Compass named in UN report

By Salamander Davoudi and Stephen Fidler
January 25, 2006
The Financial Times
Original Source: http://news.ft.com/cms/s/5fd788de-8d48-11da-9daf-0000779e2340.html

A United Nations report into procurement operations at its peacekeeping missions has uncovered evidence of suspected mismanagement, favouritism and financial irregularities in relation to its dealings with several companies - including a subsidiary of Compass, the troubled contract caterer.
The investigation by the Office of Internal Oversight Services, the UN's internal investigative arm, examined 27 contracts worth $1bn (£560m), or 31 per cent of the cumulative value of all commercial contracts over $5m. As reported, it found that the world body may have lost as much as $298m in contract irregularities.
The report, distributed to UN members this week, says: A lack of enforcement of accountability and a reluctance to investigate mismanagement of resources, fraud and abuse of delegated authority has led to a pattern of corrupt practices.
An earlier draft report, distributed to some UN member countries but not for public distribution, provides additional detail on that part of the OIOS investigation into the UN's relationship with ESS, a Compass subsidiary. The UN suspended ESS inOctober as a registered vendor pending completion of an investigation into allegations about the way ESS won a Liberia contract in 2004.
The report describes seemingly irregular payments to ESS, suspicions over why it was awarded contracts and the absence of proper financing on one contract.
A Compass spokesman said the company was aware of the reports. We are in constant contact with the head of the UN investigation, Paul L Roberts. We have not seen the report but have been assured that there is nothing significant in it relating to ESS that we are not already aware of. We continue to co-operate very closely with all relevant authorities on this matter.
The draft report cites four separate areas in which UN dealings with ESS were called into question:
*The UN mission in Liberia complained that ESS's performance in providing food rations was dismal and hired a private investigations company, SGS, to ascertain why it had won the contract.
*Some $7.6m was allegedly paid to ESS in relation to a contract in East Timor, in violation of the UN's financial regulations.
*A meeting in December 2004 awarded a $201m contract to ESS to provide food rations for the UN mission in Sudan without the usual requirement that it provide a guarantee, even though this represented a crucial business risk for the UN.
*ESS was among the companies that allegedly benefited from a failure to enforce UN rules relating to the provision of performance bonds, which are issued by banks to guarantee satisfactory performance by a contractor. Investigators found that, on one $61.4m contract, ESS did not provide bonds to the required value and that its performance bond was returned eight months before the contract ended.
The UN is still investigating the matter.