Custer Battles is suspended from doing business with the military [Archive] - SOCNET: The Special Operations Community Network

magician

16 February 2005, 13:02

from : http://www.corpwatch.org/print_article.php?&id=11575

Iraq Contractor Accused of Offshore Shell Game
by*David Phinney,*Special to CorpWatch
October 14th, 2004

Former managers working with Custer Battles, a high-profile private security company in Iraq, are accusing the firm of using affiliated "shell" companies in the Cayman Islands and other "tax haven" countries to fraudulently overcharge on government contracts by tens of millions of dollars. The accusations are spelled out in a lawsuit filed under the False Claims Act and made public October 8.

Custer Battles, headquartered in McLean, Virginia, first grabbed headlines after winning a $16.5 million contract in June 2003 to provide security for the Baghdad International Airport by hiring Nepalese Gurkhas. It was the first major assignment for the fledgling firm after being launched in October 2001.

Founded by two Army veterans, Scott Custer and Michael Battles -- a former Republican candidate for Congress in Rhode Island -- the firm had little experience in private security and employed only a handful of people at the time. The two entrepreneurs, both in their mid-30s, made their first payroll with credit cards and personal loans. Since then, Custer Battles has landed security contracts totaling an estimated $100 million that include protecting Iraq’s new currency and training the Iraqi army.

But during those early months in Iraq, the company resorted to using crooked accounting and "sham" companies in far-flung countries including the Cayman Islands, Cyprus and Lebanon, to dramatically pump up charges on contracts by as much as 162 percent on equipment, construction supplies and services, claim plaintiffs’ Robert Isakson and W.D."Pete" Baldwin, both of who worked for Custer Battles.

"When I see crooks come into a war zone where people are fighting and dying, I just turn them in," Isakson says. "In my opinion they were cheating the government and taxpayers and just being rewarded with more contracts."

Since the 1991 Gulf War, Isakson says his disaster relief and construction company, DRC of Mobile, Ala., has worked in support of the military and others as a subcontractor in Kuwait, Somalia and Kosovo. The former FBI investigator says he has blown the whistle on other frauds in the past, but Custer Battles trumps everything he has seen.

Custer Battles denies the allegations as "baseless" and portrays Isakson and Baldwin as in "direct competition" with the company. Custer Battles spokeswoman Jennifer Martin referred inquires about the lawsuit to an October 8 press release. "We believe that the individuals filed this claim solely as a last ditch effort to achieve a competitive edge over CB," the release says.

Nevertheless, the Pentagon temporarily banned the company from future government contracts on September 30 until legal proceedings are resolved. In an Air Force memo calling for the government-wide suspension, Custer Battles and its officers are accused of creating "sham" and "interlocked" foreign companies to fraudulently increase profits and inflate costs charged to the Coalition Provisional Authority (CPA), the temporary governing body in Iraq largely led and funded by the U.S. government.

"Adequate evidence" establishes that the conduct of Custer Battles and top individuals associated with the firm "is of so serious or compelling a nature that it affects their present responsibility to be government contractors or subcontractors," the memo concludes.

During one contract meeting with CPA officials, the Air Force claims that Battles absentmindedly dropped a spreadsheet on a table reflecting an attempted billing of $9,801,550 for expenses that cost the company $3,738,592. Under the contract, actual costs and invoiced costs should have been the same, the memo says, but had been marked up 162 percent.

The Air Force also makes additional accusations against the company, which include a $2.7 million bill fabricated from "forged leases, inflated invoices and duplication," as well as a $157,000 charge for a $95,000 helicopter pad in Mosul, Iraq.

Offshore tax havens popular with government contractors

Custer Battles is just one of many government contractors known to use offshore companies in countries commonly known as "tax havens," according to recent reports by the Government Accountability Office, the investigative arm of Congress.

One study, made public in February, finds that 59 of the 100 largest federal contractors in 2001 reported having subsidiaries in approximately 39 countries identified as tax havens. Such countries, including the Cayman Islands and Cyprus, levy negligible taxes on corporate income and provide privacy laws that shield businesses from international scrutiny.

