to build houses for the world’s poorest, along with wind farms — was an ambitious new impact-investing initiative overseen by the United Nations Office for Project Services, a major development projects implementer and the only U.N. agency that is self-financing. The initiative is known as Sustainable Investments in Infrastructure and Innovation, or S3i.
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Now the U.N. Office of Internal Oversight Services has launched an independent investigation into the circumstances around a series of loans to Singapore-based Sustainable Housing Solutions Holdings, or SHS Holdings — a primary S3i contractor. The company received tens of millions of dollars in UNOPS funds to develop plans to build more than 1 million affordable homes in six countries, despite having no previous experience in delivering projects of this size or scope.
The probe is focused on S3i’s chief executive Vitaly Vanshelboim, who drove the initiative’s agenda and oversaw its lending to SHS Holdings.
S3i’s aim is to de-risk and attract private sector investment to infrastructure projects in developing and emerging economies. The Ghana housing scheme was among eight S3i investments — others promised to build hundreds of thousands of homes in India, Guinea, the Caribbean, Pakistan, and Nigeria.
But today, the entire project is stalled, UNOPS is owed tens of millions of dollars, and no houses have been built. A UNOPS spokesperson says “steps are being taken to recover all outstanding amounts regardless of the source of activities.”
Vanshelboim, who joined UNOPS in 2006 and was named S3i’s chief executive in 2020, was put on administrative leave in December. And in March, Vanshelboim’s boss, UNOPS Executive Director Grete Faremo — who is not currently under investigation — announced her retirement, citing health among other reasons. A senior U.N. official told Devex that U.N. leadership asked Faremo to resign. She will stay in her role until September.
Numerous former and current UNOPS staff, who spoke to Devex on the condition of anonymity, described the latitude of entrepreneurial senior managers at UNOPS to take advantage of loose checks and loopholes within the agency — and leverage their political clout — to direct funds at will. One former UNOPS official described the agency’s senior leadership team, of which Vanshelboim was part, as “thick as thieves” and “a corrupt cabal that is only interested in money.” Another said the team was “a mafia.”
“U.N. work culture is fear based, which pushes the U.N. away from solving problems.”
— Jonas Svensson, former head of global innovation and technology, S3iThe UNOPS spokesperson told Devex that the agency “disputes any suggestion that the functions of diligence and accountability — legal, financial oversight, ethics, and human resources management — have been undermined.”
“UNOPS accepts there are current challenges with S3i, including outstanding payments by S3i partners, as reported by UNOPS to the UN Board of Auditors,” UNOPS said in a statement released Thursday. “We take this situation seriously and are taking all appropriate actions to address the issue.”
Further, S3i’s entire housing project is now “under review,” the UNOPS spokesperson told Devex. S3i, which is based in Helsinki with support from the Finnish government, has seen Finland suspend its funding while the U.N. investigation is conducted.
Building to nowhere
S3i seed-funds large-scale affordable housing, renewable energy, and health infrastructure projects. It became a standalone business unit within UNOPS in 2020.
The same year, U.N. Secretary-General António Guterres appointed Vanshelboim as assistant secretary-general and chief executive of S3i. Current and former UNOPS staff who Devex spoke to credited Vanshelboim, a senior leader within UNOPS for more than 15 years, with turning the procurement agency into a multifaceted U.N. organization.
From fixing sewers in Yemen and supplying office furniture in Yangon to capacity building for Nepalese police and climate change initiatives in the Caribbean, UNOPS went through a major transformation in the time since Vanshelboim joined. Its revenue boomed from near-bankruptcy in 2004 to operating 1,000 contracts worth over $3.4 billion in 2021. Vanshelboim did not respond to Devex’s requests for comment.
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In project announcements, S3i has touted its “unique role as a co-investor and trusted partner” that enables it to “channel private financing in regions and sectors that have struggled heretofore to attract capital.” Its pitch to investors is the chance to take part in projects with positive environmental, social, and economic impact, with “financial returns above prevailing market rates.”
