Compass rival claims $125m compensation over UN bribes scandal
Saturday 11 March 2006
The world's largest catering group faces several UN and US federal investigations into the way in which it won contracts to provide food to peace-keepers. Supreme alleges Compass bribed a former UN official, Alexander Yakovlev, with nearly $1m for leaking confidential documents to its Eurest Support Services (ESS) division over the past five years. Mr Yakovlev has pleaded guilty to conspiracy to commit wire fraud and money laundering, and could face 60 years in jail.
ESS was suspended as a registered UN supplier in October pending the outcome of an inquiry into allegations it obtained confidential information related to a $62m three-year contract to supply food and water to peacekeepers in Liberia.
The Switzerland-based Supreme, which along with ES-KO of Monaco is Compass's main competitor for UN food contracts, alleges Compass obtained all of its UN business by improper means over the past five years. Supreme says it lost out on contracts worth $350m as a result. ES-KO might sue Compass for lost business.
Michael Gans, a director and co-owner of Supreme, said: "They bribed people to get all this business. We would have received a significant portion of this business had Compass not obtained it improperly." He said Supreme could claim treble damages under the US Racketeer Influenced and Corrupt Organisations Act.
Compass said it would "resolutely defend this complaint." It said its UN business amounted to $270m over the past five years, one-third of 1 per cent of its annual turnover, and does not expect the matter to have any material impact on its financial performance. However, analysts have highlighted the potential damage to the group's reputation from the ongoing investigations.
In its complaint, Supreme cites an e-mail sent in April by Mr Yakovlev to two Compass executives, Steve Kemp and Len Swain, which described Compass's poor performance on a deal to supply food to peace-keepers in Burundi and enabled it to take steps to prevent being dropped from the contract. Supreme had bid on the Burundi contract, worth up to $111m, but lost it to Compass.
Supreme issued its civil complaint against Compass and another supplier, IHC Services, as well as several former Compass employees and former UN officials, in New York.
The complaint states: "For approximately five years, defendants engaged in an illegal scheme involving mail fraud, wire fraud and bribery to rig the award of UN contracts for the provision of food rations to UN peace-keeping forces around the world. This conspiracy corrupted the UN and defrauded the UN's member states." Compass recently admitted that eight employees were caught up in the scandal, more than double the number originally thought to be involved. Of those, only three have been fired, including Peter Harris, the head of Compass's UK division and Andrew Seiwert, a mid-ranking manager in ESS.
Several others have left as part of a group restructuring, but Mr Kemp is staying. A three-month investigation by Compass's lawyers and auditors uncovered "serious irregularities" in the way UN deals were awarded, but concluded the problems were limited to "a few individuals" within ESS.
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