United Nations Procurement Task Force: Report on Avicos (PTF-R007-07), 28 Jun 2007
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United Nations Office of Internal Oversight Services (UN OIOS) 28 Jun 2007 report titled "Report on Avicos [PTF-R007-07]" relating to the Procurement Task Force. The report runs to 25 printed pages.
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United Nations Nations Unies
OFFICE OF INTERNAL OVERSIGHT SERVICES
PROCUREMENT TASK FORCE
This Report is strictly confidential and is protected under the
provisions of ST/SGB/273 of 7 September 1994, A/RES/59/272 of
2 February 2005, and other applicable issuances
REPORT ON AVICOS
Report no. PTF-R007/07
Case no. PTF/003/07
STRICTLY CONFIDENTIAL
This Investigation Report of the Procurement Task Force of the United Nations
Office of Internal Oversight Services is provided upon your request pursuant to
paragraph 1(c) of General Assembly resolution A/RES/59/272. The Report has
been redacted in part pursuant to paragraph 2 of this resolution to protect
confidential and sensitive information. OIOS' transmission of this Report does
not constitute its publication. OIOS does not bear any responsibility for any
further dissemination of the Report.
28 June 2007
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OIOS PROCUREMENT TASK FORCE
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REDACTED AND STRICTLY CONFIDENTIAL
____________________________________________________________________________________________________________
TABLE OF CONTENTS
I. INTRODUCTION.......................................................................................................................... 1
II. APPLICABLE UNITED NATIONS STAFF REGULATIONS AND RULES......................... 2
III. RELEVANT CONCEPTS OF CRIMINAL LAW ...................................................................... 5
IV. METHODOLOGY......................................................................................................................... 6
V. BACKGROUND ............................................................................................................................ 6
VI. OVERVIEW OF THE SCHEME AND PAYMENTS ................................................................ 8
VII. AVICOS AND ALEXANDER YAKOVLEV ............................................................................ 12
A. COMPANY BACKGROUND .............................................................................................................. 12
B. AVICOS ARRANGEMENTS WITH ALEXANDER YAKOVLEV ........................................................... 12
C. AVICOS PAYMENTS TO ALEXANDER YAKOVLEV ......................................................................... 14
D. COMPANY RESPONSE TO THE TASK FORCE ................................................................................. 15
VIII. DUE PROCESS............................................................................................................................ 16
IX. FINDINGS .................................................................................................................................... 16
X. CONCLUSIONS .......................................................................................................................... 17
XI. RECOMMENDATIONS ............................................................................................................. 18
A. RECOMMENDATION PTF-R007/07/1 ............................................................................................ 18
B. RECOMMENDATION PTF-R007/07/2 ............................................................................................ 18
C. RECOMMENDATION PTF-R007/07/3 ............................................................................................ 18
D. RECOMMENDATION PTF-R007/07/4 ............................................................................................ 19
ANNEX A: AVICOS LETTER TO THE TASK FORCE (1 MARCH 2007) ....................................... 20
ANNEX B: THE TASK FORCE LETTER TO NIKOLAI USTIMENKO (25 APRIL 2007)............. 22
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I. INTRODUCTION
1. The Procurement Task Force ("the Task Force") was created on 12 January 2006
to address all procurement matters referred to the Office of Internal Oversight Services
("OIOS"). The creation of the Task Force was the result of perceived problems in
procurement identified by the Independent Inquiry Committee into the Oil-for-Food
Programme ("IIC"), and the arrest and conviction of Mr. Alexander Yakovlev, a former
United Nations Procurement Officer.
2. Under its Terms of Reference, the Task Force operates as part of the OIOS, and
reports directly to the Under-Secretary-General for the OIOS.1 The remit of the Task
Force is to investigate all procurement cases, including all matters involving procurement
exercises, procurement staff, and vendors doing business with the United Nations.2 The
Task Force's investigations have focused upon a number of procurement cases, including
cases involving companies doing business with the Organisation. Some of these matters
are particularly complex and span significant periods of time.
3. The Task Force has previously issued two reports directly addressing Mr.
Yakovlev's activities.3 Most significantly, on 2 May 2007, the Task Force issued its
Interim Report on matters concerning Mr. Yakovlev and entities and individuals
associated with him.4
4. As was discussed in these reports, Mr. Yakovlev's assistance to certain vendors
included, inter alia, improperly disclosing confidential United Nations documents and
information; improperly assisting selected United Nations vendors in preparing their
contract proposals; tampering with the results of the financial evaluations; adjusting
contract proposals after the official submission to ensure that the contract award would be
steered towards a particular company; and favoring selected companies during the
execution of their contracts to the detriment of the Organisation. In return, these vendors
paid Mr. Yakovlev sums of money which were often paid into secret off-shore bank
accounts in the names of entities established in furtherance of the scheme. Two of these
accounts were established in the names of Moxyco Ltd. ("Moxyco") and Nikal Ltd.
("Nikal").
5. The Interim Report specifically focused on the financial assets derived by Mr.
Yakovlev through his participation in fraudulent schemes executed with various vendors
and vendor intermediaries doing business with the Organisation. The Interim Report set
forth relevant evidence--including information regarding various bank accounts
1
Terms of Reference of the Procurement Task Force (12 January 2006).
2
Id.
3
Procurement Task Force, Report on Eurest Support Services (Cyprus) International, IHC Services Inc.,
and Certain United Nations Staff Members, Report PTF-R010/06 (7 December 2006); Procurement Task
Force, Interim Report on Matters Concerning Former United Nations Staff Member Mr. Alexander
Yakovlev and Associated Vendors, Report PTF-R002/07 (2 May 2007) ("Interim Report on Alexander
Yakovlev").
4
Id.
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associated with Mr. Yakovlev--for consideration by the Organisation in its pursuit to
recover the proceeds of Mr. Yakovlev's unlawful activities.
6. The purpose of this Report is to address the allegations concerning Avicos, a
United Nations vendor that had allegedly made improper payments to Mr. Yakovlev.
