The peace profiteer

Posted By Colum Lynch Thursday, March 18, 2010 - 9:32 PM

Ezio Testa, an Italian executive, built a lucrative business in the late 1990s helping to supply U.N. peacekeepers with the food rations, body armor, and other essentials they need to sustain themselves in the world's nastiest conflict zones. But Testa held an improper edge over his competitors, according to an internal U.N. investigation: He was paying for inside information about upcoming contracts.

The details of Testa's murky empire are brought to light in a previously unreported December 2008 letter, marked "strictly confidential" and sent by an internal U.N. watchdog, the U.N. Procurement Task Force, to the lawyers of U.S. security contractor Armor Holdings. The letter, obtained by Turtle Bay, spells out how Testa paid for illegal information from a U.N. procurement officer, Alexander Yakovlev, on behalf of a former executive at Armor Holdings. Testa and Yakovlev then "entered into a corrupt agreement to steer a valuable United Nations contract to Armor Holdings in exchange for promises of sums of money to be paid to the individual participants," the letter concludes. Such confidential information subsequently helped Armor Holdings win a contract for bullet-proof vests for a U.N. peacekeeping mission.

What emerges is a picture of a man whose career flourished in the shadows of the U.N. system as he acted as a fixer for multinational corporations, seeking access to contracts for servicing the U.N.'s expanding peacekeeping empire. U.N. investigators from the task force had previously linked Testa to Eurest Support Services International (ESS), a subsidiary of the world's largest food caterer, Compass Group, which improperly secured contracts for more than $100 million for food and other supplies. His allegedly illicit activities were first reported in a 2005 series by Fox News. And Testa's company was later blacklisted by the United Nations.

Neither Testa, IHC, or ESS were prosecuted for their alleged role in the food-ration scheme. But ESS's parent company, Compass Group, settled a lawsuit from two competitors who claimed they'd lost their bids because of fraudulent behavior. Compass paid more than $70 million to the two companies, but did not accept liability.

The U.N. letter, however, discloses new details, most importantly by connecting Testa and Yakovlev directly to a wide-ranging criminal investigation by the U.S. Justice Department into bid-rigging by former officials at Armor Holdings and other security contractors. Testa's contact at Armor Holdings was Richard Bistrong, a former senior official who was charged in January with paying bribes to officials in the Netherlands and in the United Nations to secure insider information on contracts for bullet-proof vests.

Yakovlev pleaded guilty in 2005 to unrelated federal charges that he received about $1 million in bribes for insider information from companies seeking U.N. contracts. Both men's cases have been reported previously, Bistrong's by the New York Times last month. But this is the first time that Bistrong, Testa, and Yakovlev have all been linked.

Testa declined to comment on the case, saying he had no idea that he was tied to the Bistrong case through his alleged links to Armor Holdings. "I am unaware of what you are telling me," he said before hanging up. A spokeswoman for the Justice Department, Laura Sweeney, declined to say whether Testa himself was the target of a federal criminal investigation.

Becoming a player

Testa first came on the scene in 1996, heading the firm IHC Services Inc., which offered consulting services to large multinationals looking to tap into the billions of dollars the United Nations spends each year to service its 18 peacekeeping missions. On his personal website, Testa, who obtained U.S. citizenship in 2004, describes himself as an expert in "cost control." A longer online profilerecounts his career as a senior executive at Torno Construction, one of Europe's largest construction firms. He has built oil pipelines between Turkey and Iraq, assisted U.N. peacekeeping missions in Africa, and helped with preparations for Operation Iraqi Freedom in 2002. "We put 18,000 troops in the middle of the Kuwaiti desert where there was nothing but sand ... and in 96 days they had everything."

Testa established himself as a player into the late 1990s, appointing one of the U.N.'s best-known diplomats, Giandomenico Picco, as chairman of the IHC board of directors, a position he held even as he continued to serve as a top U.N. official. Testa also cultivated personal relationships with members of an obscure community of U.N. procurement officers. Prizing secrecy, Testa required companies he represented to sign confidentiality agreements that prohibited them from acknowledging they had ever hired him, according to the U.N. task force's 2006 report.

