UN probe adds to Compass woes

By Stephen Fidler and Salamander Davoudi
October 3, 2005
Financial Times
http://news.ft.com/cms/s/602bdcba-33aa-11da-bd49-00000e2511c8.html
As the United Nations has expanded its peacekeeping role in trouble spots around the globe in recent years, Compass was one of the companies that benefited.
Its expertise in thedifficult business of getting food to remote regions in sometimes hostile conditions put it in a good position to win lucrative business supplying blue helmet UN peacekeepers.
This helped its defence, offshore and remote site business to expand by 45 per cent in the year ended September 2004.
At the start of this year its ESS Support Services subsidiary was supplying 30,000 UN troops in Kosovo, Cyprus, East Timor, the Golan Heights, Lebanon, Liberia, Eritrea and Burundi. In some of these places, ESS was among the largest recipients of contracts.
ESS has brought unwelcome attention from the UN Office of Investigative Oversight Services and from US federal investigators looking into UN buying practices following the discovery of corruption in contract awards.
The investigations are the latest ramification of a scandal over the UN's management of the corruption-riddled oil-for-food programme that supplied Iraq with food and medicines before the 2003 US-led invasion.
In investigating this, an independent commission led by Paul Volcker, the former chairman of the US Federal Reserve, stumbled across other evidence of corruption. It discovered payments of more than $950,000 (£540,000) to Alexander Yakovlev, a Russian who worked as a UN procurement officer for more than 20 years, from companies or people that had together won more than $79m of UN contracts and purchase orders.
Mr Yakovlev resigned in June following disclosures that he had helped get a job for his son Dmitry at a company called IHC Services, with offices in New York and Milan, which provides products and services to UN contractors, including Compass. Kofi Annan, the UN secretary-general, waived his diplomatic immunity and in August Mr Yakovlev pleaded guilty to wire fraud and conspiracy charges.
Paul Kelly, a Compass spokesman, admitted the company had multiple contacts with Mr Yakovlev, but said the contracts it won were not awarded by Mr Yakovlev.
He said the company had co-operated with US and UN investigators, but asserted there was no suggestion of any wrongdoing and that many other companies were being questioned.
He would not specify how much its UN contracts were worth, citing client confidentiality, but said they represented less than 1 per cent of Compass revenues, or less than £120m.
ESS Support Services reported interim profits of £22m for the six months to March 31, 2005 on turnover of £273m. Compass last week issued its third profit warning in 12 months and Mike Bailey, chief executive, said he was quitting.