II. APPLICABLE UNITED NATIONS STAFF
REGULATIONS AND RULES
7. The following provisions of the Staff Regulations of the United Nations ("the
Staff Regulations") are relevant:
(i) Regulation 1.2(b): "Staff members shall uphold the highest standards of
efficiency, competence and integrity. The concept of integrity includes, but is not limited
to, probity, impartiality, fairness, honesty and truthfulness in all matters affecting their
work and status."5
(ii) Regulation 1.2(e): "By accepting appointment, staff members pledge
themselves to discharge their functions and regulate their conduct with the interests of the
Organization only in view. Loyalty to the aims, principles and purposes of the United
Nations, as set forth in its Charter, is a fundamental obligation of all staff members by
virtue of their status as international civil servants."6
(iii) Regulation 1.2(f): "[Staff members] shall conduct themselves at all times
in a manner befitting their status as international civil servants and shall not engage in
any activity that is incompatible with the proper discharge of the duties with the United
Nations. They shall avoid any action, and, in particular, any kind of public
pronouncement that may adversely reflect on their status, or on the integrity,
independence and impartiality that are required by that status."7
(iv) Regulation 1.2(g): "Staff members shall not use their office or knowledge
gained from their official functions for private gain, financial or otherwise, or for the
private gain of any third party, including family, friends and those they favour."8
(v) Regulation 1.2(i): "Staff members shall exercise the utmost discretion
with regard to all matters of official business. They shall not communicate to any
Government, entity, person or any other source any information known to them by reason
of their official position that they know or ought to have known has not been made
public, except as appropriate in the normal course of their duties or by authorization of
the Secretary-General."9
5
ST/SGB/2007/4, reg. 1.2(b) (1 January 2007); ST/SGB/1999/5, reg. 1.2(b) (3 June 1999).
6
ST/SGB/2007/4, reg. 1.2(e) (1 January 2007); ST/SGB/1999/5, reg. 1.2(e) (3 June 1999).
7
ST/SGB/2007/4, reg. 1.2(f) (1 January 2007); ST/SGB/1999/5, reg. 1.2(f) (3 June 1999).
8
ST/SGB/2007/4, reg. 1.2(g) (1 January 2007); ST/SGB/1999/5, reg. 1.2(g) (3 June 1999).
9
ST/SGB/2007/4, reg. 1.2(i) (1 January 2007); ST/SGB/1999/5, reg. 1.2(l) (3 June 1999).
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(vi) Regulation 1.2(l): "No staff member shall accept any honour, decoration,
favour, gift or remuneration from any non-governmental source without first obtaining
the approval of the Secretary-General."10
8. The following provision of the Staff Rules of the United Nations is relevant:
(i) Rule 112.3: "Any staff member may be required to reimburse the United
Nations either partially or in full for any financial loss suffered by the United Nations as a
result of the staff member's gross negligence or of his or her having violated any
regulation, rule or administrative instruction."11
9. The following provisions of the Financial Regulations and Rules of the United
Nations are relevant:
(i) Regulation 5.12: "The following general principles shall be given due
consideration when exercising the procurement functions of the United Nations:
(a) Best value for money;
(b) Fairness, integrity and transparency;
(c) Effective international competition;
(d) The interest of the United Nations."12
(ii) Rule 105.14: "[P]rocurement contracts shall be awarded on the basis of
effective competition."13
10. The following provisions of the United Nations Procurement Manual are
relevant:14
(i) Section 4.1.5(4)(a): "UN staff shall not allow any Vendor(s) access to
information on a particular acquisition before such information is available to the
business community at large."15
(ii) Section 4.2(1): "It is of overriding importance that the staff member
acting in an official procurement capacity should not be placed in a position where their
actions may constitute or could be reasonably perceived as reflecting favourable
10
ST/SGB/2007/4, reg. 1.2(l) (1 January 2007); ST/SGB/1999/5, reg. 1.2(l) (3 June 1999).
11
ST/SGB/2005/1, rule 112.3 (1 January 2005).
12
ST/SGB/2003/07, reg. 5.12 (9 May 2003). See also ST/SGB/Financial Rules/1/Rev. 3, rule 110.21
(March 1985).
13
ST/SGB/2003/07, rule 105.14 (9 May 2003). See also ST/SGB/Financial Rules/1/Rev. 3, rule 110.21
(March 1985).
14
United Nations Procurement Manual, Rev. 3 (August 2006) ("2006 Procurement Manual"); United
Nations Procurement Manual Rev. 2 (January 2004) ("2004 Procurement Manual"); United Nations
Procurement Manual (31 March 1998) ("1998 Procurement Manual").
15
2006 Procurement Manual, sec. 4.1.5(4)(a); 2004 Procurement Manual, sec. 4.1.5(4)(a); 1998
Procurement Manual, sec. 7.06.01.
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treatment to an individual or entity by accepting offers or gifts and hospitality or other
similar considerations."16
(iii) Section 4.2(2): "It is inconsistent that a Procurement Officer . . . accepts
any gift from any outside source regardless of the value and regardless of whether the
outside source is or is not soliciting business with the United Nations. All staff members
involved in procurement shall decline offers of gifts."17
(iv) Section 4.3(2)(a): "`Bribery' means the act of unduly offering, giving,
receiving or soliciting anything of value to influence the process of procuring goods or
services, or executing contracts."18
(v) Section 4.3(2)(c): "`Fraud' means the misrepresentation of information or
facts for the purpose of influencing the process of procuring goods or services, or
executing contracts, to the detriment of the UN or other participants."19
(vi) Section 4.3(3)(b): "The UN . . . [w]ill declare a firm ineligible, either
indefinitely or for a stated period of time, to become a UN registered Vendor if it at any
time determines that the firm has engaged in corrupt practices in competing for or in
executing a UN Contract."20
(vii) Section 4.3(3)(c): "The UN . . . [w]ill cancel or terminate a contract if it
determines that a Vendor has engaged in corrupt practices in competing for or in
executing a UN Contract."21
(viii) Section 7.12.2(1)(a): "The criteria for suspension or removal from the
Vendor Database . . . [includes] [f]ailure to perform in accordance with the terms and
conditions of one or more contract[s] . . . and [a]busive, unethical or unprofessional
conduct, including corrupt practices and submission of false information."22
11. The following provisions of the United Nations General Conditions of
Contract are relevant:
16
2006 Procurement Manual, sec. 4.2(1); 2004 Procurement Manual, sec. 4.2.1(1); 1998 Procurement
Manual, secs. 3.04.05, 7.06.01, 8.03.04.