In 1998, Testa met Yakovlev, a U.N. procurement officer from Russia, and offered to help him start up his own business in Moscow. Yakovlev hoped his company would market a product called Oilgater, which uses germs to erode grease and oil. Before long, Yakovlev, still a U.N. procurement officer despite his private business activities on the side, furnished Testa and his clients with internal documents that helped them secure U.N. business, according to the letter and the 2006 report. Testa gave Yakovlev a mobile telephone and paid the bill. In May 2000, Testa hired Yakovlev's son Dmitry at IHC as a low-level administrative assistant.

How Testa and Yakovlvev first got involved with Bistrong is unclear, but the letter accuses Testa of providing confidential information to representatives of Supercraft (Europe) Ltd., a London-based subsidiary of Armor Holdings, in exchange for about $200,000 in cash payments. According to the letter, the firm's managing director sent Testa an email in May 2001 seeking "confidential and proprietary" information from a source inside the U.N. procurement department. Four months later, Testa sent the managing director's boss, Bistrong, a copy of an internal U.N. memo with technical evaluation for an ongoing bid for bulletproof vests. "This confidential information was furnished to Bistrong by Testa in an email instructing him to ‘[p]lease destroy after reading,'" according to the letter.

A 2007 filing with the Securities and Exchange Commission by Armor Holdings confirms that one of its subsidiaries hired Testa's company, IHC, to help prepare a bid proposal for the purchase of body armor for U.N. peacekeepers.

Yakovlev first became a target of a U.N. investigation into corruption in the oil for food program in Iraq. In 2006, the United Nation task force produced a report that spelled out how "Mr. Yakovlev and Mr. Testa engaged in corrupt practices involving important United Nations business and procurement excercises." Yakovlev resigned from the United Nations in June 2005 and was subsequently arrested and pleaded guilty for fraud and money laundering in the southern district court in Manhattan (though he was never sentenced and remains free). Also as a result of that investigation, Testa's company was suspended from the U.N. list of approved contractors. John Suttle, a spokesman for BAE Systems, which bought Armor Holdings in July 2007, said that Armor severed relations with IHC at that time.

Suttle said the company dismissed officials implicated in the alleged scheme after it conducted its own investigation into the U.N.'s findings. He said his company has cooperated fully with U.N. and federal investigators and that the U.N. ultimately withdrew the letter to reflect that cooperation.

As part of his plea agreement, Yakovlev agreed to cooperate with the prosecution, according to his lawyer Arkady Bukh. Bukh said he did not believe Yakovlev was a target of the ongoing federal investigation into Bistrong, but he said he could neither admit nor deny that his client was cooperating with federal investigators in that case. Bistrong's lawyer, Brady Toensing, declined to comment.

Another compounding detail of the case comes from Bistrong's personal entanglements. He was married to a former U.S. ambassador at the United Nations, Nancy Soderberg, who oversaw U.N. peacekeeping operations for the United States. But the alleged crimes occurred after Soderberg, who served under the Clinton administration, had left the United Nations. And she has not been linked to the case. They have since divorced.

Investigation issues at the U.N.

In addition to flagging serious concerns about the transparency of the U.N. procurement system in recent years, the case also raises questions about how the United Nations investigates incidents of internal corruption. The investigation into Armor Holdings is one of scores of corruption probesconducted by the now-defunct U.N. procurement task force from 2006 until 2009, when its mandate expired. That task force specialized in white-collar criminal investigations, some of which have led to criminal investigation in U.S. courts.

While its mandate lasted, the task force faced intense criticism from the governments of Singapore and Russia, whose nationals were targeted by its investigations. In December 2008, Russiapressed for the barring of any task force members from being hired by the United Nations. The U.N. leadership, meanwhile, blocked the hiring of the task force's chairman, Robert Appleton, last year on the grounds that there were no women or non-American candidates on the short list.

The expertise amassed from the task force was supposed to be incorporated into the investigations division in the U.N.'s internal oversight office. But the task force and most of its staff have left the United Nations, and the U.N. has been slow to hire new investigators, undercutting its capacity to police itself.

U.N. spokesman Farhan Haq said that "all hiring of personnel has to comply with the guidelines that include steps to ensure that all hiring processes are fair and take into account a wide range of candidates."