18 May 2015
To AFICS/NY President and Governing Board
Please find below an open letter to Participants and Beneficiaries of the UN Staff Pension Fund, which we are requesting that you post on the AFICS website.
Dear Participants and Beneficiaries of the UN Joint Staff Pension Fund,
We wish to refer to the petition launched on 6 May 2015 requesting the Secretary-General not to approve the changes proposed by the Chief Executive Officer (CEO) of the Pension Fund in a Memorandum of Understanding (MOU) between the UNJSPF and the Secretariat.
Some have wondered who we are and whom we represent. We are a group of “concerned citizens,” participants and beneficiaries, many of whom are also members of AFICS. While it is true that some of us are getting old, we haven’t yet lost our grip on reality. We are still able to understand the plain meaning of language and to identify unstated bureaucratic agendas when they stare us in the face.
The petition did not come out of the blue. It was a follow-up and amplification of a previous petition that was started on 15 May 2014 by UN staff organizations in Geneva and New York. If you follow the link that was provided for that first petition (http://bit.ly/1gsLyfq), you will see that the issue of the MOU has been dragging on for over a year with the same concerns still being expressed as the CEO seeks to move forward on his original proposal.
Most participants and beneficiaries would not know the content of the MOU because it was stamped as “Confidential” and was not intended for general circulation or discussion. If the MOU is as innocuous as claimed, why hide it behind a cloak of confidentiality? It should be open to all participants and beneficiaries since it has an impact on our life savings. After the staff meetings on 31 March 2015, the MOU was in fairly wide circulation around the Secretariat and copies became readily available.
It is true that the MOU appears to be a fairly anodyne document. Most of the text could lull anyone into complacency. It says at one point, for example, “United Nations Secretariat's administrative issuances concerning human resources management (i.e., Secretary-General's Bulletins, Administrative Instructions and relevant Information Circulars) shall apply to the Fund, except where the Chief Executive Officer of the Fund (the "Chief Executive Officer"), in consultation with the Representative of the Secretary-General, decides that an administrative issuance, or a particular section of an administrative issuance, is generally incompatible with the requirements of the Fund.”
The problem, however, comes with the Annexes to the MOU where the CEO specifies which administrative issuances he may decide are “generally incompatible with the requirements of the Fund.” These exceptions run to two full pages and the list is not limited, since it “may be amended from time to time.”
The most troubling of the exceptions concerns rules governing ethics, gifts, conflicts of interest and procurement. We all know about “pay to play”; the prize of course is the Fund itself. A former SG’s Representative to the Pension Fund on investments told a meeting of retirees in 2014 that the pressure on pension fund managers to give in to players who want to pay for this action is unrelenting. In his view, the UN’s rules governing ethics and the receipt of gifts give the Fund’s managers some protection, but the potential rewards are substantial, and not everybody wants to be protected.
Many of you will recall a previous attempt to divert a substantial portion of the Fund's assets to unconventional investments. There was a proposal to index the North American portfolio to one of the common stock market averages, which would have involved selling off the portfolio first. Then, as now, there were also two camps, one advocating the sell-off of the portfolio and the other seeking to maintain the status quo. The Pension Board was forced to take an unprecedented vote on the matter, but made the wrong decision based on assurances from a senior UN official from the banking industry (who has since returned to banking) that this change was in the best interest of the Fund. It was a matter of sheer chance and the slowness of the procurement process that forestalled the sell off of the portfolio. If that sale had gone through, just prior to the 2008 stock market crash, we would now be faced with a shortfall amounting to some US$20 billion by some estimates.
Now, the CEO is proposing that the Fund no longer be bound by these same UN rules. Why? How will this benefit the Fund? How will this ease the day-to-day running of the Fund (which the CEO has cited as a reason for change)? How will it help ensure the safety of our investments and our Fund? How exactly will relaxing the rules on gifts and the code of ethics work, should the SG agree to ease them? The CEO claims that the changes he is asking for in these exceptions to the UN’s rules and regulations will give him more “flexibility” in running the UNJSPF.
In response to our petition, the President of AFICS, on 12 May 2015, sent through the UNJSPF, a letter defending the MOU and outlining the positions the AFICS leadership had taken with regard to alternative investments discussed at the meeting of 16 April 2015 with the Chef de Cabinet (CDC).
The AFICS letter misses the point when it says: “These flexibilities would in no way alter the two part structure of the Fund.” The structure obviously wouldn’t be affected, but the operations of the Fund would be, opening the door to “pay to play” ethics.
The letter further misstates our position on the structure of the Fund and the linkage between the MOU and the Fund’s Investment Management Division. We stated clearly, “The trend signaled by this MOU is the full incorporation of the Investment Division under the authority of the CEO.” We did not say this would happen immediately, but that over time this is the direction in which we are headed if this MOU is approved as is. We were trying to point out dangers of which the AFICS President seems either unaware or is reluctant to acknowledge.
The key take-away from the President’s letter is that it was only on 10 May (four days after we launched the petition) that AFICS sent its "most recent message to the Chef de Cabinet ... [in which] 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."
Earlier in her letter, the President states that the Chef de Cabinet, "assured participants [in the meeting of 16 April] that there were no plans to increase investments in hedge funds now, or in the medium- or long- term." Most of us who attended that meeting heard from the Chef de Cabinet that there was no cause for concern, but no specific assurances were given. If the Chef de Cabinet is now making this assurance, through AFICS, we are deeply grateful and reassured because this is the first time we have heard it. Having it in writing from the CDC would be preferred, however.
These are exactly the issues covered in our petition. We are gratified that the AFICS leadership now says that it has finally adopted the positions that many of us have been advocating all along. If this is what AFICS truly supports, then it should be urging all its members to sign the petition. It is inexplicable that the AFICS leadership would seek to discourage members from signing the petition and thereby diminish the limited leverage it gives to staff representatives in their further negotiations on these issues.
It was not our intention to set up a dispute with the leadership of AFICS. We have said all along that AFICS is the appropriate avenue of representation for retirees. At the same time, we cannot sit idly by while actions are taken that have the potential to compromise the integrity of a pension system that has produced admirable results since its inception in the 1940s. It may seem a conservative position to take, but: “If it’s not broken; don’t fix it.”
It is for these reasons that we urge all participants and beneficiaries to sign this petition aimed at protecting the viability and health of our Pension Fund.
Anna Theofilopoulou, Loraine Rickard-Martin, Lowell Flanders, Barbara Tavora-Jainchill, Somendu Banerjee, Curling Smith, Julie Thompson, Luis E. Alvarez, Ted Folke, Mik Magnusson, Marilyn Dantis, Barbara Van Elsen, Consuelo Brannon, Matthew Chip Bhima Logan, Mary Eliza Kimball, Troy Setiawen, Margaret Reade Rounds, Narda Ishmael, Marian Awwad, Colette Mninski, Veronica T. Garcia, Yohannes Mengesha, Julie Griffith, Martin Bentz, Mampela Mpela, Joao Marcedo, Jotaze BM, Karen Albert, Joan Seymour, June Knesl, John David Werner, Donald L. Lee, Maria Teresa Mauro, Mousa Olayan, Alias Ahmad, Carmen Goss, Alicia Dorrego, Loida Madrigal, Negla H. Chawky, Zamira Kushmuradova, Denise Nolan Operman, Diane Bailey, Vivian Pliner, Lucine Tegnazian