Damages awarded to watchdog forced from Geneva-based health fund

John Parsons, left, dropped out of sight after splitting with the Global Fund Keystone

The former head of the watchdog office within the world’s largest disease-fighting fund – one of the most influential international organisations headquartered in Switzerland – has won an important ruling over his dismissal in 2012 after he complained of “undue interference” with his anti-corruption efforts.

The International Labour Organisation’s administrative tribunal sided with John Parsons, a British auditor who served as head of the Office of the Inspector General, or OIG, for the $29 billion (CHF28.9 billion) Global Fund to Fight AIDS, Tuberculosis and Malaria. Both the ILO and the Global Fund are based in Geneva. 

Parsons’ office had been uncovering fraud and mismanagement that made the Global Fund’s donors hold back funds, and he was being pressured to assure the United States government that the watchdog office was free of outside interference.

Created in 2002 by attendees at the World Economic Forum in Davos, Switzerland, the Geneva-based fund is the world’s premier financing tool to fight the three diseases in 151 nations.

Backed by celebrities such as Bono and Carla Bruni-Sarkozy, it raises nearly $4 billion a year from donor nations and private donors and distributes that money to health ministries and organisations that run approved grant programs.

Little more than two years ago, at a donor conference in Washington, Switzerland called it a great privilege to host the fund’s secretariat in Geneva and boosted the country’s pledge to help its efforts up to 60 million francs over the next three years, nearly triple the previous pledge.

Switzerland, which has supported the fund since its inception, committed to giving official development assistance to the fund at a rate of 0.5 per cent of gross domestic product. It also has held a prominent role in the fund’s governance by sharing an alternate seat on the board.

‘Moral damages’ awarded

After Parsons was forced out, the fund’s top officials assured the U.S. government – and issued a news release – claiming that he was removed strictly for an “unsatisfactory” job performance based on undisclosed reviews, not because they wanted to undermine his office.

The ILO tribunal disagreed, saying in a ruling published on its website on Wednesday that it “concludes that there was no reasonable justification for stating in the news release that the complainant was terminated, let alone that he was terminated for unsatisfactory performance”.

It ordered the Global Fund to remove the news release from its website within seven days and to pay Parsons the salary and benefits he would have received between February 2013 and his anticipated retirement in June 2016, plus CHF150,000 ($150,600) for “moral damages” and CHF15,000 for legal fees.

GAP said the news release was issued to prevent giving the impression that the sacking of the inspector general was a reaction to the reports his office released on corruption such as “expired and counterfeit medications, ghost workers and diverted funds in areas at high risk for HIV/AIDS, malaria and tuberculosis.”

It said the case is especially significant in the United States because under U.S. law, the State Department must certify to Congress each year that the fund’s OIG, which does audits and investigations, is free of interference or pressure to reduce the scope and depth of its work, and that it can fully report to the public what it finds.

Promise of transparency

The fund’s OIG was created in 2005 at the insistence of donors, mainly the United States, its biggest backer. Other major donors include Britain, the European Commission, France, Germany, Italy and Japan.

The fund’s annual assurance that the OIG  was working properly “was worth about $300 million in US contributions to the Global Fund each year”, said the Government Accountability Project (GAP), a Washington-based group that represented Parsons.

Parsons was asked to consent to the fund’s statement that no one impinged on the independence of the office during the year before his dismissal, but he would not agree.

GAP said that documents it obtained under a US Freedom of Information Act request “showed pressure exerted on Parsons in October, 2012 to certify to the US State Department that the OIG operated without interference and Parsons’ refusal to comply”.

Parsons declined to comment and the fund’s press office did not respond to a request for comment on Thursday.

Claims of interference

During the two months before his firing, Parsons had asserted in emails to other fund officials that the then- board chairman, Simon Bland, and head of the audit and ethics committee, J. Graham Joscelyne, who directly oversaw the OIG, were trying to weaken his office and prevent the release of information that could cause more bad publicity.

Joscelyne emailed Parsons that the committee would more directly manage the office’s work, reports and personnel, and that it would reserve the right to assign specific tasks to staff that could replace their planned assignments. In response, Parson asserted in emails that Joscelyne and the audit committee backed by Bland were trying to weaken the office by curtailing its field work, ordering changes in personnel and pressuring to reduce the scope and depth of audits and investigations and what is disclosed from them in public reports, the emails show. 

At the November 2012 board meeting, Parsons clashed with Bland and Joscelyne at a closed-door session. Hours later, Parsons emailed Bland and the audit and ethics committee to say it was clear “that you want me out of the Global Fund, and that your true intention is to weaken the function _ simply because you don’t like what we find and report upon.” 

“There is no credible basis for criticism of me or my office worthy of this hostility and degree of attack that I have been subject to,” Parsons wrote. “The world will see this for what it truly is _ an intentional effort by you and Graham to weaken the function, diminish the office and penalize me for simply doing my job …”, he wrote. Parsons’ firing was announced later that day.

Bland, a senior British government official in its development arm, wrote to then US Senator John Kerry of Massachusetts, when he was chairman of the Senate Foreign Relations Committee, to assure him that Parsons’ firing “was related to his performance alone” and “did not reflect any shift” in the board’s commitment to transparency and accountability, or to the office.

Backlash and reactions

News articles during the previous year on the financial losses uncovered by that office led to the fund’s biggest crisis of the past decade when some donors, including Germany and the European Commission, held up hundreds of millions of dollars in donations, which forced the fund to cut back on spending.

To calm donors, the fund created a high-level panel of outside experts chaired by ex-U.S. Health and Human Services Secretary Michael Leavitt and former Botswana President Festus Mogae.

Their September 2011 report recommended tougher financial safeguards, many of which were later adopted, and commended the “rigor and thoroughness” of the work done by the inspector general’s office, particularly the “remarkable” depth of its investigations. It said the office was the only part of the fund “that has worked as designed” to reduce financial risks.

But the backlash, compounded by U.S. and European budget problems, still came to a head in late 2011 when the Global Fund canceled plans for some $1.5 billion in spending and put off any new or expanded programmes until 2014. The fund also replaced its executive director and chief spokesman. 

During Parsons’ nearly four-year tenure the office set a high bar for transparency and served as a bellwether for similar professional work among aid and development organisations worldwide. The office had identified tens of millions of dollars in losses due to mismanagement, misuse, improper bookkeeping and alleged fraud, making the results public online in keeping with the fund’s policies.

The same day that Parsons’ departure was announced, the fund’s board selected as its next executive director Dr. Mark Dybul, an American physician who headed the U.S. Office of the Global AIDS Coordinator from 2006 to 2009. That is the office within the State Department that was then reviewing the fund’s submission for the rest of the money.

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