Thursday, May 26, 2016

Breaching the divide: Revised MOU on hold, but the CEO gets his 'flexibilities', 26 May 2016

So, the revised Memorandum of Understanding between the UN Pension Fund and the Office of Human Resources Management is still safely on hold, we thought, where it was placed by USG DM Takasu on 10 July 2015. You will recall his iSeek message stating that “ we believe more work is needed in sensitizing staff and retirees alike to the purpose of the proposed MOU and to disavow any remaining misconceptions. In this regard, we have consulted with the UNJSPF management and have agreed that it is important to make further efforts and dialogue with concerned parties in order to ensure a clear understanding on the initiative before finalizing the revised MOU.”

However, we have information today that at the time of Mr. Takasu’s message, the staff management ‘flexibilities’ pushed for by the Fund CEO had already been in force for almost two months. The UN Staff Union President circulated a broadcast today to UN staff, of which we received a copy, about the ‘strong powers’ given to the Fund CEO by UN Human Resources in a memo dated 17 May 2015 to the Fund CEO, attached to her broadcast. (See the 17 May memo below). 

Sunday, May 22, 2016

Response to AFICS President and Governing Board's 'Update on Recent Issues', 22 May 2016

Posted today on the FB page of 'Former and Current UN staff': 

Since both Loraine and I are referenced in the AFICS Board Update (see below), we prepared the following response for your consideration:
Response to AFICS Board Update on Recent Issues Dated 19 May 2016
It hardly behooves us to respond to the accusations contained in the AFICS Board Statement distributed at the recent AFICS Annual Meeting, circulated by email to AFICS members, and posted on the AFICS website; but the statement contains so many factual inaccuracies and misstatements of past events that we would be remiss if we let stand such efforts at misdirection.
We two members of AFICS who have signed this statement below stand accused of having proposed amendments to the AFICS By-Laws and Rules of Procedure, as if these were writ in stone, immutable and unchangeable however much external circumstances have changed since the By-Laws were written in the 1950’s. There are a number of threats to our Pension savings that have emerged since 2006 and which continue today. Moreover, according to Article VIII of the existing By-Laws, they may be amended “On the proposal of the Governing Board or at the written request of at least fifty members of the Association (emphasis added) [and] … by the Assembly by a vote of two thirds of the members present and voting…” after 30 days of notice has been given to all members.

Saturday, May 21, 2016

Pushing for change and having an impact: AFICS annual assembly, 21 May 2016

Secretary-General Ban Ki-moon turned up at the AFICS/NY annual assembly (Thursday, 19 May 2016) for the first time in years. The SG has a warmth and joy that brings a breath of fresh air to the room. And he showed that he knows how to get to the heart of the matter, particularly when noting,  to warm applause that “you can take the civil servant out of the UN but you can’t take the UN out of the civil servant” (link to webcast below). 

A collective message of reassurance emanated from the podium. From the AFICS/NY President: the AFICS/NY President and Governing Board "are and will continue to be passionate advocates for your concerns"; the Chair, AFICS/NY Pension Committee: the Fund has been facing issues related to the MOU (last year) and investments and delayed pension payments (this year), and the AFICS/NY Governing Board members are working hard on your behalf;  Fund CEO: the Fund Secretariat has faced issues with IPAS implementation and rising volumes of new cases; however, the Fund is on track to dispatch the backlog in payments to new retirees by 31 May 2016 as agreed with the Department of Management; Representative of the Secretary-General for Investments: “leaders of pension funds are dropping like flies; other funds have a 7-l/2 per cent return objective, which is harder to meet; the Fund only has a 3-l/2 per cent return target; which it hasn't met; but the total capital preservation lost was 1 per cent last year and 1 per cent gained this year, and the asset allocation policy is more conservative than before; thus our pensions are safe

Monday, May 16, 2016

AFICS annual assembly: who's in "good standing"? 16 May 2016

The AFICS office confirmed to UN Pension Blog by telephone today that members are in "good standing" unless they have not paid their dues by the beginning of the third year,  in other words, payment of dues is in arrears for two consecutive years (reference AFICS email message to members dated 12 May --three working days in advance of the annual assembly scheduled for 3 pm on Thursday 19 May in ECOSOC chamber -- stating that "The meeting is for AFICS/NY members in 'good standing'). 

