Food Services Company Files Lawsuit Over U.N. Procurement Contracts

A Switzerland-based food services company has filed a lawsuit against several competing companies and individuals who are being investigated in relation to U.N. bid-rigging schemes involving lucrative peacekeeping contracts.

Supreme Foodservices AG claims it is owed about $125 million in damages after being shut out of the bidding process by the alleged parties.

These parties include: Compass Group, a British-based firm known as the largest food-services company in the world; its subsidiary, Eurest Support Services (ESS), which had previously held food services contracts for U.N. peacekeeping forces worth as much as $350 million; Alexander Yakovlev, a long-time U.N. procurement officer who pleaded guilty last August to fraud and money-laundering charges; and a company called IHC Services, which does supply business with the U.N. on behalf of numerous companies, including ESS. Also charged in the suit are a number of individuals who have recently been fired by Compass, including Peter Harris, a Compass board member who was also CEO of ESS.

"I think there's an expectation when any company makes a bid that the bid is going to be honestly considered, you win or lose on your merits, on the merits of the bid," Bob Begleiter, an attorney with Constantine Cannon representing Supreme, told "Supreme has done a lot of work for the U.N., has done good work for the U.N., and again had a good expectation that when it was making a bid, the bid would be considered. It appears that has not happened."

The lawsuit by Supreme, a long-time U.N. food services supplier, is the latest in a procurement scandal that has taken the United Nations by storm.

• Click here to read the text of Supreme's lawsuit (pdf).

Last fall, the U.K.-based Compass Group, which bills itself as the largest catering service in the world, announced that Harris, another senior ESS executive named Andy Seiwert and one other high-ranking employee involved in U.N. bidding were dismissed for actions relating to dealings with IHC Services, which helped companies obtain U.N. procurement contracts.

Yakovlev was a U.N. procurement officer who was arrested last August and pleaded guilty to corruption and wire fraud charge. He is known to have sought bribes from U.N. contractors as early as 1996.

"For approximately five years, defendants engaged in an illegal scheme involving mail fraud, wire fraud and bribery to rig the award of United Nations contracts for the provision of food rations to U.N. peacekeeping forces around the world," reads the lawsuit filed on Monday. "This conspiracy corrupted the United Nations and defrauded the U.N.'s member states. It contaminated a bidding process designed to be free and fair, and it cheated Plaintiff Supreme out of contracts that could be worth an excess of $350 million."

The suit, a copy of which was obtained by FOX News, alleges that not only did IHC give Yakovlev cash payments to rig bids for Compass, but another defendant, IHC CEO Ezio Testa, hired Yakovlev's son to work at IHC headquarters in New York City.

Last October, FOX News revealed that Testa had leaked confidential U.N. procurement bid information to another firm named in the lawsuit, ESS, five days before the United Nations gave ESS a $62 million contract to feed peacekeepers in Liberia. Included in the information was Supreme's bid on the same contract.

The lawsuit notes that Paul Volcker, the former Federal Reserve chief heading up the independent investigation into the U.N.'s Oil-for-Food program, found that Yakovlev had taken at least $1 million in bribes relating to U.N. procurement contracts and Oil-for-Food. Yakovlev had his diplomatic immunity stripped that same day.

Later, a top U.N. budget official, Vladimir Kuznetsov, was charged with laundering money he got from Yakovlev. Kuznetsov, who is also named in the Supreme lawsuit, pleaded not guilty.

The lawsuit specifically cites the $62 million Liberia contract, alleging that Compass used "top-secret, highly confidential U.N. information illegally obtained from Defendant Yakovlev" to secure this contract.

After news of the potential bribes broke, the United Nations removed ESS from its approved vendor list and began investigating the possible procurement scandal. Despite those actions, however, ESS and Compass continue to supply food to U.N. peacekeepers under the existing contracts, and one contract has even been extended. The U.N. says it is having difficulty finding replacement suppliers.

A statement received by from Compass Group attorneys reads: "Compass Group PLC has identified that a U.S. complaint has been issued, but not served, by a competitor, Supreme Foodservice AG, making allegations in connection with U.N. contracting. The Group will resolutely defend this complaint and it is not expected that this matter will have any material impact on the company's financial performance."

Supreme claims that the conduct by Compass, ESS, IHC and other defendants violated the Racketeer Influenced and Corrupt Organizations (RICO) Act, the anti-trust Sherman Act and New York State's Donnelly Act regulating free trade, and that their actions interfered with Supreme's business deals. The lawsuit was filed in the U.S. District Court, Southern District of New York.

Begleiter said the lawsuit has to be served to all defendants, who then have a chance to respond. That process could take anywhere from 30 to 60 days.

"I think it's important that the truth come out here," he said. "We're involving an organization that is very important, obviously, to the peace of the world and it's very important that we learn the truth on whether it's Oil-for-Food, whether its these food service contracts, that we learn what's happened, the wrongs have been done and that these wrongs have been righted."