Compass suspends executive and calls in investigators

Compass, the crisis-torn catering group, suspended one of its top executives yesterday and ordered an independent investigation over claims of improper behaviour in connection with a contract for the United Nations.

Shares in the group, the world's biggest catering company, continued their downward spiral, falling a further 9 per cent, after it said Peter Harris, the chief executive of the group's UK, Ireland, Middle East and Africa division, had been suspended. Last night, the UN said it was suspending Compass as a registered vendor pending the outcome of the investigation.

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The law firm Freshfields Bruckhaus Deringer has been appointed to carry out the inquiry relating to a $62m (£35m) three-year contract to supply food and water to UN peacekeepers in the west African state of Liberia.

According to reports, the Compass subsidiary Eurest Support Services obtained confidential documents relating to the Liberian contract from IHC, a former contractor to the UN's procurement department.

A statement from Compass said it had instructed Freshfields to conduct an investigation into "the relationships between Eurest Support Services, IHC and the United Nations".

Mr Harris has run Eurest for some time and in July was given wider responsibility for the UK, Ireland, Middle East and Africa. He is not a main board director.

When news of the allegations broke 12 days ago, Compass issued a statement saying its contracts with the UN last year accounted for less than half of 1 per cent of turnover. Since then the shares have continued to tumble. Last night, they closed a further 6 per cent down at 175p - their lowest level since the merger with the non-television operations of Granada four years ago.

Compass has already announced the departure of its chairman Francis McKay and chief executive Mike Bailey, but neither is due to leave until the middle of next year. Sir Roy Garner, the chief executive of Centrica, is due to take over then as chairman.

But the latest scandal is certain to increase pressure for management changes more quickly than that. "In our opinion, there is a lack of control in Compass and growth is pursued at any cost," brokers at Panmure said. "It is difficult to have confidence in the board. Investors should continue to sell."

Mr Harris's responsibilities will be taken over by Gary Green, the chief executive of the group's Americas division. Compass could not say how long the Freshfields investigation was likely to last.

The UN was criticised last month in a report by the former head of the US Federal Reserve, Paul Volcker, into its oil-for-food programme in Iraq.