Compass faced with new UN lawsuit

By Salamander Davoudi and Stephen Fidler
March 29, 2006
The Financial Times
Original Source: http://news.ft.com/cms/s/6831ecb8-bf57-11da-9de7-0000779e2340.html

Compass has been hit with a second US lawsuit from an international competitor claiming hundreds of millions in damages for business it lost through the UK caterer’s alleged corruption at the United Nations.
The suit casts doubt on Compass’s ability to limit the fall-out from allegations of bid rigging by its Eurest Support Services subsidiary that feeds UN peacekeepers.
Es-Ko, a Monaco-based private company that supplies provisions to UN peacekeepers, has filed a suit in Manhattan claiming $369m in damages.
It alleges racketeering by the Compass subsidiary as it climbed from nowhere in 1999 to become the leading supplier to UN peacekeeping forces.
Compass said it would strongly resist the action. It said: “This claim contains no new information. It simply reformulates previous arguments. An initial review indicates that the damages claimed bear no relation to the value of the UN contracts awarded to ESS and the complaint will be vigorously defended.”
Es-Ko alleges it has lost $86m in profit from contracts illicitly won by ESS and $37m as a result of reduced profit margins in contracts that Es-Ko won 
It is claiming treble damages to reflect ESS’s alleged criminal behaviour.
It is the second such lawsuit this month. On March 6, Supreme Foodservice, another competitor, also filed a lawsuit in Manhattan claiming $125m in damages and saying it had lost $350m of UN business.
Compass was suspended as a vendor to the UN last October pending an investigation into allegations of corrupt buying practices. All of its existing UN contracts were retendered and Peter Harris, former head of ESS, and several other executives have been dismissed.
Es-Ko also claims that knowledge of a dishonest relationship between ESS and IHC Services, an intermediary company used by ESS to do business with the UN, extended further into Compass than it has so far admitted and described the sackings as a “cover-up”.
It says Michael Bailey, Compass’s outgoing chief executive, was involved with Mr Harris in formulating the initial business relationship between Compass Group/ESS and the UN.
Es-Ko says it reserves the right to include Mr Bailey in its legal action. Mr Bailey declined to comment.