Many of the federal contractors named by GAO also hold multi-million dollar contracts in Iraq, including Fluor, Foster Wheeler (which is incorporated in Bermuda), Computer Associates International, Bearing Point, Harris, and others. (A separate GAO report released in August found that such companies enjoy a substantial competitive edge in winning contract awards over government contractors without such offshore operations.)

Houston-based Halliburton, the largest contractor in Iraq, holds billions of dollars in reconstruction and logistics contracts. It operated 17 subsidiaries in tax haven nations as of 2001, according to GAO.

CorpWatch has found that Halliburton makes use of one Cayman Island subsidiary, Service Employees International, Inc., to employ an estimated 70 percent of its workers from the United States and elsewhere for a major Pentagon contract for military support services.

Company spokeswoman Cathy Gist offered no comment on this employment practice but said in an e-mail earlier this summer that all Service Employees International, Inc. employees are covered by U.S. workplace rules.

A number of other companies contacted by for this report declined to comment on GAO’s findings of offshore subsidiaries or if such operations are used in their Iraq contracts.

Titan, a contractor that provided interpreters accused of being involved with torture incidents at Abu Ghraib prison, may have had as many as three offshore subsidiaries but they probably became dormant or recently dissolved because they were acquired through acquisitions of other companies, according to company spokesman Wil Williams.

"We can confirm that no bids – particularly U.S. government bids – or revenues were received or made out of these entities as far back as we can see," Williams says.

Bearing Point, which holds contracts worth up to $240 million for famine relief and directing Iraq’s transition to a sustainable market-driven economic system, is also identified by GAO as having operated 22 subsidiaries in tax haven countries during 2001.

Bearing Point spokesman John Schneidawind acknowledged existence of the subsidiaries but cautioned that his company never "availed itself" to accomplish tax savings as "some other entities are thought to."

Schneidawind also declined comment on a BearingPoint contract with Custer Battles for security that was reportedly terminated six months prematurely because of the fledgling firm's inexperience and misunderstanding of the agreement.

According to a September 20 USAID Inspector General report, security costs grew 49 percent under Bearing Point's Iraq Economic Reform Program.

"Bearing Point, in its cost proposal, proposed to spend approximately $894,000 for security costs during the base year of the contract, but later estimated its actual security costs at closer to $37 million," the report states.

Custer Battles also worked in tandem with Bearing Point on the Iraqi Currency Exchange (ICE), a 2003 effort that introduced new currency in Iraq, but performed security support, transportation and the building of new camps in Iraq to house and feed workers involved in the program under a contract directly with the CPA.
*Cayman Island subsidiaries

The allegations against Custer Battle’s use of offshore firms open a window into the possible ways such companies may be leveraged to raise profit margins, mask overcharges and conceal company costs. Those possible manipulations go far beyond the scope of recent GAO investigations focusing on potential tax avoidance through the use of "tax haven" subsidiaries.

"By conspiring to bill fictive costs generated by their shell entities," the lawsuit against Custer Battles contends, defendants fraudulently increased profits by including "artificial markups paid to shell entities owned or controlled by the defendants, but which themselves provided no additional service or item."

While the ICE contract allowed for a 25 percent profit over actual costs, Custer Battles made use of Cayman Islands operations, Secure Global Distribution and Middle East Leasing, to collect and inflate charges for even larger profits, according to the lawsuit. It claims that equipment, trucks and prefabricated buildings were leased through these companies at costs that were sometimes doubled in the process.
When asked to justify the high costs by the ICE Supervising Board, Custer Battles allegedly said that the leasing companies would not make leasing records available.

"Defendants Custer and Battles withheld from the ICE Board the fact that they, along with other defendants, owned or controlled these so-called leasing companies," the lawsuit says.

The lawsuit also claims that Abu Darwish, an alleged business associate of Custer Battles, was recently discovered on a plane leased by the firm with $12 million dollars worth of dinars, the Iraqi currency. The cash was confiscated by customs in Lebanon, where Darwish resides, the lawsuit claims.

Efforts to locate Darwish for comment have been unsuccessful, but Custer Battles attorney Annemarie Carney said the allegation "is entirely inaccurate."

