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Compass faces second US lawsuit

30 March 2006

Compass Group faces its second US lawsuit relating to allegations of bribery and corruption in the awarding of United Nations peacekeeping contracts.

Monaco-based logistics group ES-KO has filed a total claim of $902m (£517m) alleging that Compass division ESS obtained business through rigged bids and fraud.

It follows similar action by Swiss-based Supreme Foodservice, which launched a £72m claim earlier this month.

The writ, which has been filed at the US District Court of the Southern District of New York, stated: "But for the illegal conduct of Compass, the United Nations would have awarded ES-KO contracts having a value of approximately $574m (£330m)."

ES-KO alleged Compass obtained food and water deals in nine countries, including Sudan, Lebanon and Syria, after obtaining sensitive information on rival bids, enabling it to undercut competitors.

The action also threatens to implicate outgoing chief executive Mike Bailey in the scandal. "Bailey was frequently in New York during the relevant period 1999-2005]," stated the complaint.

It added that Bailey was involved in forming the "initial business relationship between Compass/ESS and the United Nations", along with former ESS chief executive Peter Harris.

Harris was dismissed from Compass in November last year following an internal investigation.

Dresdner Kleinwort Wasserstein analyst Karl Green said the case may jangle nerves in the City.

"There is still a huge amount of uncertainty surrounding the ESS fiasco. Investors should not underestimate the sentiment impact of scary headlines," he said.

A Compass spokesman said: "A preliminary review indicates the damages claimed bear no relation to the value of the UN contracts awarded to ESS and the complaint will be resolutely defended."

US Congress has questions over Compass investigation >>

Serious Fraud Office denies formal Compass investigation >>
By Tom Bill

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