17
2006 Procurement Manual, sec. 4.2(2); 2004 Procurement Manual, sec. 4.2.1(2); 1998 Procurement
Manual, secs. 3.04.05, 8.03.04.
18
2006 Procurement Manual, sec. 4.3(2)(a); 2004 Procurement Manual, sec. 4.2.5(2)(i); 1998 Procurement
Manual, secs. 5.12.01-5.12.02.
19
2006 Procurement Manual, sec. 4.3(2)(c); 2004 Procurement Manual, sec. 4.2.5(2)(iii); 1998
Procurement Manual, secs. 5.12.01-5.12.02.
20
2006 Procurement Manual, sec. 4.3(3)(b); 2004 Procurement Manual, sec. 4.2.5(3)(ii); 1998 Procurement
Manual, secs. 5.12.01-5.12.02.
21
2006 Procurement Manual, sec. 4.3(3)(c); 2004 Procurement Manual, sec. 4.2.5(3)(iii); 1998
Procurement Manual, secs. 5.12.01-5.12.02.
22
2006 Procurement Manual, sec. 7.12.2(1)(a); 2004 Procurement Manual, sec. 7.12.2(1)(a)(iv); 1998
Procurement Manual, secs. 5.12.01-5.12.02.
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(i) Article 2.0: "The Contractor shall refrain from any action that may
adversely affect the United Nations and shall fulfill its commitments with the fullest
regard to the interests of the United Nations."23
(ii) Article 6.0: "The Contractor warrants that no official of the United
Nations has received or will be offered by the Contractor any direct or indirect benefit
arising from this Contract or the award thereof. The Contractor agrees that breach of this
provision is a breach of an essential term of this Contract."24
III. RELEVANT CONCEPTS OF CRIMINAL LAW
12. The following well-established common law concepts are applicable to this
Report:
(i) Fraud: Commonly, fraud is defined as an unlawful scheme to obtain
money or property by means of false or fraudulent pretences, representations, or
promises. A scheme to defraud is any plan, device, or course of action to obtain money
or property by means of false or fraudulent pretences, representations or promises
reasonably calculated to deceive persons of average prudence;
(ii) Bribery: Commonly, bribery is defined as an act of a public official to
corruptly solicit, demand, accept or agree to accept anything of value from any person, in
return for being influenced in the performance of any official act or being induced to do
or omit to do any act in violation of the official duty of such official;
(iii) Conspiracy: Conspiracy is an agreement to do an unlawful act. It is a
mutual understanding, either spoken or unspoken, between two or more people to
cooperate with each other to accomplish an unlawful act. In this case, it is the agreement
to engage in a scheme to improperly obtain sums of money under contracts with the
United Nations not properly due and owing to them; and
(iv) Aiding and Abetting an Offense: Under the concept of aiding and
abetting, the offense is committed by another. In order to aid and abet a crime, it is
necessary that individuals involved associate themselves in some way with the crime, and
that they participate in the crime by doing some act to help make the crime succeed.
Individuals who aid and abet another in committing a criminal offense are equally as
culpable as if they committed the offence themselves.
13. If any evidence of bribery or fraud or other criminal offense is revealed during the
course of the Task Force's investigations, a referral to the appropriate prosecutorial
agency will be recommended.
23
2006 Procurement Manual, United Nations General Conditions of Contract, art. 2.0; United Nations
Procurement Manual, United Nations General Conditions of Contract, art. 2.0 (31 March 1998) (hereinafter
"1998 Procurement Manual")
24
2006 Procurement Manual, United Nations General Conditions of Contract, art. 6.0; 1998 Procurement
Manual, United Nations General Conditions of Contract, art. 4.0.
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IV. METHODOLOGY
14. The Task Force's investigations discussed in this Report have included interviews
with numerous witnesses, including current and former United Nations staff members,
representatives of various United Nations vendors, and other individuals with knowledge
of the transactions in question.
15. The Task Force's investigations involved review and analysis of a significant
number of documents and extensive examination of electronic media and evidence. The
Task Force's review of documentary evidence was complicated by the fact that the
United Nations procurement records were often incomplete, missing important
documents, and in a state of disarray. The Task Force made significant efforts to locate
and obtain all relevant files.
16. The Task Force also engaged in an extensive process of obtaining and examining
significant volumes of records and information from various United Nations vendors.
Notably, the Task Force did not have access to Avicos' records as the company did not
provide any cooperation to the Task Force.
17. The Task Force's investigations of the complex international financial schemes
and transactions described in this Report have faced a number of challenges, including
the need to obtain and reconstruct relevant data; the lack of compulsory process outside
of the United Nations system; limited cooperation from certain parties; and the fact that
several key witnesses with knowledge of the events could not be located or would not
agree to an interview.
18. The Task Force has been greatly aided in its investigations by the use of
electronic forensic tools. These tools have proved instrumental in reconstructing and
recovering crucial evidence relevant to the matters addressed in this Report.
V. BACKGROUND
19. Subsequent to Mr. Yakovlev's resignation on 21 June 2005, he was arrested and
pleaded guilty to conspiracy, wire fraud, and money-laundering charges in the United
States District Court, Southern District of New York.25 The investigations by IIC and the
United States Attorney's Office for the Southern District of New York revealed that since
2000, substantial amounts of money had been wired into an account controlled by Mr.
