The alleged involvement of two nonprofit organizations in the United Nations bribery case filed this week by U.S. authorities has shed light on the role these groups play in U.N. affairs, raising questions about the interlaced relationship between diplomats and privately funded groups.

Federal prosecutors alleged South-South News, a media company, and the Global Sustainability Foundation served as conduits for more than $1.3 million in bribes funneled to John Ashe, a former president of the U.N. General Assembly, according to the complaint made public Tuesday.

In exchange for the money, prosecutors said, Mr. Ashe promoted Chinese business interests at the U.N. and in the Caribbean. Mr. Ashe's attorney said his client has denied any wrongdoing.

Officials from both organizations said they were surprised by the allegations and defended their groups' work.

On Thursday, U.N. officials said they would launch an internal investigation into the U.N.'s relationship with GSF and with the Sun Kian Ip Group, which is closely affiliated with South-South News.

"What we are looking at are contacts and flow of money between the U.N. and these two foundations," said Stephane Dujarric, spokesman for the secretary-general. "If wrongdoing is found then we'll expand the investigation."

The U.N. said Wednesday it hadn't opened an investigation because the six people charged in the case weren't considered U.N. staff. But officials changed course Thursday because of the seriousness of these allegations, Mr. Dujarric said.

Federal prosecutors didn't charge the organizations with wrongdoing. But executive staff from GSF and South-South News were arrested Tuesday along with Mr. Ashe.

Federal investigators are continuing to scrutinize a network of organizations connected to the alleged scheme, according to a person familiar with the matter.

More than 8,000 foundations and nongovernmental organizations officially work with the U.N. Many thousands more work with the U.N.'s various agencies and local branches.

South-South News and GSF aligned themselves closely with U.N. initiatives, sponsoring galas and international forums in the U.N.'s honor that attracted heads of state and U.N. officials.

Both organizations include U.N. officials among their leadership: Mr. Ashe, who until 2014 was also the U.N. representative from Antigua and Barbuda, is listed as the honorary chairman of GSF and the chairman of a foundation tied to South-South News and funded by a Macau real-estate mogul, Ng Lap Seng, also charged in the alleged scheme. An attorney for Mr. Ng said his client declined wrongdoing.

Diplomats don't technically work for the U.N. and aren't required to file conflict-of-interest disclosure reports.

People familiar with the U.N. said it is common for current and former diplomats to hold executive positions in nongovernmental organizations affiliated with the U.N. But some said the interdependence between the U.N. and these privately funded nonprofits is vulnerable to abuse.

Robert M. Appleton, who headed a now-disbanded special task force created by the U.N. to investigate corruption, said some nongovernmental organizations, known as NGOs, had emerged in the course of his investigations at the U.N.

"NGOs can be high-risk," Mr. Appleton said. "It's also a vehicle that's been used in the past to funnel illicit funds, or used as a vehicle to hide influence."

The U.N. often works closely with NGOs, including Oxfam and Human Rights Watch, to advance its efforts world-wide. The majority of these partnerships are necessary and legal, said Jim Della-Giacoma, deputy director of New York University's Center on International Cooperation, who has worked with the U.N. and these groups.

"There are formal mechanisms for these interactions," Mr. Della-Giacoma said. Still, he said, there are organizations—known to some in the development community as "suitcase NGOs"—that use the facade of nonprofits as a front to enrich themselves or engage in corrupt behavior.

Noting that he wasn't speaking specifically about the allegations against South-South News and GSF, Mr. Della-Giacoma said that prosecution of such cases could promote transparency. "Where there is sunlight, there is going to be less corruption," he said.

Mr. Dujarric, the U.N. spokesman, said the U.N. can do more to improve its vetting of these groups. But "we would not want one or two cases to impact our ability to work with foundations and private sector," he said.

Sheri Yan, the chief executive of GSF, and Heidi Piao, the group's finance director, were charged Tuesday with bribery and money laundering. Prosecutors accused them of arranging for more than $800,000 in payments to Mr. Ashe on behalf of Chinese businesspeople seeking to extend their influence in the Caribbean. Attorneys for Ms. Yan and Ms. Piao declined to comment.

Gerard McKeon, a media liaison for GSF who also publishes an online magazine focused on NGOs and philanthropy, said he was "very surprised" by the charges against Ms. Yan and Ms. Piao. He said he believed GSF was doing important work.

Mr. McKeon said U.N. officials often take on roles in NGOs related to development work, where their expertise can be brought to bear. "It's not a conspiratorial as it sounds," he said.

"There's always a chance for one bad apple to create a lot of discord and pain," he said. "But I don't think it's a big issue."

South-South News is one of several organizations connected to the Sun Kian Ip Group Foundation, the nonprofit arm of a real-estate company run by Ng Lap Seng, the Macau mogul charged in the case. The foundation describes itself as a "facilitator for key stakeholders in building the capacity of developing countries."

Write to Christopher M. Matthews at christopher.matthews@wsj.com and Farnaz Fassihi at farnaz.fassihi@wsj.com

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(END) Dow Jones Newswires

October 08, 2015 21:05 ET (01:05 GMT)