In response to our question, the AFICS staff member stated that AFICS is in the process of calling all members who do not have access to email or the Internet to clarify the meaning of "in good standing." She also said the members not in 'good standing' had been so informed when they received their invoice in January this year, and the numbers of those were very low. We suggested that it would have been a good idea to make that clear in the email message sent to the general membership including those with fully paid up dues and others who may be a year in arrears, since some AFICS members who received the email have voiced uncertainty about whether they'll be admitted to the annual assembly or not. (Why not send the message in the first place only to the 'low numbers' of those to whom it applies?)

Friday, May 13, 2016

AFICS annual assembly, Thursday, 19 May 2016, 3 pm, ECOSOC Chamber: Checking democracy at the door, 13 May 2016

The AFICS President and Governing Board are gearing up for their annual assembly blowout next week (Thursday, 19 May 2016, 3 pm in the ECOSOC Chamber).

Yesterday, 12 May,  members received an email from AFICS noting that “The meeting [assembly] is for AFICS/NY Members in good standing.” (Members with unpaid dues received a lengthier message.) The same email messages informed AFICS members that the meeting has been moved to the ECOSOC Chamber.

Under Article VII of the AFICS by-laws (2) “Members who fail to pay dues for two consecutive years shall have their rights and privileges suspended until payment is effected.” Therefore, members are in “good standing” unless they have “failed to pay dues for two consecutive years. Is this issue of such importance that the AFICS leadership should at the very least have clarified their interpretation of “good standing”?  We think so.

Tuesday, May 10, 2016

Pension Fund backlog: Queuing at the Q-gate and doing the math, 10 May 2016

It’s 21 days to “E” day, i.e., “Elimination” day. Remember? The UN Pension Fund CEO has given the Department of Management his "personal assurances" that the backlog in pension payments “would be eliminated” by 31 May 2016.

The agreed Q-Gates (fancy name for performance indicators) are 35% by 31 March; 70% by 30 April; and 100% of the backlog by 31 May (1 March DM iSeek message).

We like the ring of certainty in “would be eliminated”, as in long-suffering UN retirees who’ve been waiting -- many for more than six months --for their first pension payment will be able to do things they used to do: you know, pay rent or mortgage, buy food, that sort of thing.

Wednesday, May 4, 2016

Trouble at the UN Pension Fund, May 4, 2016

"Corporate infighting, allegations of management fraud, media leaks, pensions not being paid, a move towards risky investments, all capped by a seemingly pliant board. How did it all go wrong?

Once seen as a bastion of stability, the UN pension fund has rarely been out of the news these last two years, and for all the wrong reasons. We’ll try to shine some light on the malaise at the top of our pension fund and expose the power politics that could eventually tear it apart."


Trouble at the pension fund


Corporate infighting, allegations of management fraud, media leaks, pensions not being paid, a move towards risky investments, all capped by a seemingly pliant board. How did it all go wrong?

Once seen as a bastion of stability, the UN pension fund has rarely been out of the news these last two years, and for all the wrong reasons. We’ll try to shine some light on the malaise at the top of our pension fund and expose the power politics that could eventually tear it apart.
The United Nations Pension Fund, 67 years old this year, provides pensions to 72,000 UN retirees and survivors. With $52 billion in assets, it has enjoyed robust health for much of its existence. While it suffered a significant dip in assets during the 2008 economic crisis, as did many public pension funds, unlike others that foundered, it rallied and continued to thrive. It has grown on the back of a conservative investment policy, with solid checks and balances in place, including strict separation of the departments managing its investments, known in the industry as the assets side, and that paying retirees, the liabilities side.
This all changed in 2014. Enter the fund’s CEO, Sergio Arvizú, a man known for his outward charm and diplomacy and in reality responsible only for paying retirees and with no access to the investments, despite his title. The staff unions received a trove of leaked documents documenting Arvizú’s attempts to revise the Memorandum of Understanding, the cornerstone document defining the fund’s relationship to the UN. The revision was being justified by a General Assembly resolution, 68/247, adopted in December 2013, requesting the fund’s board to prepare a review of staf!ng issues. (However, Arvizú failed to reveal that the fund was not supposed to take action until the proposals had been considered by the General Assembly.) While the MOU reads as a very technical document, the staff unions contended that the real goal of the MOU revision, which included changes to rules on procurement, receipt of gifts and hiring, was to disassociate the fund from the UN, give the CEO free rein over staffing issues and allow Arvizú to take control of the fund’s investments.
Following two petitions to the Secretary-General signed by 16,000 current and former staff, Ban Ki-moon’s then chief of staff Susana Malcorra, organized a town hall meeting on 16 April 2015 at UN headquarters in New York. Amidst widespread anger, she stressed that there would be no plans to change the investment policy in the short, medium, or longer term, and assured staff that no changes would be made to the MOU without consultation.
It was finally the UN’s head of management, Yukio Takasu, who suspended finalization of the revised MOU on 10 July that year, citing the need to allow time to sensitize staff and retirees about the real purpose of the MOU and ensure it would allow the fund “to operate in a more efficient and responsive manner.”