Yakovlev, in the name of Moxyco at the Antigua Overseas Bank, Antigua and Barbuda.26
IIC further established that a number of United Nations contractors and Mr. Yakovlev
25
Alexander Yakovlev letter to Andrew Toh (21 June 2005). In his letter, Mr. Yakovlev stated: "In view of
the latest allegations involving my violating of the applicable Staff Rules and in order to protect integrity,
reputation and the interest of the Organization, I hereby respectfully submit my resignation effective
immediately". Id. Mr. Yakovlev's resignation was accepted the next day. Andrew Toh letter to Alexander
Yakovlev (22 June 2005).
26
Independent Inquiry Committee into the Oil-for-Food Programme, "Third Interim Report," p. 65 (8
August 2005). The Third Interim Report is available on-line at http://www.iic-offp.org/documents.htm.
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engaged in a continuous course of conduct to provide substantial sums of money to Mr.
Yakovlev in connection with his position as a United Nations procurement official.27
20. As part of his guilty plea, Mr. Yakovlev entered into a cooperation agreement
with the United States Attorney's Office for the Southern District of New York.28 (See
figure below.) Under the terms of this agreement, Mr. Yakovlev agreed to forfeit
US$900,000 to the United States government. Mr. Yakovlev was required to offer all
assistance to the United States authorities in their on-going investigations, which included
testifying at the federal criminal trial of Mr. Vladimir Kuznetsov, a former Chairman of
the United Nations Advisory Committee and Administrative and Budgetary Questions.29
...
Figure: Alexander Yakovlev Cooperation Agreement, pp. 2-3 (8 August 2005)
21. Mr. Yakovlev testified at the trial of Mr. Kuznetsov on 27 and 28 February
2007.30 Mr. Kuznetsov's trial focused on the money laundering scheme to direct the
proceeds of Mr. Yakovlev's criminal activities with certain United Nations vendors. On
7 March 2007, a jury in the United States District Court, Southern District of New York,
convicted Mr. Kuznetsov of conspiring to commit money laundering.31
22. On 2 May 2007, the Task Force issued its Interim Report on Mr. Yakovlev and
associated vendors. As discussed in the Interim Report, the Task Force found that
beginning in or about 1993, and continuing until his arrest in 2005, former United
Nations Procurement Officer Mr. Yakovlev engaged in a corrupt scheme to solicit and
accept sums of money and items of value from a number of United Nations vendors
seeking to obtain United Nations contracts in exchange for unlawfully and improperly
providing these companies with assistance in the bidding and contract selection process.
These agreements were made and implemented by Mr. Yakovlev with the voluntary
27
Id.
28
Alexander Yakovlev Cooperation Agreement (8 August 2005).
29
Id., pp. 2-3.
30
Unites States v. Vladimir Kuznetsov, trial transcript (SDNY 2007) (hereinafter "Vladimir Kuznetsov trial
transcript").
31
Interim Report on Alexander Yakovlev, p. 7.
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assistance of Mr. Kuznetsov and entities and individuals associated with them. These
payments compromised the integrity of the procurement process, and were made by these
vendors and their representatives in direct violation of the United Nations rules and
procedures and to the direct detriment of the Organisation.32
VI. OVERVIEW OF THE SCHEME AND PAYMENTS
23. The United Nations Procurement Service ("the Procurement Service") facilitates
the acquisition of various goods and services needed by other departments of the
Organisation, including the equipment and services necessary to perform their duties.33
These goods and services are purchased through competitive bidding exercises conducted
by the Procurement Service from the companies registered as United Nations vendors.34
24. Mr. Yakovlev joined the United Nations as a Procurement Officer in August
35
1985. During his twenty-year tenure with the Procurement Service, Mr. Yakovlev was
involved in a wide range of procurement exercises involving a variety of goods and
services.36 However, in the last years of his service, Mr. Yakovlev primarily dealt with
the supplies for the United Nations peacekeeping operations, such as food rations for
troops, fuel, lubricants, and security equipment.37
25. During his tenure with the Procurement Service, Mr. Yakovlev also acted as a
case Procurement Officer overseeing a significant number of procurement exercises for
various United Nations contracts, and was responsible for communicating with vendors
on behalf of the Organisation.38 With regard to the procurement exercises to which he
was assigned as a case Procurement Officer, Mr. Yakovlev was responsible for preparing
and distributing bidding documents and participating in the evaluation of the submitted
proposals.39
26. The evaluation of bids submitted by vendors is a multi-step process. It includes
the submission of technical and financial evaluations, as well as examination of the
company's compliance with various contract proposal requirements.40 Generally, the
company offering the lowest cost proposal and the most technically acceptable bid is
32
Id., pp. 2-5, 24.
33
Id., p. 7; 2006 Procurement Manual. Prior to August 2004, the Procurement Service was known as the
Procurement Division. Joan McDonald memorandum to Andrew Toh (27 August 2004) (renaming the
Procurement Division into the Procurement Service). However, for purposes of this Report, the
Procurement Division and the Procurement Service are referred to collectively as "the Procurement
Service."
34
Financial Rules and Regulations of the United Nations, ST/SGB/2003/07, rule 105.14 (9 May 2003)
("procurement contracts shall be awarded on the basis of effective competition"); 2006 Procurement
Manual.
35
Interim Report on Alexander Yakovlev, p. 7.
36
Id.
37
Id., pp. 7-8.
38
Id., p. 8.
39
Id.
40
Id.
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awarded the contract.41 However, the procurement rules provide that if any proposal
does not conform to the requirements of the technical specifications or proposal
guidelines, such proposals can be rejected by the Procurement Service irrespective of the
fact that the company nevertheless offered the lowest price.42 Therefore, it is critically
important for companies bidding on United Nations contracts to comply with the bid
requirements.
