U.N. Procurement Scandal: How Far Did the Inside Information Travel?

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Published February 10, 2006

| FoxNews.com

On April 27, 2005, a U.N. procurement officer named Alexander Yakovlev was working unusually late.

At 11:23 p.m. he fired off an e-mail to a food service executive named Andy Seiwert, and by the next morning, something close to panic appeared to be spreading through some of the offices at Eurest Support Services (ESS), a company that is now deeply embroiled in the multibillion-dollar United Nations procurement scandal.

Yakovlev’s note said simply: “Dear Andy, for your urgent comments, pls.”

It also contained an attachment: an extensive U.N. internal checklist of ESS’s failings on a contract to supply food rations to U.N. peacekeepers in Burundi. The checklist and appended comments were labeled “strictly confidential, not for release outside of the United Nations.”

Click here to read the e-mail and accompanying documents.

The U.N. official who authored the document was accusing ESS of dramatically sub-par performance on the food rations deal. According to the U.N., ESS contracts for Burundi, including add-ons, were worth as much as $111 million.

According to a U.N. official familiar with the world organization’s procurement practices, such documents are never shared directly with offending U.N. suppliers, though the problems mentioned may be discussed, with the aim of solving them.

By the next day, Seiwert, an ESS executive charged with business development, had passed along the e-mail to two of his subordinates who dealt with U.N. contracting. Seiwert added some demands for fast action of his own.

“The recommendation of the local team is not to use ESS as a food-rations contractor again,” Seiwert wrote. “Your urgent attention to this would be appreciated.”

The correspondence between Yakovlev and Seiwert is another indication of the unusual ties between ESS and the U.N. procurement department, which is one of the wellsprings of the procurement scandal, which involves bribes and irregularities affecting hundreds of millions of dollars of U.N. business. But it also raises fresh questions for Compass Group, the British-based food service giant that owns ESS and is also embroiled in the U.N. scandal.

Just last week, after a three-month internal investigation, Compass declared it had discovered “serious irregularities” in its U.N. business, but that these were limited to “only a few individuals” within its ESS subsidiary, and had been cleaned up through “appropriate and decisive action.”

The chain of e-mails between Yakovlev and ESS, obtained by FOX News, suggests the irregularities and number of individuals involved went beyond what Compass has so far disclosed.

The Burundi e-mail exchange offers new details of how insider information moved from within the U.N. to its suppliers in the procurement scandal, and raises further questions about who at ESS may have had unauthorized access to sensitive U.N. documentation. Those questions have become especially important as Compass, ESS’s parent company, has tried to distance itself from the wrongdoings that have cut hundreds of millions from its shareholdings, and are still rocking the U.N.

Less than two months after the April 2005 Burundi e-mails, ESS’s privileged access to confidential U.N. information via Yakovlev would abruptly end, when the U.N. procurement officer was found by FOX News to have a secret Caribbean bank account. Yakovlev has subsequently pleaded guilty to corruption and wire fraud charges, and he awaits sentencing.

Since then, all of ESS’s dealings with the U.N. have been suspended, including contracts worth at least $237 million, or possibly as much as $351 million, after FOX News further discovered that Seiwert had received secret bid information on a $62 million U.N. contract for food rations in Liberia, via Ezio Testa, CEO of a mysterious U.N. supplier called IHC Services.

In November, 2005, Seiwert was fired by Compass. So was Seiwert’s boss, Peter Harris, head of ESS and of Compass’ British operations, after FOX News revealed that Harris had been involved in the secret sale of IHC Services last June to a mysterious company based in the British Virgin Islands.

A third ESS official was also dismissed; though Compass did not identify him, he has been identified by U.S. congressional investigators as Doug Kerr, an ESS executive who worked with Seiwert on preparing bids for U.N. contracts.

Last week, after a three-month internal investigation by an independent law firm and the Ernst and Young accounting firm, Compass announced that the problems with its U.N. business have been dug out, and that the “few individuals” involved had been appropriately dealt with.

The company said there was “no reason to believe that these issues extended beyond these individuals to other parts of ESS or to the wider Compass Group of companies.” But Compass refused to make public its investigation and did not name any other individuals involved beyond those already fired.

As the Burundi e-mails obtained by FOX News show, at least two other Compass-ESS executives — Steve Kemp and Len Swain — were also on the receiving end of U.N. documents that outsiders were never supposed to see.

According to Compass Group communications director Paul Kelly, Steve Kemp is currently a “Regional Operations Director with ESS with responsibility for operating the company’s contracts for the U.N. in-country.” Len Swain “was responsible for procurement for ESS, but is now working on a project for the Middle East and Africa business before leaving the company shortly.” Kelly said Swain’s departure is “part of the on-going restructuring of ESS,” but he would provide no further details.

Whether other e-mails containing confidential information might have passed through ESS, or who might have seen them, is not known. Nor is the full extent of Yakovlev’s wrongdoing. The United Nations has refused to disclose the full extent of procurement contracts that Yakovlev supervised at the U.N., though a recent, unpublished version of a U.N. audit report on peacekeeping operations refers to a single officer supervising $2 billion worth of contracts in 2005 — a reference that points to Yakovlev, who worked largely on expensive food and fuel deals in U.N. Procurement.

U.N. congressional investigators who have been looking into the procurement scandal have refused to take Compass Group’s word, based on unpublished evidence, that the limits to the company’s U.N. wrongdoing are now known.

Compass says it will continue to cooperate with investigations now being conducted, which include the congressional inquiry, a U.S. federal criminal investigation, and a probe by the U.N. itself.

George Russell is executive editor of Fox News. Claudia Rosett is a journalist-in-residence with the Foundation for the Defense of Democracies.

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http://www.foxnews.com/story/2006/02/10/un-procurement-scandal-how-far-did-inside-information-travel