Compass UN probe finds 'serious irregularities'

By Miles Costello
February 1, 2006
Times Online (UK)
Original Source: http://business.timesonline.co.uk/article/0,,9073-2020020,00.html


Embattled catering group Compass has concluded its three-month internal investigation into alleged corruption involving United Nations procurement contracts, having established serious irregularities involving its subsidiary, Eurest Support Services. 
Having already fired three senior executives over the scandal, including Andrew Seiwert, a director at ESS, the world's largest catering group today tried to draw a line under events by highlighting the actions it had taken over the allegations.
It said its inquiries, undertaken by law firm Freshfields and auditors at Ernst & Young, had established that there were issues in relation to the behaviour of a few individuals within ESS. 
The caterer noted that senior management at the subsidiary, drawn into a probe involving both the UN and its former contractor and vendor IHC, had been completely restructured and a new reporting line set up to finance director Andrew Martin. 
It said the considerable work undertaken by Freshfields and Ernst & Young gives no reason to believe that these issues extend beyond these individuals to other parts of ESS or to the wider Compass Group of companies.
The probe, overseen by Steve Lucas, the chairman of Compass's audit committee, centred on allegations that ESS improperly obtained information on a three-year $62 million contract to supply food and water to UN peacekeepers in Liberia. 
It also took in allegations surrounding the relationship between ESS and IHC, which works for companies trying to do business with the UN. 
Fox News, the US news channel, obtained copies of e-mails from IHC to ESS containing confidential information on the contract bidding process that was designated only for UN officials. 
Compass, which has been suspended as a UN contractor during a wider probe into alleged contract bidding malpractice, has already conceded that the investigation raised serious concerns as to whether, within ESS, there has been, in connection with IHC and the UN, improper conduct and a failure to comply with the company’s statement of business principles.
When it first revealed the investigation, Compass stressed that it was a signatory to the UN Global Compact and that its business practices were governed by a strict, zero tolerance based code of ethics that applies to all employees without exception.
It added that last year, revenues from UN contracts were less than 0.5 per cent of overall takings.
Today, Compass said that IHC's relationship with both the UN and ESS was part of a wider, criminal investigation in the United States, which is ongoing and with which it is fully co-operating. 
Mr Lucas said: This has been a highly regrettable episode for Compass Group. However, we have now concluded a very thorough investigation and taken appropriate and decisive action. 
We have no reason to believe that the issues identified extend to any other part of the group.
Shares in Compass, which have also been hit by three profits downgrades over the past 12 months, recovered 2.25p to 224p this morning. 
Compass has a stock market value of approaching £4.8 billion.