27. As discussed in the Task Force's Interim Report, several major United Nations
vendors participated in Mr. Yakovlev's schemes, which generated more than US$3.5
million.43 The payments to Mr. Yakovlev were made into the bank accounts of Moxyco,
the company Mr. Yakovlev created to facilitate this scheme, and Nikal, a company
controlled by Mr. Kuznetsov.44 Additionally, the Task Force identified evidence that
certain payments were made to Mr. Yakovlev in cash and into his other accounts,
particularly in early 1990s.
28. Chart A below contains a summary of the payments made into the accounts of
Moxyco and Nikal.45 The number of individual transfers composing each of the total
amounts is provided in parentheses preceding each of the total amounts. In the period of
February 2000 to July 2005, Moxyco and Nikal received a total of over US$3.5 million
from various United Nations vendors (both directly and through associated front
companies) as well as unidentified entities and persons.
41
Id.; Financial Rules and Regulations of the United Nations, ST/SGB/2003/07, rules 105.14, 105.15 (9
May 2003).
42
Interim Report on Alexander Yakovlev, p. 8; 2006 Procurement Manual, rules 9.9.24(3), 10.1.5(1),
10.3.3(1)(c)(ii), 10.3.3.(i)(d)(iii), 10.4(4), 10.5.1(2), 11.4(1), 11.5(1), 11.6.9(1), 11.6.9(2), 11.6.10(1).
43
Interim Report on Alexander Yakovlev, pp. 8-10.
44
The creation of Moxyco and Nikal and the opening of their bank accounts at Antigua Overseas Bank
were fully described in the Interim Report on Mr. Yakovlev. Id., pp. 15-17, 21-22.
45
Id., p. 10; Antigua Overseas Bank, Moxyco account records (February 2000 to July 2005); Antigua
Overseas Bank, Nikal account records (June 2000 to July 2005); Confidential source report (23 April
2007). The amounts provided in Chart A are rounded.
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Chart A: Overview of Payments to Moxyco and Nikal (2000-2005)
29. Mr. Yakovlev's corrupt agreements with a number of United Nations vendors
were part of his efforts to illegally obtain money and tangible benefits through his
activities as a United Nations Procurement Officer. Mr. Yakovlev's financial motives for
his scheme were addressed in the Task Force's Interim Report.46
30. The proceeds of the scheme were subsequently utilized for various purposes,
including purchase of real estate.47 Mr. Yakovlev also transferred some of the illicit
proceeds to his bank accounts in Switzerland, Austria, and Liechtenstein to conceal the
financial assets.48
31. The Task Force identified fourteen accounts associated with Mr. Yakovlev and
Mr. Kuznetsov.49 These accounts were located in several countries, including Antigua
46
Interim Report on Alexander Yakovlev, pp. 11-12.
47
Id.
48
Id.
49
Id., pp. 14-22.
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and Barbuda, Austria, the United States, Russia, Cyprus, Switzerland, and
Liechtenstein.50 Chart B below provides an overview of the accounts associated with Mr.
Yakovlev and Mr. Kuznetsov and the distribution of the financial assets accumulated by
Moxyco and Nikal.51 As shown below, Moxyco and Nikal received in excess of US$3.5
million. The number of known individual transfers composing each of the total amounts
in Chart B is provided in parentheses preceding each of the total amounts.
Chart B: Overview of Alexander Yakovlev and Vladimir Kuznetsov Accounts
Over US$3.5 million
(from various sources)
OXYCO IKAL
(Alexander Yakovlev) (Vladimir Kuznetsov)
Hellenic Bank (50) US$757,583
(34) US$641,562 (1) US$278,658
Apr. 2000-July 2004 Dec. 2000-July 2005
July 2005 UNFCU
(12) US$148,867
Apr. 2000-June 2003
Citibank Hyposwiss Chase Manhattan
(6) US$278,645 (7) US$647,699 (13) US$110,670
June 2000-Oct. 2001 Feb. 2001-Jan. 2005 July 2001-Jan. 2004
Bank Austria
UNFCU Creditanstalt Chase Manhattan UNFCU
(11) US$218,153 (1) US$150,400 (1) US$20,142 (14) US$209,755
June 2000-Aug. 2004 Apr. 2002 Mar. 2000 Dec. 2000-July 2003
Liechtensteinische Landesbank European Trust Bank (Russia)
(transfer amounts unknown) (transfer amounts unknown)
32. The Task Force has obtained information revealing that at least some of these
accounts still contain substantial assets as of the date of this Report. As part of its Interim
Report on Mr. Yakovlev and associated vendors, the Task Force recommended that the
Organisation seek recovery of the illegal proceeds of Mr. Yakovlev's schemes.52 Based
on the Task Force's recommendation, the Organisation has been taking steps to recover
50
Id.; Antigua Overseas Bank, Moxyco account records (February 2000 to July 2005); Antigua Overseas
Bank, Nikal account records (June 2000 to July 2005). The amounts provided in Chart B are rounded.
51
Two bank accounts shown in Chart B--the accounts at Liechtensteinische Landesbank and European
Trust Bank--were identified by the Task Force through forensic analysis of Mr. Yakovlev's electronic
files. As of the date of this Report, the Task Force does not have information on the exact amounts of
transfers into these accounts.
52
Interim Report on Alexander Yakovlev, pp. 23, 25-26.
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the money corruptly obtained by Mr. Yakovlev and entities and individuals associated
with him.
VII. AVICOS AND ALEXANDER YAKOVLEV
A. COMPANY BACKGROUND
33. Avicos, an insurance company from Russia, was established in 1991.53 Avicos
has approximately 100 employees in Moscow and representative offices across Russia.54
The company's net profit for the first half of 2006 totaled approximately US$220,000.55
34. The company's President is Mr. Nikolai Ustimenko, and the company's General
Director is his son, Mr. Pavel Ustimenko.56 In 2003, Avicos signed a partnership
agreement with AFES, another Russian insurance provider, forming an insurance group
called Avicos-AFES.57 AFES and Avicos are located at the same address in Moscow and
utilize the same telephone and facsimile numbers.58 Both Mr. Pavel Ustimenko and Mr.
