2005 United Nations misconduct incident
ESS became a UN-registered food vendor in 2000 and then went on to win contracts to supply UN peacekeepers operating in Sudan, East Timor, Liberia, Burundi, Eritrea, Lebanon, Cyprus and Syria.[14]
In 2005, subsidiary Eurest Support Services won contracts to provide food to UN peacekeepers in Liberia, valued at $237 million.[14][55][56]
The UN suspended Compass in October 2005 after allegations of contract bidding irregularities. It was alleged that ESS may have improperly obtained confidential information concerning a three-year contract to supply food and water to UN peacekeepers in Liberia. ESS's poor performance on a food contract to provide rations to peacekeepers in Burundi was also looked into before it lost the contract.[14] The scandal broke after former HIC official and former procurement officer Alexander Yakovlev was arrested on suspicion of conspiracy, wire fraud, money laundering and related issues. The Russian[14] official Alexander Yakovlev, the UN procurement officer, and Vladimir Kuznetsov, head of the UN Committee for Administrative and Budgetary Issues, were arrested and indicted after taking nearly $1 million in bribes from companies doing business with the UN.[14]
In November 2005, Compass sacked the head of its UK division and two other employees as the investigation continued.[57] Compass said staff members had been dismissed but did not officially say how many.[58] The investigation was conducted by law firm Freshfields and accountants Ernst & Young and overseen and ultimately by the chairman of Compass' audit committee, Steve Lucas.[57][58]
In a separate UN investigation into the oil-for-food program hand found that Yakovlev was guilty of fraudulent conduct. He subsequently pleaded guilty to criminal charges of both wire fraud and money laundering relating to claims he had taken $1 million in bribes from companies doing business with the UN.[14]
The rivals firms who made the allegations of bribery were Es-Ko and Switzerland's[14] Supreme Foodservice AG[14] (Supreme was later investigated, fined and blacklisted by the US DoJ for 'price fixing' on US DoD contracts in Afghanistan).[14][55] Officials initiated lawsuits claiming violation of the Racketeer Influenced and Corrupt Organizations (RICO) Act, the Sherman Antitrust Act and New York State's Donnelly Act regulating free trade.[59] Federal investigations were held and the case was referred to the Serious Fraud Office (UK).[60] The lawsuits, in which the two competitors who claimed a total of £600m in damages against Compass, alleged that Compass had tried to rig the awarding of UN contracts worth in excess of $350m (£188m) for United Nations peace keepers across the world.[14]
After its own £5 million,[14] three-month internal investigation, Compass had declared it had discovered "serious irregularities" in its UN business, but that these were limited to "only a few individuals" who were dismissed: Peter R. Harris,[14] Andy Seiwert and Doug Kerr.[55] Mr Harris, who by then was the head of the group's British, Middle East and African division at this point.[14] While Compass refused to make public its investigation,[55] CEO Michael Bailey stepped down in June 2006. The subsidiary Eurest Support Services was soon restructured and reformed along a new business model.[57]
The corruption allegations were also referred to the UK's Serious Fraud Office[57] a criminal investigation by US federal prosecutors[14] and wider investigations into UN procurement by both the Southern District Court of New York, the US Congress and the UN.[58] Compass had agreed by October 2006 to pay to up to £40m to settle two lawsuits brought against it for allegedly bribing a UN official to win catering contracts.[14] Compass Group did not admit any legal liability and paid a confidential settlement in the region of £40m.[14]
Then chief executive of Compass Group, Richard Cousins, was quoted as saying: "We believe it is in the best interests of the business and shareholders, and good management, to avoid the uncertainties and costs associated with prolonged litigation. My focus is on the future and this settlement is a major step in putting the matter behind us."[14]
