THE BLOG
08/05/2014 11:15 am ET | Updated Oct 05, 2014

How Did the Global Fund Fire Its Inspector General and Then Claim He Worked Without Interference?

Those who work in the international aid business know the signs of fraud: the bodega where the health center should be, the multiple Mercedes in the parking lot outside the clinic and the empty medications cabinet inside, the nurses no one has ever seen except on the payroll. The Global Fund to Fight AIDS, Tuberculosis and Malaria, headquartered in Geneva, underwritten by Bill and Melinda Gates, and supported by Bono, and Carla Bruni Sarkozy, was to be the answer to all this. The Global Fund, a quasi-private inter-governmental organization, would grant funds directly to non-governmental organizations (NGOs) in poor countries, thus bypassing unethical government officials and minimizing corruption.

In the United States, though, where the Congress is skeptical, the Appropriations Committees still insisted on precautions and conditioned 10 percent of the U.S. contribution to the Global Fund on the maintenance of an independent Office of Inspector General (OIG), the unit that investigates corruption at the organization. In legislation authorizing the contribution (Sec. 202,HR 5501), the Congress exacted an annual letter from the State Department certifying that the Global Fund OIG operated without interference. To help ensure the OIG's effectiveness, the reports on investigations were to be published on the organization's website. Together, the certification and the publications would make it nearly impossible to conceal fraud and thievery in Global Fund grants.

Nearly, but not absolutely, impossible. The trick, of course, would be to muzzle the OIG, so that the published reports were not so damning when the expired medications and the ghost workers turned up. And, because the IG himself was an employee of the Global Fund, he could be pressured. The pressure, however, had to be invisible because the IG had to certify to State, which certified to Congress, that there was in fact no pressure at all.

So the linchpin in all of this was the Global Fund IG. He had to certify that no one at the organization interfered with his operations. His signature on that letter to the State Department was worth over $130 million to the Global Fund each year, roughly 10 percent of the U.S. annual contribution. That much money could create a lot of pressure.

All of it came to bear on John Parsons, who, from 2008 until November 2012, was the IG at the Global Fund. For five years, Parsons worked hard there to get the investigative and auditing unit running effectively. By 2011, the results of a series of complex and protracted investigations came in and went up on the OIG website. The news was not good; millions of dollars were missing. Invoices did not exist. Medical equipment was substandard and drugs were tainted. While the celebrities toasted the successes of the Global Fund and spoke blithely about the millions of lives they had saved, Parsons and his team posted reports showing that the projects scrutinized could not account for 30 to 65 percent of the funds spent on them.

In January that year, John Heilprin of the Associated Press (AP) reported on the Global Fund's investigations: "Fraud Plagues Celebrity-Backed Global Fund."

The fund's newly reinforced inspector general's office, which uncovered the corruption, can't give an overall accounting [for fraud affecting the organization] because it has examined only a tiny fraction of the $10 billion that the fund has spent since its creation in 2002. But the levels of corruption in the grants they have audited so far are astonishing.

A full 67 percent of money spent on an anti-AIDS program in Mauritania was misspent, the investigators told the fund's board of directors. So did [sic] 36 percent of the money spent on a program in Mali to fight tuberculosis and malaria, and 30 percent of grants to Djibouti.

The reaction from donors was swift and ruinous: Germany, Sweden, Denmark and the European Union suspended their contributions. And after that, John Parsons' job got much, much harder. On July 25, 2012, Parsons sent a message to State Department officer Brian Hackett; the subject line read "Disclosure policy and US cingressional [sic] certification." Parsons asked "Can we discuss at 12:30 EST today, please? It's rather urgent." Apparently, he received no written response. Since Parsons asked for a talk, it's probable that Hackett and he discussed the U.S. Congressional certification by phone in October two years ago. Parsons himself is in no position to say because he is gagged by pending legal cases.

We know, however, that in November 2012, after much acrimony and conflict, the Board of the Global Fund fired John Parsons. Of course, when an organization with corruption problems fires its inspector general, that is huge red flag. In the U.S., we would expect State Department officials responsible for certification of the IG's independence to start asking questions.