Nikolai Ustimenko are members of AFES' Board of Directors, and Mr. Pavel Ustimenko
also serves as the General Director of AFES.59
35. According to Mr. Kabachnik, Avicos' Executive Director, the company began
providing insurance services to United Nations vendors as early as 1994.60 On 14 March
2007, based on the evidence introduced during the trial of Mr. Kuznetsov, Avicos was
removed from the United Nations vendor database, pending completion of the Task
Force's investigation.61
B. AVICOS ARRANGEMENTS WITH ALEXANDER YAKOVLEV
36. The United Nations General Conditions of Aircraft Charter Agreements require
that "[t]he aircraft provided by the Carrier . . . shall be . . . fully insured during the entire
53
Vladimir Kuznetsov trial transcript, Alexander Yakovlev testimony, p. 152 (27 February 2007); Avicos,
"About the company," http://www.avicos.ru/index; Ilya Kabachnik interview (22 February 2007).
54
Id.
55
Avicos, "Report on the revenues and losses for the first half of 2006" (30 June 2006),
http://www.avicos.ru/finan; FXConverter, http://www.oanda.com/convert/classic (showing currency
exchange rates for 30 June 2006).
56
Avicos, "Organizational structure of Avicos," http://www.avicos.ru/avicos_vnesh_f20070218.swf; Ilya
Kabachnik interview (22 February 2007); Alexander Yakovlev interview (16 and 17 August 2005).
57
Avicos, "About the company," http://www.avicos.ru/index; Avicos, "2005 Annual Report"; Sergey
Merkulov facsimile to the Procurement Service (25 April 2007) (identifying Mr. Merkulov as AFES'
Executive Director).
58
AFES, "Contact Information," http://www.afes.ru/coord; Avicos, "Contacts,"
http://www.avicos.ru/contact.
59
AFES, "Annual Report of AFES for 2004," p. 10 (24 June 2005).
60
Ilya Kabachnik interview (22 February 2007); Avicos, "Organizational structure of Avicos,"
http://www.avicos.ru/avicos_vnesh_f20070218.swf.
61
Warren Sach letter to Avicos (14 March 2007).
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term of this Charter Agreement."62 The standard long-term and short-term aircraft
charter agreements also state that "[p]rior to the commencement of any air charter
services under this Agreement, the Carrier shall obtain, and shall provide and maintain,
for the entire duration of this Agreement and from an insurance carrier acceptable to the
UN, comprehensive insurance coverage."63
Figure: Standard Short-Term and Long-Term Aircraft Charter Agreements, art. 8.2
(undated)
37. Thus, insurance carriers need not be registered United Nations vendors to provide
insurance coverage for an air carrier doing business with the United Nations.64 Avicos
worked directly with the United Nations vendors and, according to Mr. Kabachnik,
obtained United Nations vendor registration "only as part of [its] general work."65
38. According to Mr. Yakovlev, he was contacted by telephone by a representative of
Avicos, who found his name on the Procurement Service's website, where Mr. Yakovlev
was listed as the contact person for Russian companies.66 The representative explained to
Mr. Yakovlev that Avicos was in the business of providing insurance arrangements for
aviation and space companies.67
39. Mr. Yakovlev was asked by Avicos if he could assist the company by providing it
with the names and contact information for Russian aviation companies participating in
United Nations bids.68 Avicos believed that if it had access to these companies, it would
be able to expand its business, which would be "mutually beneficial for . . . [Avicos] and
for the companies."69 In return for his help, and subject to successful arrangements with
the companies, Mr. Yakovlev was promised financial compensation to be determined at
Avicos' discretion.70
62
United Nations General Conditions for Aircraft Charter Agreements, art. 1(a) (undated) (applicable in
2002 and 2007).
63
Standard Long-Term Aircraft Charter Agreement, art. 8.2 (undated) (emphasis added); Standard Short-
Term Aircraft Charter Agreement, art. 8.2 (undated) (emphasis added).
64
Staff Member 1 interview (8 May 2007) (identifying Staff Member 1 as a long-time member of the
Procurement Service); Staff Member 2 interview (9 May 2007) (identifying Staff Member 2 as a Team
Leader with the Procurement Service).
65
Ilya Kabachnik interview (22 February 2007).
66
Vladimir Kuznetsov trial transcript, Alexander Yakovlev testimony, p. 152 (27 February 2007);
Alexander Yakovlev interview (16 and 17 August 2005).
67
Vladimir Kuznetsov trial transcript, Alexander Yakovlev testimony, p. 153 (27 February 2007).
68
Id.; Alexander Yakovlev interview (16 and 17 August 2005).
69
Vladimir Kuznetsov trial transcript, Alexander Yakovlev testimony, p. 153 (27 February 2007).
70
Id.
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40. Mr. Yakovlev subsequently provided the requested information to Avicos, which
used it to approach the vendors, offering them aircraft insurance to comply with the
United Nations rules concerning aircraft charter agreements.71
41. According to Mr. Yakovlev, Avicos also offered financial assistance to aviation
companies working with the United Nations.72 For this reason, it was in Avicos' interest
to pursue any outstanding payments owed by the United Nations to companies financed
by Avicos.73 According to Mr. Yakovlev, Avicos called him inquiring about outstanding
invoices, and Mr. Yakovlev obtained explanations for the payment delays or worked on
expediting the payment.74
42. According to Mr. Yakovlev, his primary point of contact in Avicos was Mr.
Mikhail Kochetkov, who is no longer with the company.75 The Task Force attempted
to contact Mr. Kochetkov, but received no response.76 However, Avicos confirmed to the
Task Force that Mr. Kochetkov was employed by Avicos as Advisor to the President of
the company from 28 December 2001 to 1 November 2004.77
C. AVICOS PAYMENTS TO ALEXANDER YAKOVLEV
43. OIOS and the Task Force undertook considerable efforts to identify and obtain
relevant financial and corporate records to establish the entities and individuals behind
the front companies employed to make payments to Mr. Yakovlev.