While attention over the last two years has been mainly focused on the difficulties facing CEO Arvizú, the fund’s investment side, known as the Investment Management Division, has also come under fire.

If this was meant to bring peace it failed, as around the same time staff working at the fund had come forward alleging fraud and conflict of interest by Arvizú, later detailed in the US and Swiss press. This plunged the fund into a new storm and triggered an investigation into Arvizú, which is still ongoing.
With the MOU debacle and allegations against Arvizú still fresh, the annual meeting of the fund’s board, which took place in July 2015, was the most contentious in recent memory.
Against a charged atmosphere at the Palais des Nations in Geneva, Arvizú and his counterpart in charge of investments known as the Representative of the Secretary General, Carolyn Boykin, looked horns on a number of issues.
Allies of Arvizú in the board also took to the floor one after the other to lambast Takasu for suspending the revision of the MOU. Arvizú then had UN security remove a participant from the meeting when it appeared that she would question his management practices. The staff union federations present at the meeting, CCISUA and FICSA, were at tacked in an outburst by the fund’s legal chief, Janaa Sareva, for campaigning against changes to the MOU. Sareva was then supported by Linda Saputelli, the president of the FAFICS retiree association.
Unspoken at that meeting was a new looming crisis that would shortly hit the fund. Over that summer, a new administrative software was being installed called IPAS (Integrated Pension Administration System). Against better advice, the decision had been taken among the fund’s senior leadership not to provide a backup procedure in case the system failed to work.
And that is exactly what happened. Between May and August that year, the fund was unable to process payments for newly retiring staff members. And when the system finally started to function, fund staff, despite working overtime and weekends, were unable to maintain the rate of processing they had before.
Reports emerged in late 2015 of protracted and unprecedented payment delays, reaching by the end of the year an average of six months. Emails by retirees, some penniless, went unanswered and stories circulated of unopened files stacked floor to ceiling at the fund’s New York office. Messages from Arvizú failed to acknowledge the severity of the situation.
The staff union federations, CCISUA, FICSA and UNISERV, in a joint letter dated 18 February 2016 to the Secretary-General and Executive Heads, drew attention to the problem, and called on the chair of the fund’s board, Olusoji Adeniyi, to convene an extraordinary meeting to resolve the crisis.
Adeniyi, reputed to be close to Arvizú, replied that he saw no reason for an extraordinary board meeting and that the delays would swiftly resolve themselves. Unsatisfied by the reply, the staff unions initiated a new petition to the Secretary- General, which at the time of writing had collected 3,500 signatures, calling for Arvizú to be replaced with someone able to “fix the problems at the fund and restore staff morale.”

Stung into action by the letter and petition, Takasu, the UN head of management, intervened at the end of February to impose performance indicators on Arvizú, with a target to reduce the six-month payment backlog by 35 percent by the end of March and eliminate it entirely by 31 May 2016. He announced this to staff through the UN’s intranet on 1 March.

Meeting the CEO once month later, Takasu was assured that the fund had accelerated processing and exceeded its first performance target. This was promptly announced on the UN intranet. However, the figures are disputed (see inset by the CCISUA staff union federation president) and the petition to Secretary-General Ban Ki-moon to replace Arvizú has been revived.

At the same time, a former chief of entitlements at the fund issued an open letter on 9 April 2016 describing the Arvizú’s reports on the backlog as “seriously flawed and deceptive” and calling for an independent investigation and payment of interest and damages to retirees who hadn’t been paid.

While attention over the last two years has been mainly focused on the difficulties facing CEO Arvizú, the fund’s investment side, known as the Investment Management Division, has also come under fire.

The division is led by Carolyn Boykin, with the innocuous title of Representative of the Secretary-General. She reports directly to Ban Ki-moon rather than to Arvizú. Her appointment in 2014 had already caused a stir when media reports were shared of her sudden departure from a previous position as chief investment officer at the Maryland State Retirement and Pension System under a mismanagement cloud in 2003. (She then joined Bolton Partners Investment Consulting Group, an actuarial, not investment, company for a number of years before landing the UN job.)

