Thursday, June 25, 2015

AFICS to members: "There are issues but don't sign the petition." (12.5.15)

Room DC1-580, United Nations, New York, NY 10017
Tel. (212) 963-2943 Fax. (212) 963-5702 e-mail.


Honorary Members
Martti Ahtisaari
Kofi A. Annan
Ban Ki-moon
Aung San Suu Kyi
Boutros Boutros-Ghali
Javier Perez de Cuellar
12 May 2015


Dear Members of AFICS/NY,

Since the April 2015 postings on the AFICS/NY website, we have not had replies from the UN
Administration to our successive queries as to the final content and status of the Memorandum of
Understanding (MoU). In the last weeks AFICS/NY has either met or been in contact with the Office of the Secretary-General, the Office of Human Resources Management (OHRM), the Office of Internal Oversight Investigation (OIOS), the Legal Office and of course the Pension Fund, including the two Assistant Secretaries-General, to continue to press for resolution of the MoU. You may wish to consult the AFICS/NY website which began to post articles on the matter as far back as May 2014 and which continues to be updated as developments require.

Allow me first to recap briefly what AFICS/NY has done and where the matter stands at present.
Following the meeting organized on 31 March 2015 by the New York staff representatives alleging
fraud and mismanagement by the CEO of the Pension Fund, AFICS/NY began immediately to press the Administration to hold a follow-up meeting to reply to the allegations. On 2 April, the Chair of the AFICS/NY Pension Committee, Warren Sach, and I requested a meeting with the Under-Secretary-General of OIOS to ensure that OIOS had been seized with the allegations; we were told they had been and we urged OIOS to expedite the investigations. The follow-up meeting we had been requesting of the Administration, and which came about because of the persistent efforts of AFICS/NY, was finally held on 16 April and was chaired by the Secretary-General’s Chef de Cabinet, Susana Malcorra. She explained the structure of the Pension Fund, providing an organigram to illustrate it: the CEO heads the liabilities (administration and payment of pensions) and is responsible to the Pension Board, while the Representative of the Secretary-General (RSG) for investments, who manages the investments, reports to the Secretary-General. The Chef de Cabinet made it clear that the majority of the Fund’s assets were managed internally and conservatively, with approximately 10 per cent of the overall portfolio invested in alternative investments, including real estate; approximately one percentage point of the 10 per cent was invested in a hedge fund, described as not a true hedge fund in the way such funds were normally structured, and she assured participants that there were no plans to increase investments in hedge funds now, or in the medium- or long –term.

Immediately after the 31 March meeting, some retirees and a number of former staff representatives began to publish on social media and through email lists a broad mischaracterization of the MoU, alleging that it would drastically change the Fund’s structure, enable the Fund’s CEO to take over the investments side of the Fund and increase investments in hedge funds. The explanations of the Chef de Cabinet were ignored and the flawed premise of a take-over by the CEO continued to be promoted by this group who followed it by a wide campaign across the organizations and within the AFICS/NY membership. AFICS/NY was criticized for not supporting this erroneous point of view. Last week an open letter and new petition, similar to the one circulated last year, was addressed to the Secretary- General urging him, inter alia, to “reject the organizational changes proposed by the CEO in a new MoU” and the flexibilities contained therein, flexibilities approved by the Pension Board and the General Assembly last year. The updated draft MoU does not propose changes to the structure of the Pension Fund, nor does the CEO draft the MoU which is the function of OHRM on behalf of the Secretary-General. Yet these claims form the basis of the new petition and appear to be believed by some retirees. AFICS/NY has been criticized for not supporting this erroneous point of view. The petition also wrongly asserts that “the CEO would be at full liberty to ignore the UN’s well-established rules” in areas such as the code of ethics, policy on gifts, approval of outside activities, etc. In a MoU made available to the Pension Board last year the four flexibilities outlined in the MoU were analysed, discussed at length and modified to ensure that they were quite specific and limited on the delegated authority given by the Secretary-General to the CEO. The flexibilities relate to a handful of well defined personnel management issues such as promotions from G to P, mobility requirements for Plevel staff, extensions beyond retirement age and possible use of external experts to classify posts in accordance with UN common system job classification standards and subject to approval by OHRM.These flexibilities would in no way alter the two-part structure of the Fund.

Although there is absolutely no linkage between the MoU and the investments of the Fund, this
assertion to the contrary has evidently created genuine concern on the part of some retirees who have been calling our office or emailing us to ask what our views are and, more recently, if they should sign the latest petition. In its discussions, the AFICS/NY Governing Board recalled that since March 2015, it has sought to portray in an objective manner all aspects of the matter and had posted information from both the CEO of the Fund and the representatives of the staff on its website. The Governing Board firmly concluded that it could not support a campaign that materially misrepresented the situation with respect to the MoU. It would continue to press the Administration to answer all of the allegations and move expeditiously towards the finalization of a MoU satisfactory to all signatories and consistent with existing Pension Board and General Assembly decisions. In the most recent message to the Chef de Cabinet sent on 10 May, AFICS/NY stressed that the MoU must respect all UN and UNJSPF rules and regulations and maintain the strict separation between the liabilities and assets sides of the Fund; for her part the RSG must ensure that there will be no change to present investment policy, meaning no increase in alternative investments, including hedge funds.

A number of AFICS/NY members have sought our guidance as to whether or not to sign the new petition. To them we say that it would be inappropriate for AFICS/NY to participate in a
campaign which distorts reality. The revised MoU does not propose changes to the two-part structure of the Fund, make it possible for the CEO to influence, let alone take over, the
investments side, bypass UN and UNJSPF rules and regulations, nor does it advance “plans to invest in hedge funds” (a reference presumably to the role of the RSG) or weaken existing controls and balances as purported in the petition. AFICS/NY has been firmly committed to a collaborative approach to solving this problem as opposed to unnecessary confrontation. Let me say that as retirees representing retirees we stand as steadfast as all other parties, if not more, in protecting the integrity and soundness of our pension benefits and the Fund itself. We will continue to vigorously pursue the objective of defending our pensions through established institutional mechanisms.

This is the situation as of today. By the time of the Annual Assembly on 4 June we may have further information which we will be pleased to provide at that time.

(Signed) Linda Saputelli

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