WASHINGTON -- The executive director of a $7 billion fund to fight deadly diseases in the world's poorest countries has made extensive use of a little-known private bank account, spending hundreds of thousands of dollars on limousines, expensive meals, boat cruises, and other expenses, according to an internal investigation.
Dr. Richard G.A. Feachem , the leader of the Global Fund to Fight AIDS, Tuberculosis, and Malaria , also frequently dipped into the office's petty cash, once spending $225.86 to rent a suit for a wedding involving the Dutch royal family -- and then double-billed the organization for the suit, the report said.
The Global Fund, which started in 2001 when then-United Nations Secretary General Kofi Annan called for an emergency response to the AIDS pandemic, has funded programs in 136 countries.
The US government has contributed $1.9 billion so far, and the US House of Representatives approved an additional $724 million last week. The Bill & Melinda Gates Foundation is the largest private donor, pledging $650 million.
The internal report, completed in August by the Global Fund's inspector general, found that Feachem's spending habits created "potential risks," including loss of donor confidence because of "inadequate internal controls over funds."
Spending charity money on entertainment and limousine rides "could be perceived as unnecessarily lavish by donors," the report said.
Feachem, 59, was knighted last month by Queen Elizabeth II for his leadership of the Global Fund. He declined numerous requests for comment.
Global Fund spokesman Jon Liden disputed the context, tone, and several facts in the inspector general's report.
"When you read through the entire report, it becomes clear we are dealing with a report of extraordinarily poor quality in terms of accuracy, context, and fairness," Liden said in an interview last week.
But Liden did not dispute 37 specific limousine charges in cities across Europe and the United States, dozens of entertainment and meals expenses, and the suit rental, among other expenditures the inspector general deemed excessive.
"We have nothing to hide," Liden said.
A separate investigation, overseen by the World Health Organization, also raised concerns about the use of the private bank account, finding what it called "abnormal" payments that WHO probably would not have approved as part of a legal agreement to oversee Global Fund expenditures from its Geneva staff. Those items included lump-sum payments of $5,000 to seven fund managers described only as back pay and about 30 payments to help staff members find homes.
The findings of both the inspector general and WHO reports have not been previously reported.
For years, Feachem has cut a dashing and authoritative figure on the international circuit of public health summits and high-level meetings. He has been dean of the London School of Hygiene and Tropical Medicine, director of the World Bank's health programs, and founder of the Institute for Global Health at the University of California-San Francisco.
He is known for his eloquence and his relationships with rock stars and royalty, many of whom have been key supporters of the Global Fund. Colleagues describe him as a proud and an exacting figure, and note that he paid close attention to the terms of his compensation. His first contract with the Global Fund took months to negotiate, as did his terms of departure, which is expected next month.
He has earned roughly $320,000 a year tax-free, including a housing subsidy of more than $70,000 -- modest for a corporate CEO package, but unprecedented in public health. UNAIDS director Peter Piot , by contrast, earns $230,000 and receives no housing subsidy; US global AIDS Ambassador Mark Dybul earns roughly $145,000 in taxable income and also receives no housing subsidy.
The inspector general's report suggested that Feachem's heavy spending was shared by other managers. "Senior management failed to convey and reinforce the need for careful and prudent use of donor funds," the report said.
Global Fund leaders went to great lengths to keep both reports secret. The full board was not given copies of the inspector general's report, according to members. They said they were allowed to read WHO's report for just a few hours in a room and could not keep copies.
Lieve Fransen , deputy chairwoman of the board, said the secrecy was necessary to protect the Global Fund and its employees.
"I strongly believe we need to fully respect people's prerogative to defend themselves and explain what has happened," she said. "Making these reports public would undermine people's dignity, credibility, right to defense, and would undermine the credibility of the Global Fund."
The other 19 board members declined to comment on the reports.
Feachem is due to vacate his post next month. The board has been unable to agree on a successor, failing at a divisive meeting last November in Guatemala to settle on a candidate. It is scheduled to make a second attempt later this week in Geneva.
The future of the inspector general's office also is in limbo. Ibrahim Zeekeh , who took over the post a year ago, resigned effective last week, citing health reasons. Zeekeh, a veteran auditor who has worked in several UN organizations, declined to comment. The office now is left with just two auditors.
Meanwhile, some donors have expressed concern about oversight of the billions of dollars in programs from Latin America to Asia. Two years ago, Congress made 25 percent of the US contribution conditional on the hiring of an inspector general.
Pam Pearson , who from 2003 to 2005 was the State Department's chief liaison with the Global Fund, said the post must be filled quickly. "Whenever you have an organization that deals with that kind of money, you need to have a watchdog authority," she said.
Several world health specialists said the board first must address the heavy spending by top executives.
Allan Rosenfield , dean of Columbia University's Mailman School of Public Health , called Feachem's spending inexcusable.
"The board has allowed this to happen," he said. "They should be held accountable as well."
An ethics specialist hired last year as a consultant to the Global Fund's ethics committee also questioned the level of spending.
"I'm familiar with cost of limousines in New York City, but this is beyond the pale," said Willem Landman , chief executive officer of Ethics Institute of South Africa, a nonprofit group.
Charities have long wrestled with the compensation for chief executives, with some specialists maintaining that higher pay and more perks help attract stronger candidates. But Landman said there should be limits on spending by leaders of humanitarian groups.
"If a corporation decides to spend luxuriously on its chief executive, and it does a proper accounting to shareholders, they are entitled to do so," he said. "That seems to me different than the head of an organization handling donor funds -- funds that are designed for relieving the most vulnerable people in the world."
The 40-page inspector general's report focused on a private account in a Credit Suisse bank. From 2002 to 2005, the Credit Suisse payments amounted to more than $2.1 million. While the vast majority of Global Fund money is kept in the World Bank, Global Fund leaders said they wanted a separate account to process expenses more quickly.
The inspector general found that Feachem used the account as a private fund for business expenses, bypassing the normal channels for reimbursement through WHO.
Global Fund documents say he spent between $91 and $930 a day for limousines in London, Paris, Rome, Washington, and San Francisco, averaging $376 a day; "typically $50 to $100 per person" on his meal expenses; $1,695 for a dinner for 12 people at the US Senate dining room in Washington; and double-charged the $225.86 suit rental.
The inspector general's report cited other charges made by senior officers, including flowers for staff members; champagne at a retreat; $8,780 for a boat cruise on Lake Geneva in Switzerland; $8,436 for a dinner in Davos, Switzerland, for 63 people; and $5,150 for a meal and drinks for 74 staff members at a retreat at Montreux, Switzerland.
Liden, the fund's spokesman, said the limousine charges averaged $341 per day, not $376, which he called "standard rates" in Europe and justified "in lieu of the car and chauffeur that senior UN staff have available to them."
He said the Washington dinner cost $69 per person and additional charges were "related to room and overtime charges." Liden said only in "exceptional instances" did costs exceed WHO limits for spending on dinners -- $75 in Washington, $73 in Geneva.
Furthermore, he said, Feachem's office paid only once for champagne, a $115 bottle, and the duplicate payment for the rented suit was rectified.
"These expenses are reasonable and necessary for carrying out the business of the Global Fund," Liden said.
WHO 's investigation examined expenditures on Feachem's credit card, which "is intended for emergency use on Global Fund business."
Feachem told auditors he used the card for business expenses that WHO wouldn't cover, including limousines and meals. The report noted that the policy should be changed or the "card holders reminded of its limited purpose."
John Donnelly can be reached at email@example.com
Update: The Global Fund's response to this article is available here: http://www.theglobalfund.org/en/media_center/press/an_070205.asp