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Associated Press

Fraud Plagues Global Health Fund

John Heilprin

Irish rock star Bono is among celebrities who have backed the Global Fund to fight AIDS, malaria and tuberculosis. That fund is now under fire for allegations of corruption. (RICCARDO GANGALE / AP)

GENEVA — A $21.7 billion development fund backed by celebrities
and hailed as an alternative to the bureaucracy of the United Nations
sees as much as two-thirds of some grants eaten up by corruption, The
Associated Press has learned.

Much of the money is accounted for
with forged documents or improper bookkeeping, indicating it was
pocketed, investigators for the Global Fund to Fight AIDS, Tuberculosis
and Malaria say. Donated prescription drugs wind up being sold on the
black market.

The fund's newly reinforced inspector general's
office, which uncovered the corruption, can't give an overall accounting
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.

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 36 percent of the money spent on a program in Mali to fight
tuberculosis and malaria, and 30 percent of grants to Djibouti.

Zambia, where $3.5 million in spending was undocumented and one
accountant pilfered $104,130, the fund decided the nation's health
ministry simply couldn't manage the grants and put the United Nations in
charge of them. The fund is trying to recover $7 million in
"unsupported and ineligible costs" from the ministry.

The fund is
pulling or suspending grants from nations where corruption is found, and
demanding recipients return millions of dollars of misspent money.

messenger is being shot to some extent," fund spokesman Jon Liden said.
"We would contend that we do not have any corruption problems that are
significantly different in scale or nature to any other international
financing institution."

To date, the United States, the European
Union and other major donors have pledged $21.7 to the fund, the
dominant financier of efforts to fight the three diseases. The fund has
been a darling of the power set that will hold the World Economic Forum
in the Swiss mountain village of Davos this week.

It was on the
sidelines of Davos that rock star Bono launched a new global brand,
(Product) Red, which donates a large share of profits to the Global
Fund. Other prominent backers include former U.N. secretary-general Kofi
Annan, French first lady Carla Bruni-Sarkozy and Microsoft founder Bill
Gates, whose Bill and Melinda Gates Foundation gives $150 million a

The fund's inspector general, John Parsons, said donors
should be reassured that the fund is serious about uncovering
corruption: "It should be viewed as a comparative advantage to anyone
who's thinking about putting funds in here."

But some donors are
outraged at what the investigators are turning up. Sweden, the fund's
11th-biggest contributor, has suspended its $85 million annual donation
until the fund's problems are fixed. It held talks with fund officials
in Stockholm last week.

Swedish Foreign Ministry spokesman Peter
Larsson said in a statement that his country is concerned about
"extensive examples of irregularities and corruption that the fund has
uncovered" in nations like Mali and Mauritania.

"For Sweden, the
issues of greatest importance are risk management, combating corruption
and ultimately ensuring that the funds managed by the Global Fund really
do contribute to improved health," he said.


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The investigative arm
of the U.S. Congress also has issued reports criticizing the fund's
ability to police itself and its overreliance on grant recipients to
assess their own performance.

Fund officials blame the misspending
on the lack of financial controls among the grants' recipients, many of
which are African health ministries whose budgets are heavily supported
by the fund. Others are nations or international organizations without
the resources to deal with pervasive corruption. The fund finances
programs in 150 nations in all.

Among the corruption uncovered by Parsons' task force:

month, the fund announced it had halted grants to Mali worth $22.6
million, after the fund's investigative unit found that $4 million was
misappropriated. Half of Mali's TB and malaria grant money went to
supposed "training events," and signatures were forged on receipts for
per diem payments, lodging and travel expense claims. The fund says Mali
has arrested 15 people suspected of committing fraud, and its health
minister resigned without explanation two days before the audit was made

—Mauritania had "pervasive fraud," investigators say,
with $4.1 million — 67 percent of an anti-HIV grant — lost to faked
documents and other fraud. Similarly, 67 percent of $3.5 million in TB
and malaria grant money that investigators examined was eaten up by
faked invoices and other requests for payment.

reviewed more than four-fifths of Djibouti's $20 million in grants, and
found about 30 percent of what they examined was lost, unaccounted for
or misused. About three-fifths of the almost $5.3 million in
misappropriated money went to buy cars, motorcycles and other items
without receipts. Almost $750,000 was transferred out of the account
with no explanation.

—Investigators report that tens of thousands
of dollars worth of free malaria drugs sent to Africa each year by
international donors including the Global Fund are stolen and resold on
commercial markets.

—The U.N. Development Program manages more
than half of the fund's spending, but U.N. officials won't release
internal audits of their programs to the fund's investigators. Parsons
said that has blocked him from investigating programs in the more than
two dozen nations, including some of the most corruption-prone.

spokesman Stephane Dujarric said Sunday that the program's policy bars
it from sharing internal audit reports with the Global Fund, but that it
is reassessing that policy.

"UNDP does, as a standing practice,
inform the Global Fund about key audit findings and recommendations
resulting from internal audits of Global Fund grants managed by UNDP,"
he said.

The Global Fund was set up as a response to complaints
about the cumbersome U.N. bureaucracy, and is strictly a financing
mechanism to get money quickly to health programs. In just eight years
it claims to have saved 6.5 million lives by providing AIDS treatment
for 3 million people, TB treatment for 7.7 million people and handing
out 160 million insecticide-treated malaria bed nets.

should focus on those results, said Homi Kharas, a senior fellow at the
Brookings Institution and formerly the World Bank's chief economist for
East Asia and the Pacific.

"Without a spotlight, without
investigations, and without some sort of accountability, it's impossible
to root out corruption," he said. "But just simply withdrawing
donations, I do believe, would condemn millions of people who are not
involved in the corruption to terrible fates."

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