MAJOR AUDIT FIRMS REJECT COLOMBIA CONTRACTS, FEARING REPRISAL

WASHINGTON (AP) Two big accounting firms, fearing "potential reprisals,"
rejected contracts to review Colombian national police records for possible
misuse of drug-fighting funds provided by the United States, so State
Department auditors have taken over the job themselves, records show.
The audit is being performed as Congress considers a Clinton administration
proposal to send Colombia $1.6 billion in fresh drug-fighting aid.

The State Department inspector general was already auditing United
States anti-drug aid to Colombia as part of the office's routine
oversight duties, but it stepped up the review of police funding in
April after being notified of the problems with the private auditors.

State Department officials sought the audit after a top Colombian
National Police official was accused of embezzling American money
intended for the force's air wing.

The audit involves a cash fund for fuel, aircraft parts and other
supplies -- which in 1998 totaled $1.2 million, said Rand Beers, an
assistant secretary of state. He said most future aid would not be
cash, but equipment and services.

"It will not involve direct transfers of money to the government of
Colombia," said Mr. Beers, who heads State's Bureau of International
Narcotics and Law Enforcement Affairs.

Correspondence obtained by The Associated Press shows American Embassy
officials in Bogota, Colombia, began seeking an audit more than a year
ago after allegations surfaced that the fund had been misused and that
much of it is missing.

"Two well-known accounting firms with offices in Bogota have declined
to accept contracts for the work for fear of potential reprisals
against their local employees," Wendy Chamberlin of Mr. Beers' office
wrote the inspector general on Feb. 4. Her letter did not identify the
firms. But a Dec. 1, 1999, letter discloses that the accounting giant
KPMG was one of the two.

KPMG wrote the State Department saying it "will not be able to proceed
with our engagement" involving an audit of the Colombian National Police.

The firm wrote Louis Moreno, a State Department drug official at the
embassy, that the work could be risky and "we are concerned about the
repercussions from the individuals in Colombia against our firm and/or
employees."

John Hummel, a KPMG partner, said in an interview that his company
hadn't received threats. He said KPMG officials from the United States
began preliminary work on an audit, working with low-level staff from
Colombia. When higher-level company officials in Bogota found out
about the audit, "they didn't want to do it," Mr. Hummel said.

The allegations involve Colombian National Police Major Oscar
Pimienta, who was accused by a subordinate of embezzling American
funds that were supposed to be used for aircraft fuel, motor vehicle
parts and other supplies. Mr. Pimienta's attorney, Hector Arcadio
Pulido, said his client has denied wrongdoing and is free while a
Colombian court considers the case.

Colombian National Police, under the leadership of Gen. Rosso Jose
Serrano, has been widely praised for its integrity and effectiveness,
even when Colombia's government and military have been under fire for
corruption and human rights violations.

American aid to Colombia has risen sharply from $29.6 million in 1995
to $360.9 million last year, according to the Congressional Research
Service. Most is intended for anti-drug efforts.