But they didn't. Quite the opposite. Correspondence between the Global Fund and the U.S. State Department just before Parsons was dismissed and in the year afterwards show a collaborative effort to certify that the organization's inspector general's office operated without undue interference. It is difficult to make such a categorical statement, of course, when the organization has just dismissed the inspector general himself. Nonetheless, with $130 million at stake, the State Department was determined to establish that Parsons' termination did not amount to interference in the operations of the OIG.

This wasn't easy, and we've since learned, there was a certain amount of turmoil surrounding the OIG then. Just after Parsons' termination, a Global Fund official wrote to his State Department counterparts, including Hackett, to alert them to another critical article by Heilprin that would be published imminently. The e-mail appears to be from Global Fund communications director, Seth Faison, and its importance was "High." The subject line read: "AP-Timing."

A negative AP article about the OIG situation may come out today. It may come out any time in the next 72 hours. Heilprin will not tell us timing (because his editors have the last word, and he won't be sure until they clear it). But he resisted efforts to delay.

There are two actions which, if taken before the article comes out, may rob it of some impact: U.S. Certification, and an announcement of interim arrangements at the OIG.

If they are taken after the article appears, they may look reactive.

Curiously, John Heilprin's AP article never appeared.

The silence at the State Department about the whole sorry mess after Parsons' termination was deafening. When the mechanics of the certification process are scrutinized, however, the agency's lack of concern is less baffling. The U.S. representative on the board of the Global Fund is a State Department employee, and is therefore a party to the machinations there. The whole story begs the question: was Parsons terminated because he refused to certify that his office could conduct its inquiries without interference? And if so, who was interfering? Management? The board? Did the State Department certify to Congress that the Global Fund IG worked independently, although the board fired him after he refused to comply with a demand for certification of his independence?

It's worth noting that the effort to extract the correspondence between the State Department and the Global Fund has been herculean. The Government Accountability Project (GAP) requested the documents in April 2013 through a Freedom of Information Act (FOIA) request. The FOIA office at State projected that they would be released over one year later, in June 2014. When June 2014 rolled around, the FOIA officer wrote to say that the search for relevant documents would not be completed until December 2014. Then, in July, a researcher who had requested the same documents -- and submitted his FOIA request after GAP's -- reported that he had already received them, so GAP got them from him -- secondhand. The State Department's search for documents under GAP's original request is ongoing. Perhaps, one day, it will be completed.

In the meantime, we wrote to Brian Hackett about certification and asked two questions:

1. On the State Dept. certification of the independence of the Global Fund OIG, are the letters from State to Congress public?
2. And the letter from the Global Fund to the State Dept.?

Hackett responded: "No" and "No."

To recap:

1. Parsons' office reports a serious problem of corruption in countries where investigators scrutinized Global Fund grants;
2. Heilprin reports on the IG's findings for AP and the news spreads;
3. Various European countries and the European Union suspend their contributions to the Global Fund;
4. Parsons writes urgently to Hackett asking for a consultation about congressional certification, which is worth over $130 million annually to the Global Fund;
5. Parsons is dismissed;
6. The Global Fund communications officer writes to Hackett warning of the next critical Heilprin article about certification of the OIG's independence at the Global Fund;
7. Heilprin's next article disappears;
8. Release of documents in response to FOIA requests from GAP is delayed for over one year;
9. GAP's questions to Hackett about the accountability process reveal that the process is secret.
10. The Global Fund continues to collect $1.5 billion annually from American taxpayers.

The problem here -- the loophole the Congress left open and the State Department drove its certification process through -- is secrecy. The accountability process established by Congress to ensure integrity at the Global Fund is secret. Of course, anyone working on government accountability knows that a secret oversight process is no oversight at all. If it's going to be effective, the accountability process has to be accountable, too. Otherwise, government agencies withhold offending documents, editors with friends in high places spike critical stories, letters of certification provide Congress with nonsense and falsehoods.

This is exactly what happened at the Global Fund in November 2012. And again in July 2013, for a total cost to the U.S. taxpayer of more than $3 billion. It's happening again this year.

Final Note: Martin O'Malley, the Inspector General who replaced John Parsons, announced yesterday that he will resign at the end of the year, citing family reasons.

Bea Edwards is Executive & International Director of the Government Accountability Project, the nation's leading whistleblower protection organization. She is also the author of The Rise of the American Corporate Security State.

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