October 6, 2005 | FOXNews.com

U.N. Procurement Scandal: Secret Information Was Leaked to a Bidder

Co-authored by: George Russell.

On the morning of Nov. 6, 2003, an e-mail sped between two business executives at two private firms, bearing an important tip-off about an impending and highly confidential United Nations (search) business deal.

The message was brief and direct. “Dear Andy,” it said, “This will go to the Committee next Tuesday. All the best.”

The committee in question was the United Nations Headquarters Committee on Contracts, a top-level U.N. body that gives final approval to, among other things, all major purchases by the procurement department of the world organization. It was slated to hold its next meeting on Tuesday, Nov. 11, 2003.

Attached to the e-mail were commercially sensitive U.N. documents that no one outside of highly restricted circles within the U.N. was supposed to have access to — and that the contracts committee itself would not ponder for five more days.

The first document (pdf) was a draft of the official recommendation by the U.N. procurement department that a $62 million contract for U.N. peacekeepers in Liberia be awarded to a company called Eurest Support Services, or ESS, based in England and Cyprus. The contract covered food and water supplies for up to 15,000 peacekeepers for three years plus two renewable one-year options. It ended with a plea for the contracts committee to approve the deal: “The advice of the Committee is requested.”

The second document (pdf) was a detailed United Nations evaluation of the technical abilities of 12 different food supply firms to meet U.N. requirements for feeding separate U.N. peacekeeping missions in Liberia, Ethiopia and Eritrea, and the Congo. The analysis winnowed the 12 firms down to five that the U.N. technicians felt could best provide food and other supplies to the Africa-based troops.

The third (pdf), and most startling, document was a detailed list of the price bids that three of the five firms had submitted for the U.N. contract, covering everything from different ration packages to warehousing costs. The document showed that ESS had bested its nearest rival, a Monaco-based food services firm known as Es-Ko, by literally pennies per ration unit, and had also underbid its competitors in virtually every other service category.

Such information is considered top-secret by the United Nations, and is submitted in a sealed-bid process that U.N. officials have touted as foolproof.

Nonetheless, all this information was clearly available to the business executive who sent the e-mail — Ezio Testa, President and CEO of a mysterious and controversial company known as IHC Services. Based in New York with offices in Milan, IHC until recently was a registered vendor to the U.N. procurement department, acting both as a contractor selling goods directly to the world body and as a go-between, or “vendor intermediary,” for a number of other suppliers.

The man who received Testa's e-mail had a vital interest in it. He was Andy Siewert, a business development executive with ESS, which is itself a subsidiary of Compass Group, self-described as the largest food services company in the world. Siewert has also been described to FOX News by sources close to the U.N. as the ESS executive who had the most frequent day-to-day contact with the scandal-plagued U.N. procurement department.

That contact included frequent meetings with Alexander Yakovlev, the U.N. procurement officer who last August pleaded guilty to charges of corruption, wire fraud and money-laundering after FOX News exposed his personal ties to IHC Services, which employed Yakovlev's son. According to documents obtained by FOX News, Yakovlev was in charge of the Liberia food rations contract that was the subject of Testa's e-mail.

FOX News has obtained copies of the minutes taken at the U.N. Headquarters Committee on Contracts meeting on Nov. 11, 2003, which confirm that the committee went on to approve the award of the contract to ESS in exactly the manner that Testa's e-mail foreshadowed. While committee members briefly questioned details of the proposal, they approved the full $62 million amount.

The Liberia peacekeeping contract was a major coup for ESS, but not the only one involving the U.N. Since 2000, ESS has won food contracts via the U.N. procurement department with peacekeeping forces in places such as East Timor, Burundi, Eritrea, Lebanon, Cyprus and Syria. The company recently won an additional contract to feed the expanding U.N. peacekeeper force in Sudan. U.N. officials estimate the total value of ESS peacekeeping contracts at more than $237 million. Including optional renewals and add-ons, the total could run as high as $351 million.

Ten months after the exchange of e-mails between Testa and Siewert, ESS and IHC announced a special “Best in Class” business partnership for future business, with Andy Siewert named as the ESS official who would manage the relationship. An announcement of the ESS-IHC relationship, dated Sept. 13, 2004, was posted on the ESS web site, but disappeared shortly after Yakovlev's Aug. 9 arrest. Access to this item in the archive now appears blocked.

In response to an e-mail from FOX News regarding his 2003 message to Siewert, IHC's CEO Testa referred FOX to his Washington, D.C., lawyers, who later told FOX that “there is no evidence that IHC had any improper communications with ESS concerning confidential U.N. information.” Telephone calls and e-mails to Siewert and to a spokesman for Compass Group were answered by a company spokesman who said “there is no evidence of any wrongdoing on our part.”

The 2003 e-mail exchange between Testa and Siewert is the most graphic evidence yet of the extent of the procurement scandal that continues to rock U.N. headquarters, in which supposedly secret U.N. business deliberations were apparently an open book to at least some firms dealing with the organization — even as the U.N. refuses to open almost all of its operations to public scrutiny.

So far, two U.N. officials have been arrested in this scandal: Yakovlev, a Russian native, and another Russian, Vladimir Kuznetsov, who headed the U.N.'s budget oversight committee. But the full extent of such schemes, and the amount of U.N. money involved, is not yet known. In a recent report, the Volcker committee investigating the U.N.'s multibillion-dollar Oil for Food  scandal noted that Yakovlev, who is now cooperating with investigators, had close to a million dollars in bribe money stowed in a secret Caribbean bank account, and that the bribes involved at least $79 million in non-Oil for Food U.N. contracts.

Tentacles of the procurement scandal have now reached as high as the U.N. Secretary-General's office. On Oct. 4, FOX News revealed that Italian businessman and diplomat Giandomenico Picco, appointed in August 1999 as a personal representative of Secretary-General Kofi Annan  with the U.N. rank of under secretary-general, had also served as a director and then chairman of the board of IHC Services from 1997 to at least February 2000. Picco's U.N. appointment was extended, with a brief interruption, until February 2003, when he became a formally designated adviser to Annan, a title that does not lapse until June 30, 2006. Neither Picco nor the Secretary General's office has answered questions about whether the overlapping duties were ever disclosed to the U.N. Picco has denied any wrongdoing.

Asked about the apparent conflict of interest in Picco's case, a spokesman for the secretary-general said that “new and stronger policies on conflict of interest and disclosure” were being contemplated.

Senior U.N. officials say that internal U.N. investigators are now heavily involved in examining the procurement department, and according to press reports, both federal and U.N. investigators are now probing alleged links of ESS and its parent, Compass, to the procurement scandal. The ESS company spokesman said his firm is cooperating with the U.N. investigation.

But whether the investigators have talked to Testa and Siewert about their $62 million communication and the window it offers into the confidential U.N. bidding process remains to be seen.

George Russell is Executive Editor of FOX News. Claudia Rosett is journalist-in-residence with the Foundation for the Defense of Democracies.



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