Baghdad airport

Isakson says he began to protest to Custer Battles about fraudulent practices after his company modified an airport terminal into an operational post for Custer Battles at a cost of several million dollars.

During that time, Isakson says he witnessed Custer Battles bill for work that was never performed and equipment that was never delivered. The company also leased eight stolen forklifts belonging to Iraqi Airways to the CPA after repainting them, he says.

Contract requirements for 138 security guards at Baghdad International Airport were never met, but the company continued to charge for that amount of service, according to the compliant. Originally a $13.6 million contract, the price soon rose to $16.5 million after the award was made.

Isakson claims that top associates with Custer Battles attempted to recruit him in fraudulent schemes but he rebuffed their efforts."I refused to cooperate with them," he says.

Within a month, Isakson says, tensions ran so high that Custer Battles employees drew their weapons on Isakson, his 14-year-old son and another worker. He says they were then stripped of their security IDs and guns and escorted to the airport gate.

Having little money to stay at a hotel and no ID for access to the CPA Green Zone, the three fled through war-torn Iraq until they reached Amman, Jordan, and then traveled back to the United States.

"I had no money, no ID, no weapons and we were left outside the gate in a war zone," Isakson says."What was I supposed to do?"

Isakson and Baldwin both say they wanted to report Custer Battles to authorities in Iraq, but did not know who to report their allegations to until returning to the United States.

To this day, Isakson maintains that Custer Battles owes his Alabama company several million dollars for unpaid work and several hundred thousand more in personal loans he made to help Custer Battles through its first month in Iraq.

The FBI and U.S. Justice Department have been investigating the allegations against Custer Battles since February, said attorney Alan Grayson, who is representing Isakson and Baldwin. On October 4, the Justice Department formally rejected Grayson's request to join the lawsuit filed under the False Claims Act to recover tens of millions of dollars in taxpayer money.

The Justice Department offered no explanation for declining to join the case, but false claim complaints generally stand a far better chance in court when they receive government backing. Custer Battles now believes that because the Justice Department declined to participate, the firm will soon be absolved of the charges made in the lawsuit.

Grayson interprets the Justice Department decision as a backroom political deal, noting that Michael Battles, a cofounder of Custer Battles ran as a Republican candidate for Congress in Rhode Island against Democrat Representative Patrick Kennedy in 2002. Although he lost the race, Battles received backing during the campaign from Haley Barbor, a former chairman of the Republican National Committee. Battles has also worked as a commentator for the Fox News network.

"Justice said it has no interest in this case because the contracts were through the Coalition Provisional Authority even though it was funded with taxpayer money," Grayson says.

Justice spokesman Charles Miller says he is aware of the Grayson’s views, but that the department does not comment on such cases.

The plaintiffs, he points out, are "free to pursue their case."

Meanwhile, Custer Battles continues to build its business. Although the security contract for Baghdad airport has ended -- reportedly because of constant feuding with CPA officials and an addition to the contract's scope for covering cover ports -- the company projects $200 million in business by next year.

Much of that new business is hoped to be outside of Iraq, which presently comprises 90 percent of its work, according to the Associated Press. Custer Battles opened a new office in Qatar in July is reported to have $35 million in commitments to invest in projects such as a shrimp farm in southern Iraq and home-loan financing operations in Eastern Europe. The company also is setting up a 227-acre corporate training center near Fort Bragg in North Carolina, the report said.

In March, Custer Battles also established what it calls an "office of corporate integrity," according to a press release posted on its Web site.

"Integrity is a core principle of Custer Battles' corporate values," Custer said in the release. "The OCI will help to ensure that everything Custer Battles does, as a company, complies with the highest ethical standards that are expected of ourselves and our employees."

To download a copy of the lawsuit click on the pdf icon below.
Contact the author, David Phinney, at phinneydavid@yahoo.com.

magician

16 February 2005, 13:06

from:

from: http://www.corpwatch.org/article.php?id=11763

Iraq Contractor Claims Immunity From Fraud Laws
Seized Oil Assets Paid For Offshore Overbilling

by*David Phinney,*Special to CorpWatch
December 23rd, 2004

The Virginia courtroom, just outside of Washington DC, was set to try what should have been a simple matter of whether or not Custer Battles, an upstart security company, based in McLean, Virginia, had defrauded its customers by as much as $50 million. By the end of the hearing last week, a perplexed judge was asked to decide whether the United States government controlled Iraq's oil revenues that were used to pay the company.