On 10 April 2015 and, later, in June that same year, CNBC and Opalesque, respectively, announced that Boykin was considering moving toward hedge funds and other alternative investments, and was authorized to hire external fund managers. This information was, according to reliable sources, deliberately leaked to the media, and calls from eager hedge funds soon followed.

Equally surprising was a simultaneous media report that the chair of the fund’s investment committee, Ivan Pictet, was resigning after ten years, citing reasons of his advancing age and long working hours.

However, fund insiders told the author that Pictet had been elbowed out. This wasn’t denied in the Swiss press: “Le fait de ne pas avoir les coudées franches a-t-il pesé dans la décision d’Ivan Pictet? “Ce n’est pas faux”, répond le banquier genevois.” (Le Temps, 10 April 2015, “Ivan Pictet a démissionné du Fonds de pension de l’ONU”).

Further exchanges of letters show deepening problems on the fund’s investments side.
In August 2015, shortly after the annual Pension Board meeting, the FAFICS retiree association president, Linda Saputelli, who had heretofore dismissed concerns about both the MOU and hedge funds, while staunchly supporting the CEO’s push for a revised MOU, swung into action, exchanging letters with Takasu, in which she voiced “unease” about a number of management and governance matters related to the fund’s investments that, she emphasized, posed risks to the system of checks and balances.

Six months later, in February and March 2016, the fund’s assets and liabilities monitoring committee wrote to Takasu raising alarms about the situation at Boykin’s Investment Management Division, and requesting Secretary General Ban Ki-moon’s intervention and concrete actions concerning “weakened governance and risk management”, “dangerous understaffing” and “a loud danger signal” of transactions conducted “in open disregard of proper clearer mechanisms” and without reference to proper investment procedures and oversight.

The letter also noted that Boykin’s statement at the committee’s February meeting “that possible changes to the Fund’s investment philosophy and approved UNJSPF risk appetite are being considered” did not conform with acceptable levels of investment risk.
Add to these worries, Boykin’s reported attempt last year, stymied by an unfavorable internal risk assessment, to invest an additional $2 billion in hedge funds at a time when large public pensions were pulling out of hedge funds.

Today the fund faces a crisis of confidence and leadership: questionable statistics about the backlog and questions about when long-suffering new retirees and survivors may expect their first pension payment; a power-hungry CEO under investigation; an investment chief operating in an environment of lax compliance and risk management with plans for riskier investment of our life savings; and a board seemingly in cahoots with the CEO.

It is not too late to reverse the fund’s problems. However, left to their own devices, neither Arvizú nor Boykin nor the fund’s ineffectual board will make a difference. Given the increasingly alarming evidence that the continued safety of our pensions may be hanging in the balance, there’s every reason for the Secretary-General to focus attention on how a faltering pension fund might impact his legacy and take swift and forceful action while he still can.

All relevant documentation may be found on Loraine’s UN Pension Blog,

Sunday, May 1, 2016

UN Pension matters (join our push for change): Proposed revisions to AFICS By-Laws and Rules of Procedure, 1 May 2016

Please see below explanatory cover note and proposed revisions to AFICS by-laws and rules of procedure prepared by Lowell Flanders and Loraine Rickard-Martin.

We're seeking support for this effort. Please circulate to  AFICS members who share our concerns and send any comments by email to, or participants of the FCUNS on Facebook may comment there (see link). 

1 May 2016 

Dear Former Colleagues and AFICS members,

Over the last year or so, with increasing assaults and threats to our pension savings, we have become increasingly concerned that AFICS is not well equipped, or oriented to act as a lobbying group to effectively protect our common interests. It is not at all clear, in fact, that AFICS was ever intended to be an organization that could mobilize its members for an extended struggle against those who may not have our best interests at heart. Nothing in the AFICS by-laws and rules of procedure provides confidence in democratic, transparent leadership and procedures, or in the role that many of us believe AFICS should play. 

Pension Funds around the world have been under siege for quite a few years now, both in the private and public sectors. Many funds have been crippled by mismanagement and malfeasance. Until recently, the UN Pension Fund has been well managed, with conservative and stable returns on its investments.  All of this changed in 2014 with the effort to make operational changes that threatened to breach the separation between the Fund’s investment and administrative functions. Efforts were also afoot for the fund to take on more risky investments in hedge funds and other questionable financial products. This came at a time when other large public pension funds were divesting themselves of such funds. It is ironic indeed that the UN is forging ahead along a path that others have already abandoned.