UNITED NATIONS – Investigations into the biggest Turtle Bay scandal since the oil-for-food affair, in which hundreds of millions of dollars were spent on questionable procurement contracts, by the United Nations’ internal watchdog lacked a “sufficient degree of suspicion” and were “too willing to accept what was said to them,” according to a new independent report prepared by a European team specializing in fraud.

The report, prepared by the European Commission’s anti-fraud office, known by the French acronym OLAF, was commissioned by the U.N. undersecretary-general heading the Office of Internal Oversight Services, Inga-Britt Ahlenius, after receiving complaints that the U.N. investigation into the procurement scandal was inadequate.

The OLAF report, seen yesterday by The New York Sun, resulted from suspicions of “collusion” by Ms. Alenius’s predecessor at the head of OIOS, Dileep Nair, which led to the quashing of allegation that two Indian companies had received sizable U.N. contracts that they did not deserve.

The OLAF review, based on three days of interviews with OIOS officials, did not find enough evidence to substantiate the allegations against Mr. Nair and others in his office. It was also unable to find evidence that the veteran director of the watchdog’s investigative department, Barbara Dixon, was involved in a “whitewash.” Nevertheless, it found “a number of shortcomings” in the way the investigation was handled by OIOS.

Those shortcomings were evident as the U.N. undersecretary general for management, Christopher Burnham, recently acquired the services of an outside task force composed of 20 experienced investigators, which includes some on loan from OLAF and others who had served on the staff of the special committee that probed the oil-for food scandal under Paul Volcker.

The task force is looking into allegations that sizable contracts were awarded to the Indian-based companies, Thunderbird LLC, and Telecommunications Consultants India Ltd., by officials of the U.N.’s procurement department.

The assistant secretary general for central supply services, Andrew Toh, a Singaporean national, and procurement officer Snjaya Bahel, an Indian, have been placed, along with six other procurement department officials, on what U.N. spokespersons described as “leave without pay” until the investigation is complete.

The task force was urged to finish its investigation by mid-July, according to several sources familiar with the probe, who spoke on condition of anonymity. Additionally, the U.S. attorney reportedly is carrying an investigation into the procurement scandal, which might involve federal crimes.

The fact that all these investigations are underway has led many at the U.N. to wonder whether the OIOS probe under Mr. Nair and Ms. Dixon’s leadership was competent, and whether the report they issued, which exonerated the accused officials from any wrongdoing, was valid.

According to the OLAF report, Mr. Burnham found 17 issues that had not been “adequately addressed” in the OIOS. Additionally, the head of the Internal Audit Division, an OIOS arm that was not initially involved in the procurement probe, Patricia Azareus, wrote in a memo to Ms. Ahlenius that the OIOS’s report on the scandal “contained so many shortcomings and flaws that Internal Audit considered there was a good possibility that it was deliberate whitewash.”

In the unsigned memo, which was cited by the OLAF investigators, Ms. Azareus posited several “worst possible explanations” for the whitewash, including that the procurement department’s Messrs. Toh and Bahel, for reasons “which might or might not included financial reward,” colluded to ensure that the Indian companies received the multi-million contracts – and that OIOS’s Mr. Nair, who is a Singaporean national of Indian descent, colluded along with them.

Another possibility, Ms. Azareus added, was that Ms. Dixon, “for reasons of her own,” issued a “deliberate whitewash of the events,” and that “others in procurement and OIOS knew of the collusion and the whitewash and said nothing.”

Stopping short of substantiating those suspicions, the OLAF report said that OIOS investigators “did not appear to approach the case with a sufficient degree of suspicion and at times seemed to be looking for confirmation that all was in order.”

Officers led by Mr. Nair and Ms Dixon bungled interviews with several key witnesses, according to the report, and “at times it is difficult not to form the impression that they were too willing to accept what was said to them.”

Mr. Nair, who last year left Turtle Bay under a cloud to become Singapore’s ambassador in Dubai, was recently found by an outside investigator, Jerome Ackerman, to have violated the U.N.’s own promotion rules. Secretary General Annan, nevertheless, sent a letter of apology to the former top investigator and the U.N. website reported he was “exonerated.”

Ms. Dixon’s contract with the U.N. is due to expire this month. According to several Turtle Bay sources who spoke on condition of anonymity, the 59-year old Ms. Dixon’s contract was extended for three months, as opposed to the customary two-year term, “to ease her out” of OIOS, as one official described it. Ms. Ahlenius yesterday did not return calls requesting comment.