"The funds that were used were Iraqi funds, not U.S. funds," said veteran Washington lawyer John Boese, who is considered one of the nation’s leading lawyers in government contract fraud , as he waved his arms in emphasis at the hearing in defense of his client, Custer Battles. "The fact that CPA was in temporary possession of the money and distributed it does not form a basis for a false claim."

Alan Grayson, the attorney for the plaintiffs, claimed otherwise. The tall Florida lawyer wearing flashy two-toned gray cowboy boots, countered that the U.S. largely controlled the Coalition Provisional Authority (CPA) that was running Iraq at the time and was clearly understood to be “a government entity” by the U.S. Congress when approving the $87 billion funding package in November 2003 for reconstruction and military spending in Iraq.

Custer Battles has been accused of illegally inflating costs on plum contracts in 2003 to protect the Baghdad International Airport as well as for a massive program that replaced Iraq’s currency. Former Custer Battles employees and plaintiffs, W.D. "Pete Baldwin" and Robert Isakson, claim that the company routinely engaged in accounting trickery and used a corporate shell game involving Cayman Island subsidiaries to drum up charges by tens of millions of dollars with the clear intent to plunder funding for reconstruction efforts.

But the court fight is not yet about determining if Custer Battles engaged in illegal billing -- even though the firm’s own internal audit raised red flags on the matter. It is about whether or not the United States government has any jurisdiction over the alleged fraud -- and if it should do anything about it.

“I’ve got to make a difficult decision,” concluded federal Judge T.S. Ellis of the U.S. Eastern District in Virginia near the end of a four-hour hearing on December 17 where attorneys for Custer Battles pleaded that the case be dismissed. “This case can be decided, but only on undisputed facts,” Ellis continued.

A Harvard-educated lawyer appointed to the bench by President Ronald Reagan in 1987, Ellis frequently snapped at the two lawyers arguing the case as he pressed them to focus on the core issues.
Baldwin and Isakson have brought the lawsuit under the False Claims Act, reinvigorated by Congress in 1986, which is considered a key weapon in fighting contract fraud. It allows federal courts to award financial incentives to people in the private sector to step forward and assist the government in recovering the money, if they have evidence of wrongdoing.

Boese argues that since none of the money that the CPA paid to Custer Battles came from U.S. taxpayers, the False Claims Act does not apply. Indeed, he says that the CPA paid Custer Battles with money that were recovered from Saddam Hussein's palaces, frozen international back accounts and oil revenues and not a penny more.

But Grayson says that since the CPA operated with U.S. funds, was largely staffed by U.S. personnel, and that contracts with Custer Battles were written on U.S. government forms. As far as Iraqi funds, Grayson added, the money was spent in the interest of the United States and U.S. currency was drawn from the U.S. treasury.

“Custer Battles knowingly presented false and fraudulent claims to U.S. officers,” Grayson said. Noting that CPA officials initially paid the security firm $4 million in cash, he added: “They were paid in American $100 bills in cellophane wrappers with labels that said ‘U.S. Treasury.’”

The opposing arguments of the lawyers reflect a broader confusion that both the Bush administration and Congress apparently share about the status of the CPA, which was dissolved at the end of June 2004 after governing Iraq for 14 months.

“This is a murky area,” said L. Elaine Halchin, an analyst for the Congressional Research Service, who has sifted through piles of presidential memorandums, legislation and determinations by the General Accounting office – all of which have sometimes sent ambiguous messages about just what kind of entity the CPA was.

“Competing, though not necessarily mutually exclusive, explanations for how it was established contribute to the uncertainty about its status,” Halchin wrote in her April 29, 2004 report to Congress, titled "The Coalition Provisional Authority: Origins, Characteristics and Institutional Authorities."

While Halchin agrees that the Coalition Provisional Authority represented a multinational effort to rebuild Iraq, restore stability, and aid in building an interim Iraqi government, other aspects of the authority are more obscure.

