Compass admits to 'serious irregularities'

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The Independent Online

The embattled catering giant Compass announced yesterday that an investigation had uncovered "serious irregularities" in the way United Nations contracts were awarded to one of its divisions.

A three-month inquiry undertaken by lawyers and auditors into the relationship between the group's Eurest Support Services (ESS) division and the UN also concluded that the problems were limited to "a few individuals" within ESS.

In November, two weeks into the investigation, Compass fired three executives at the centre of the scandal over a $62m (£35m) contract to supply food and water to UN peacekeepers in Liberia. The three included Peter Harris, the head of Compass's UK division, and Andrew Seiwert, a mid-ranking manager in ESS, who is said to have obtained confidential information related to the contract before it had been awarded by the UN. Yesterday's statement referred to several contracts awarded to ESS by the UN, without giving more details.

The investigation was conducted by the law firm Freshfields and the accountants Ernst & Young, and was overseen by Steve Lucas, the chairman of Compass's audit committee. He said: "This has been a highly regrettable episode for Compass. However, we have concluded a very thorough investigation and taken appropriate and decisive action. We have no reason to believe that the issues identified extend to any other part of the group."

There are three investigations outstanding in the US by the Southern District Court of New York, Congress and the UN. They form part of broader investigations into the Oil for Food programme for Iraq, which Compass was not involved in, sparked by concerns within the UN about the way in which its procurement division works.

Compass, the world's largest catering group, said the senior management of ESS had been restructured and now reports directly to Andrew Martin, the group finance director. It has also reviewed, with E&Y, the systems and controls within ESS and has increased central control over the division.

Analysts welcomed the news, but expressed concern over lasting damage to Compass in the form of customer losses.