"It wasn't a walkout. We could not finalise all issues in the short time available,"

said Thomas Keusters, country representative of the UN World Food Program, after

ending talks with the Cambodian Government to agree on compensation stemming from

discovery of the Food For Work scheme rice fraud racket.

Sources familiar with the scandal say there have been heated exchanges between WFP

staff and government officials. Keusters denied this.

He also denied that one of WFP's major donors has threatened to cut off support for

WFP if the issues are not resolved satisfactorily. "But if it's not resolved

the FFW program will be the casualty and that comprises 50 percent of our operations

here. So in that sense we would not then need the same level of donor support."

He said losing the FFW program would be a major blow to Cambodia's poverty reduction

efforts. "Currently FFW projects are suspended, we are not following up on any

proposals. If we reach agreement with the Government, we could very quickly have

maybe 100 small projects started.

"I am optimistic that we will have resolution before the new year, which is

a good time for FFW projects as the harvest is over and rural people are available

for paid work."

The WFP sent its No 2 man from Rome headquarters, senior deputy executive director

Jean-Jacques Graisse to lead the negotiations. He arrived September 29 and left the

next day after a meeting at the Council of Ministers that reportedly lasted only

two hours. WFP had called a media briefing for September 30 to report on progress

achieved. The briefing was cancelled five hours before it was due to start.

Keusters said it was "probably optimistic to have expected resolution in less

than three working days" when compensation of between $1 million and $2 million

was at stake from the government to the WFP. He said this was the only time Graisse

had available.

No date has been set for resumption of talks with the government group, but Keusters

said there was no specific need for this and it may not even be necessary to meet

face to face. "First we have to report to our executive board next week and

take direction." He and Graisse will be at the meeting and the Cambodian affair

is on the agenda.

Graisse met Japanese government donor representatives on his way back to Rome and

Keusters said he was still unaware of the outcome. Japan is the WFP's biggest rice

donor; its last gift was 15,000 tons.

Keusters said the WFP's expectation of a quick settlement was based on the Prime

Minister's three-point undertaking: that "the government accepts full responsibility

for the loss and will compensate WFP for food lost between January 2003 and April

2004; the government will hold accountable those primarily responsible for the fraud

through either judicial or administrative procedures; and that the government and

WFP will put in place controls to prevent the recurrence of food theft in the future."

Keusters said the WFP had still not received a formal report from the government

on its own investigation to substantiate the WFP's conclusions and claims.

"We need to treat the whole matter as one: how much was stolen, who was responsible,

and how to prevent it happening again. To achieve consensus we have to agree on the

three points.

"You know we have a commitment by the government, from the Prime Minister, and

the devil is in the detail. I cannot say when we will have an agreement, whether

it will be a week or a month."

Was the government trying to renege? "I would not think so. There was no withdrawal

from their promises. Until we have agreement we will not be undertaking any more

FFW projects. FFW has effectively been frozen since we discovered this fraud. We

have continued distributing food for existing projects but we are not starting anything

new. Our food donors have been kept informed; they are also hopeful the issues can

be dealt with speedily."

Asked to describe the current relationship between the WFP and the government, Keusters

said it was "difficult for me to answer because I don't know what it was like

before, but we were well received by Sok An [deputy Prime Minister]. Maybe they could

have agreed and maybe they could have been more negative. It would be wrong to say

the relationship has broken down."

Keusters said he was satisfied there was no mastermind behind the fraud. "It

was nickel and dime thefts, not a big controlled scam. When you look at the value

of rice thefts spread over so many places, it is obvious nobody was getting rich.

We had 367 FFW projects going and we surveyed 72 of them. To pinpoint who took what

and when, would take 10 years."

The WFP refuses to put a figure on the estimated value of the rice stolen and sold,

however an amount of between $1.5 million and $2 million is believed to be on the

table.

Rebecca Hansen, who was the WFP's country director when the fraud was detected, said

in a Post interview in August: "Two million dollars over-estimates the amount

for the period under review. This figure was discussed with the government as a possibility

for compensation going back to January 2003, but it's better not to publish the figure

because that is what is being discussed now. We have one figure which is for November

2003-April 2004, and we have government agreement to go back to as far as January

2003. What's being negotiated is the percentage we will apply to the FFW, and that's

why the government is doing its own investigation now. I will not state the range

because it could prejudice the negotiations. I really don't know it would end up

being as high as $2 million, that would probably be a ceiling."

Keusters also questioned the Post's published estimate of $2 million. "I would

not be prepared to put a figure on it. Valuation is a very fluid thing. WFP works

on fixed values for certain commodities which include FOB costs aggregated. We value

rice at $315/ton. For Cambodia, it's not a particularly relevant valuation when you

can buy local rice for as low as $215/ton," he said.

Compensation may be paid in cash or rice, by instalment, Government investigators

have been doing their own measurements of rural road and canal works for which the

WFP paid in rice and other food for labor.

A government spokesman has already said discrepancies had been found in WFP's figures

and also that the government would not be held responsible for compensating for losses

by WFP staff.

The Prime Minister's adviser Om Yieng Teng declined to comment to the Post on the

government's position, as did Council of Ministers spokesman Sean Visoth.

However, another media source quoting Visoth, said Sok An told Keusters and Graisse

at their meeting of differences between WFP figures and those discovered by the government

working group.

Visoth was reported saying on September 29: "The past investigation showed there

are three causes for the lost rice: first, it was caused by WFP staff; next, by NGOs

to which the rice was allocated by the WFP and the government were not informed about

it; last, by some Cambodian Government officials at the provincial level, whom we

are trying to identify."