44. As a result of its investigation, the Task Force established that a total of at least
US$186,800 was transferred into the accounts of Moxyco and Nikal through front
companies associated with Avicos and its senior managers.78 Mr. Yakovlev admitted to
providing information to Avicos and receiving several payments from Avicos totaling up
to US$200,000.79
45. Avicos-related payments were made through Solitaire Nominees Ltd. ("Solitaire
Nominees") and Westminster International Holdings ("Westminster International"), two
front companies associated with Mr. Nikolai Ustimenko and Mr. Pavel Ustimenko.80
71
Alexander Yakovlev interview (16 and 17 August 2005).
72
Id.
73
Id.
74
Id.
75
Id.
76
The Task Force email to Mikhail Kochetkov (2 March 2007).
77
Ilya Kabachnik letter to the Task Force (1 March 2007).
78
Antigua Overseas Bank, Moxyco account records (November 2000 to September 2001); Antigua
Overseas Bank, Nikal account records (June 2001 to August 2001).
79
Vladimir Kuznetsov trial transcript, Alexander Yakovlev testimony, pp. 153-154 (27 February 2007);
Alexander Yakovlev interview (16 and 17 August 2005).
80
Antigua Overseas Bank, Moxyco account records (November 2000 to September 2001); Antigua
Overseas Bank, Nikal account records (June 2001 to August 2001); Alexander Yakovlev interview (28
September 2005); OIOS mission analysis report (12 September 2005) (stating that Solitaire Nominees'
payments were made "per Westminster International Holdings (Pavel/Pavlovich Ustimenko)").
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Table A: Avicos-related payments to Moxyco and Nikal
Date of transfer Recepient Amount Sender
14-Nov-00 Moxyco $ 11,980 Westminster International
06-Mar-01 Moxyco 24,980 Solitaire Nominees
28-Mar-01 Moxyco 9,980 Solitaire Nominees
11-June-01 Moxyco 24,980 Solitaire Nominees
11-June-01 Nikal 24,980 Solitaire Nominees
19-July-01 Moxyco 9,980 Solitaire Nominees
20-July-01 Nikal 9,980 Solitaire Nominees
24-Aug-01 Moxyco 24,980 Solitaire Nominees
24-Aug-01 Nikal 24,980 Solitaire Nominees
25-Sep-01 Moxyco 19,980 Solitaire Nominees
Total $ 186,800
46. Chart C below summarizes the payments generated by the scheme in relation to
Avicos.
Chart C: Avicos-related payments to Moxyco and Nikal
47. It should be noted that the amount of actual payments related to Avicos could
exceed US$186,800, as Moxyco and Nikal received substantial additional sums of money
from sources that cannot be identified from the bank records currently available to the
Task Force. (See Chart A.)
D. COMPANY RESPONSE TO THE TASK FORCE
48. On 1 March 2007, after the Task Force informed Avicos of the allegations, the
company replied, stating that it "checked [its] records" and found no evidence of
payments to or agreements and correspondence with Mr. Yakovlev and entities and
individuals associated with him.81 The company further denied receiving any
information from Mr. Yakovlev and having any relationship to or transactions with
81
Ilya Kabachnik letter to the Task Force (1 March 2007).
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Westminster International or Solitaire Nominees.82 Avicos' letter is attached as Annex A
to this Report.
49. However, the information obtained by the Task Force--including bank records
and Mr. Yakovlev's admissions--provided sufficient evidence of Avicos' improper
involvement with Mr. Yakovlev.
50. On 25 April 2007, Avicos was sent a formal adverse finding letter, informing the
company that as a result of the Task Force's investigation, it was found to be in violation
of the United Nations rules and regulations. (See Annex B.) The company was further
informed that the Task Force identified over US$186,000 in Avicos-related payments to
Moxyco and Nikal, and that these payments were made in exchange for Mr. Yakovlev's
assistance provided to Avicos, including information concerning various United Nations
vendors and United Nations contracts.83
51. Avicos has not furnished any further information to the Task Force in response to
the Task Force's adverse finding letter.
VIII. DUE PROCESS
52. During the Task Force's investigation of the matters discussed in this Report,
Avicos and its officials were fully informed of the allegations and provided with copies
of bank records for payments to Mr. Yakovlev.84 The company was afforded ample
opportunity to present evidence to the Task Force. However, no records were provided
and the company failed to provide any meaningful cooperation to the Task Force. The
Task Force also repeatedly requested Avicos to provide access to Mr. Nikolai Ustimenko
and Mr. Pavel Ustimenko.85 However, the Task Force was not granted access to these
company representatives.
IX. FINDINGS
53. The Task Force finds that, between in or about November 2000 and continuing
through and until September 2001, approximately, Avicos, a company registered with the
Organisation as a United Nations vendor, and thereby bound by the Organisation's rules,
corruptly paid more than US$180,000 to Moxyco and Nikal, two companies established
to further the corrupt efforts of United Nations Procurement Officer Mr. Alexander
Yakovlev to solicit, receive, and accept sums of money in exchange for favourable
treatment of vendors seeking to do business with the Organisation. These payments were
made to improperly and unlawfully influence the procurement processes and official
business of the United Nations. The payments were made through front companies
associated with senior managers of Avicos in exchange for Mr. Yakovlev's assistance
82
Id.
83
The Task Force letter to Nikolai Ustimenko (25 April 2007).
84
Ilya Kabachnik interview (22 February 2007); The Task Force letters to Nikolai Ustimenko (23 February
and 25 April 2007); The Task Force letter to Alexey Maximov (14 February 2007).
85
The Task Force letter to Nikolai Ustimenko (23 February 2007); The Task Force email to Ilya Kabachnik
(5 March 2007); Ilya Kabachnik interview (22 February 2007).