Most of its recent troubles stem from its housing program, which was designed to create millions of energy-efficient affordable homes. In April 2019, Faremo visited Accra to launch another S3i partnership with SHS Holdings and the Ghanaian government to build another 100,000 houses for university students and teachers.
“This landmark project will not only give Ghana’s future generation access to affordable housing, but will also give the people teaching that future generation the opportunity and security to own their own home,” she said at the time.
A few months later, in July 2019, Vanshelboim spoke in front of Pakistan’s then-prime minister, Imran Khan, laying out the UNOPS partnership and plans to build 500,000 homes in Pakistan.
Similar events in India, Kenya, Guinea, the Caribbean, and Nigeria were held as S3i promoted its housing investments — which used Baupanel System, a company owned by David Kendrick — as a way to pull people out of poverty.
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Kendrick also owns SHS Holdings, the primary contractor on S3i’s housing project. Kendrick declined to answer questions about the projects’ status, telling Devex that the deal between UNOPS and SHS Holdings is confidential.
“I am not at liberty to discuss matters relating to such agreements,” he said in an email.
But SHS Holdings never secured the necessary private funding, or financial backing from local banks, to start building homes. Whether individuals benefited from that failure is central to the ongoing U.N. probe, a source familiar with the investigation told Devex.
Still, SHS Holdings’ local partner in Accra, Kwame Blay — the son of Ghana’s ruling party chairman, Freddie Blay — said he remained confident the project would happen.
“The Ghana project is going ahead as planned,” he told Devex, but declined to elaborate on who would pay the costs associated with building 200,000 homes in the country.
SHS Holdings official Allen Zimbler, who attended events in Kenya and Ghana, did not respond to questions sent via WhatsApp and email. SHS Holdings’ CEO in India, Amit Gupta, declined to update Devex with the status of their project. He said it was “highly confidential.”
Commissioner Akintunde Oyebode, from Nigeria’s Ekiti state government Ministry of Finance and Economic Development, told Devex the project had progressed slowly due to COVID-19 restrictions and a land dispute that went to court.
“It is true the project has not moved. But we will formally contact UNOPS this week to ask about its status,” he said.
However, one current UNOPS staff member is not so confident. “They need to raise a massive amount of cash to bankroll this housing project. Who in the private sector would give money to this company? I doubt one house will be built,” the staffer said.
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Another UNOPS investment under scrutiny is an S3i scheme to invest $8.8 million in a 22-megawatt wind farm in Mexico that could not attract private investors and struggled to stay afloat due to local companies missing payments for their electricity.
“This project, as with many others in the country, was negatively impacted by changes in national regulations. Due to these changes in circumstances, the decision to withdraw from this project early was made,” the UNOPS spokesperson said.
UNOPS’ Internal Audit and Investigations Group has launched a separate review into the circumstances surrounding what UNOPS sources told Devex was a $5 million grant to David Kendrick’s daughter, Daisy Kendrick, who at the time was a student at Boston’s Northeastern University. UNOPS disputes this figure, but acknowledges it paid Daisy Kendrick $3.3 million to fund a project aiming to reach millennials to promote ocean conservation.
Daisy Kendrick, who founded a group called We Are The Oceans, developed “The Big Catch,” an interactive means of learning about ocean protection. Part of that also paid British singer Joss Stone to perform a song called “Oceans” as a way to inspire a generation to stop polluting the sea in line with U.N. Sustainable Development Goal 14. The video game is no longer available to play, and Daisy Kendrick did not respond to numerous messages via email and social media seeking comment.
The blame game
UNOPS is owed at least $38.18 million in “bad and doubtful debt,” according to its July 2021 annual report, much of which went to the SHS plan to build homes. UNOPS told Devex it is pursuing the money, but did not elaborate on how that money would materialize.
Last month, Faremo, who has served as UNOPS’ executive director since 2014, hosted two all-staff online “town hall” meetings, one of which was specifically meant to address the S3i issue, the UNOPS spokesperson confirmed. According to sources who attended, staff raised issues about the lack of transparency and questioned leadership decisions regarding S3i. Staff left feeling that Faremo and other senior leaders did not answer their questions, attendees told Devex.
