Compass claims reach $1bn

Rivals turn up heat over 'illegal' UN deals

Embattled catering giant Compass is facing legal claims of more than $1bn (£578m), double the amount originally thought. Rival caterer Es-ko International is claiming it would have won contracts from the UN had it not been for the "illegal conduct" of Compass.

It is seeking $123m for the financial damage allegedly incurred, but is using a tactic known as "treble damages", meaning the claim is actually $369m. But analysts at Dresdner Kleinwort Wasserstein (DrKW) have pointed out that, after seeing the legal complaint document submitted to the US District Court, Es-ko is also claiming punitive damages of "not less" than $500m, plus interest. That takes its total claim up to $869m.

Another rival, Swiss group Supreme Foodservice, is claiming $125m, which DrKW said meant the theoretical risk for Compass actually topped $1bn.

Concerns about how Compass secured a deal worth $62m a year to feed and water 15,000 UN peacekeepers in Liberia emerged last year. UN procurement official Alexander Yakovlev was arrested after an investigation revealed he had received $1m in bribes. It is alleged that Compass subsidiary Eurest Support Services paid money to Mr Yakovlev through IHC, an intermediary which helps companies secure UN contracts. Compass, Supreme and Es-ko were the UN's largest suppliers.

It has been a tough period for Compass. Its schools business was hit by demand for healthier food for schoolchildren, following celebrity chef Jamie Oliver's campaign, and it has issued three profits warnings in the past 18 months.

DrKW went on to point out that claiming very high damages was a well-known tactic in US litigation, and said it was "inconceivable" that Compass - which has made no provision for legal claims - would have to pay out the full $1bn.

However, it added that Compass was now being investigated by a raft of bodies, including the US Congress, the Serious Fraud Office in the UK and the UN, and that the legal claims against it made for "disturbing reading".

Compass announced recently that it was seeing good levels of new business and contract retention, and named Richard Cousins chief executive. The former BPB boss will take over from outgoing chief Mike Bailey later this year.

The company - which is being advised by leading City law firm Freshfields Bruckhaus Derringer - is thought to remain confident that it will be able to defend itself successfully against the legal claims. A Compass spokeswoman declined to comment.