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with Avicos' business projects in relation to the United Nations. The assistance provided
to Avicos included improper disclosure of information concerning various United
Nations vendors and United Nations contracts. The company's conduct, discussed in this
Report, was corrupt and unlawful, and compromised the integrity of the procurement
processes and execution of contracts related to Avicos. Further, the conduct described in
this Report served to undermine the reputation of the United Nations and its staff
members.
54. Mr. Yakovlev's assistance to Avicos and the company's payments to Mr.
Yakovlev were in violation of criminal laws of the host country, as well as the United
Nations regulations and rules, including procurement and financial rules. By
orchestrating a scheme to obtain valuable United Nations information through fraudulent
and corrupt means, including payments to a public official to influence the operations of
an international organisation, Avicos, as well as the officials who participated in the
efforts identified herein, committed criminal acts. This company violated, and caused to
be violated, United Nations procurement rules, procedures, and contractual provisions,
which prohibit the United Nations vendors from engaging in corrupt practices during the
procurement process.
55. The Task Force finds that a number of Avicos' officers had knowledge of, were
responsible for, or participated in the corrupt acts, including Mr. Nikolai Ustimenko, Mr.
Pavel Ustimenko, and Mr. Mikhail Kochetkov.
56. The Task Force further finds that Avicos violated its obligations as a United
Nations vendor by not cooperating with the Task Force in the course of its investigation
and refusing to provide any relevant records or access to requested company officers.
X. CONCLUSIONS
57. The Task Force concludes that Avicos, Mr. Nikolai Ustimenko, Mr. Pavel
Ustimenko, Mr. Mikhail Kochetkov, and possibly other company officials, engaged in
criminal acts, including bribery, corruption, and money laundering.
58. The Task Force concludes that Avicos violated the following provisions of the
United Nations procurement rules:
(i) Sections 4.3(2)(a) and 4.3(2)(c) of the 2006 Procurement Manual and
corresponding provisions in earlier editions of the Procurement Manual, which provide
that vendors should not engage in bribery and fraud;
(ii) Section 4.3(3)(c) of the 2006 Procurement Manual and corresponding
provisions in earlier editions of the Procurement Manual, which state that vendors should
not engage in "unethical or unprofessional conduct, including corrupt practices and
submission of false information";
59. The Task Force concludes that Avicos, Mr. Nikolai Ustimenko, Mr. Pavel
Ustimenko, Mr. Mikhail Kochetkov, and other employees of this company caused
violations of Staff Regulations 1.2(b), 1.2(e), 1.2(f), 1.2(g), 1.2(i), 1.2(l), as well as
Sections 4.1.5(4)(a), 4.2(1), 4.2(2) of the 2006 Procurement Manual (and corresponding
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provisions in earlier editions of the Procurement Manual), which state that procurement
officers should act in the best interests of the Organisation and should not use their office
for private gain. The Task Force further concludes that Avicos and its employees and
officials caused violations of Articles 2.0 and 4.0 of the 2004 edition of the United
Nations General Conditions of Contract.
XI. RECOMMENDATIONS
A. RECOMMENDATION PTF-R007/07/1
60. The Task Force recommends that the Procurement Service take all necessary
steps to permanently remove Avicos from the vendor registration list in accordance with
the United Nations procurement rules, and that this company, in any form and in any
capacity, be banned from any United Nations business, either directly or indirectly,
including as an affiliate of any other vendor. The Task Force recommends that Avicos
should not be viewed as an acceptable insurance provider by any United Nations
department, agency, office, or mission. The Task Force also recommends that the
Organisation should not conduct any business with any joint ventures that involve
Avicos, including AFES.
61. The Task Force further recommends that the individuals involved in Avicos'
arrangements with Mr. Alexander Yakovlev--Mr. Pavel Ustimenko, Mr. Nikolai
Ustimenko, and Mr. Mikhail Kochetkov--be banned from conducting any business with
the Organisation.
B. RECOMMENDATION PTF-R007/07/2
62. The Task Force further recommends that the Secretary-General request the Office
of Legal Affairs to make appropriate referrals for criminal prosecution with regard to
Avicos and company officials identified in this Report.
C. RECOMMENDATION PTF-R007/07/3
63. The Task Force recommends that the Secretary-General request the Office of
Legal Affairs to continue its efforts to recoup the proceeds of Mr. Yakovlev's unlawful
schemes, including asserting claims against the funds held at various financial institutions
for the benefit of Mr. Yakovlev, and asserting a claim with the United States District
Court, Southern District of New York. Further, the Task Force recommends that the
United Nations seek recovery of the proceeds of Mr. Yakovlev's illegal schemes under
the common principles of criminal and civil liability, as well as under the United Nations
rules and regulations, including Staff Rule 112.3, which states that "[a]ny staff member
may be required to reimburse the United Nations either partially or in full for any
financial loss suffered by the United Nations as a result of the staff member's negligence
or of his or her having violated any regulation, rule or administrative instruction."
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D. RECOMMENDATION PTF-R007/07/4
64. The Task Force strongly recommends that the Secretary-General direct the Office
of Legal Affairs and the Procurement Service to amend and revise the United Nations
General Conditions of Contract and vendor registration forms to require, as a condition of
doing business with the Organisation, that vendors, their subsidiaries, agents,
intermediaries, and principals cooperate with OIOS in its investigations. Such
cooperation shall include, but not be limited to, access to all employees, representatives,
agents, and assignees of the vendor, as well as production of all documents requested,
including financial records. Failure to fully cooperate with investigations must be
sufficient grounds allowing the Organisation to repudiate and terminate the contract and
debar and remove the vendor from the Organisation's list of registered vendors. Further,
notice to this effect should be included in the Procurement Manual and provided to
prospective vendors through the Procurement Service's website and solicitation
documents.
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ANNEX A: AVICOS LETTER TO THE TASK FORCE (1
MARCH 2007)
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ANNEX B: THE TASK FORCE LETTER TO NIKOLAI
USTIMENKO (25 APRIL 2007)
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