“They were unapologetic, it was like ‘nothing to see here, there’s an investigation, we can’t say anything.’ How one person can be responsible for this was not explained,” a current UNOPS contractor told Devex of Vanshelboim.
“It sounds like everyone just protected themselves and blamed Vitaly, but how can one official be responsible for the whole process allocating millions of dollars at the U.N.? This was not answered,” said another UNOPS contractor, who attended the meeting virtually and spoke to Devex on condition of anonymity.
UNOPS is the only self-financing U.N. agency and runs at a surplus, making it a rarity in the development world, considering most U.N. agencies struggle to get their budgets covered and donor pledges met and engage in fierce competition annually.
In its 2020 annual report, UNOPS reported a surplus of around $40 million for that year. UNOPS’ net assets at the end of 2020 stood at $286.5 million, far exceeding the minimum threshold established by its executive board — which drew concern from Christopher Lu, the U.S. ambassador for U.N. management and reform.
“The U.N. must be much more transparent. … It should waive the privileges and immunities behind which it often hides.”
— Mukesh Kapila, former U.N. resident and humanitarian coordinator for Sudan“This next stage of our growth—in which we’ll partner with the private sector, share risks, and go to market together—has a lot of potential, but it’s controversial,” Faremo told Harvard Business Review in 2019. “Instead of just winning contracts, we’re using our cash to invest in assets and put skin in the game.”
As part of this growth, S3i has ostensibly acted like an investment company, using UNOPS’ accumulated revenue streams to financially support its projects.
Beyond housing, the S3i initiative also established global “innovation centres” in Japan, Sweden, and Antigua and Barbuda. The centers are meant to “bring together a diverse range of innovators, entrepreneurs, programmers and researchers to provide creative ideas and solutions needed to advance the 2030 Agenda and achieve the Sustainable Development Goals,” according to S3i’s website.
But Jonas Svensson, S3i’s former head of global innovation and technology, who left earlier this year, told Devex the U.N. was not equipped for such novel development plans via technological means.
“If you look at U.N. innovation, you don’t find many people who have actually innovated, or even started a company. It’s mostly run by U.N. bureaucrats,” he said. “However, a bigger surprise is that the U.N. work culture is fear based, which pushes the U.N. away from solving problems.”
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The UNOPS business model does not sit well with many within the U.N. Last July, the U.N. Advisory Committee on Administrative and Budgetary Questions raised concerns that UNOPS was simply making too much money from overcharging member states and donor agencies. It requested that UNOPS provide more transparency around its budgets and pricing structures.
The U.N. Board of Auditors “noted that bad debt allowances had been recognized against a high proportion of S3I initiative investments, during which insufficient monitoring was noted,” according to UNOPS’ 2020 annual report.
Former U.N. whistleblower Mukesh Kapila, who first raised concerns about UNOPS’ handling of S3i on his personal blog, said UNOPS senior leadership ignored, refuted, or undermined staff concerns surrounding these deals for several years. Kapila, who served as U.N. resident and humanitarian coordinator for Sudan in 2003-2004 and lost his job after speaking out to the BBC about atrocities in Darfur, is today a professor emeritus at the University of Manchester.
“The U.N. must be much more transparent and accountable,” he told Devex. “It should waive the privileges and immunities behind which it often hides, and allow a national authority with jurisdiction to conduct an independent investigation into any fraud that may have been committed at UNOPS.”
“In true U.N. fashion, nothing will happen. Vitaly will go quietly. His contract ends soon this year. U.N. investigation reports are rarely public,” the UNOPS staffer said. “That’s why the U.N. self-policing system is rotten.”
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About the author
Ilya Gridneff@IlyaGridneff
Ilya Gridneff is a writer based in Brussels, Belgium. He has worked as a correspondent covering Africa, Europe, and the Pacific islands region.
