Compass, the world's largest catering group, announced yesterday it had agreed to pay up to ￡40m to settle two lawsuits brought against it for allegedly bribing a UN official to win contracts worth millions of pounds to supply UN peacekeepers.
Two rival food companies brought the lawsuits, claiming a total of ￡600m in damages, against Compass in March. They alleged that Compass had led an illegal conspiracy to rig the award of UN contracts worth in excess of $350m (￡188m) to provide food rations to peacekeeping forces around the world that "corrupted the United Nations and defrauded the UN's member states".
Compass said it had settled the cases to draw a line under the episode but did not admit any legal liability. It said the terms of the settlement were confidential but did not exceed ￡40m.
Richard Cousins, the chief executive of Compass, said: "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."
However, a criminal investigation by US federal prosecutors is still going on. The UN and the US Congress are also carrying out wider investigations into UN procurement, which include the contracts won by Compass.
The long-running dispute centres on allegations that five senior executives at a Compass subsidiary, Eurest Support Services (ESS), bribed a UN official to win contracts to supply food and water to UN peacekeepers.
Compass, based in Surrey, became a UN-registered vendor in 2000 and subsequently won contracts to supply peacekeepers operating in Sudan, East Timor, Liberia, Burundi, Eritrea, Lebanon, Cyprus and Syria.
One of the complaints, brought by the Swiss company Supreme, alleged that five ESS executives, led by Peter Harris, the chief executive of ESS and a Compass board member, paid Alexander Yakovlev, a Russian UN official, hundreds of thousands of dollars through another New York-based company called IHC. It also alleged that Yakovlev's son was given a job at IHC.
A separate UN investigation into the oil-for-food programme subsequently found that Yakovlev had taken $1m in bribes from companies doing business with the UN. He pleaded guilty to criminal charges of wire fraud and money laundering.
According to the complaint, Yakovlev also supplied ESS executives with confidential UN documents relating to a tender for a $62m contract to supply food and water to peacekeepers in Liberia, which Compass subsequently won.
It says it also provided ESS with confidential information about ESS's poor performance on a contract to provide rations to peacekeepers in Burundi, which allowed ESS to improve its performance before it lost the contract.
In November, Compass dismissed Mr Harris, who by then was the head of the group's British, Middle East and African division, along with two other ESS managers. It also launched an internal investigation costing ￡5m, which uncovered "serious irregularities". ESS was last year suspended as a registered vendor by the UN and has not been reinstated.