Definitive answers about how the CPA was established, under what authority, and by whom within the U.S. government have yet to be found. Materials produced by the Bush administration alternately deny that it is a federal agency and state that it is. Others suggest that it was enacted as part of United Nations Security Council Resolution 1483, which was designed to lift the sanctions burden on the Iraqi people. Then there are those materials that portray the United States and United Kingdom as having jointly launched the organization, Halchin said.

“Without a clear, unambiguous statement that declares the CPA’s organizational status and clarifies its relationship with DOD and other federal agencies, various questions may be left unanswered, including whether, and to what extent, CPA might be held accountable for its programs, activities, decisions, and expenditures,” Halchin concluded.

Some executive branch documents support the notion that President Bush created the CPA, possibly as the result of a National Security Presidential Directive (NPD). But the White House directive, if it exists, has not been made available to the public, Halchin found.

The court’s decision about the Custer Battles lawsuit may help resolve this debate, but Judge Ellis must cut through the murky layers of administrative changes in the management and funding of post-invasion Iraq leading up to the CPA’s creation.

The Bush administration initially handed responsibility for reconstruction contracts to the Office of Reconstruction and Humanitarian Assistance (ORHA) as early as January 2003. The United Nations Security Council then gave its blessing to the CPA as a unified command of coalition forces to promote the welfare and security of the Iraqi people in Resolution 1483 on May 22.

The ORHA was first headed by Jay Garner and apparently worked closely with the Pentagon and the U.S. Agency for International Development for several months. By mid-April, however, the news media reported that Garner would soon be working under Paul Bremer, the man President Bush appointed as special envoy and civilian administrator of Iraq, without seeking congressional approval.

But as, the Bush administration made no official announcement that ORHA had been replaced, or subsumed, it legally unclear what the relationship is between the two entities, although the CPA’s Inspector General stated in his initial report to Congress that ORHA became CPA in May 2003, according to Halchin. As a result the legal standing of the CPA has been thrown into question, and the bigger question of whether or not it is independent of the U.S. government.

Judge Ellis seems determined to answer the question of both the CPA’s independence from the United States and whether or not Custer Battles was paid exclusively with Iraqi assets. “We’ve raised enough questions that we need to probe more deeply,” he said after musing out loud about billable hours of attorneys. “You’re making more money than me.”

Others have already made official, as well as conflicting, decisions on the matter. While the U.S. Justice Department declined to participate in the case against Custer Battles without comment, the U.S. Air Force, on the other hand, suspended Custer Battles from all future U.S. contracts on complaints of fraud in the company’s work at the Baghdad airport and for the Iraqi currency exchange program.

Custer Battles and its associates “conspired to defraud the CPA” the Air Force announced September 20 in its suspension notice with the use of “sham companies” in the Cayman Islands and elsewhere that were used to pump up charges by as much as 162 percent. Custer Battles denies the finding and hopes to see the decision reversed, but an Air Force investigation is reported by the Los Angeles Times to be ongoing.

Ellis will hear closing arguments on the motion to dismiss the Custer Battles dispute on February 10, but the answer to whether or not the CPA should be held accountable is sure to have lasting consequences far beyond the case itself. At stake are numerous other lawsuits that accuse other companies of overcharging, kickbacks, bribes and poor performance.

Read the original story Iraq Contractor Accused of Offshore Shell Game
You can contact the author, David Phinney, at phinneydavid@yahoo.com.

SOTB

16 February 2005, 13:07

....I don't thuink I've heard one good thing about those guys.They did have a pretty nice pool. A little chilly after an all-night desert wind blowed across it though....

magician

16 February 2005, 13:40

from: http://www.custerbattles.com/press/pr021505.html

NBC Nightly News

February 15, 2005 – Middletown, RI - Custer Battles is shocked and dismayed that NBC Nightly News aired a story based solely on the allegations of four conspiring disgruntled contractors regarding misconduct in Iraq. The Company has conducted an external investigation into these allegations, and have found these allegations completely baseless and without merit.

Upon learning of these allegations from Lisa Myers of NBC on 28 Dec 04, the senior management of Custer Battles immediately launched an investigation by outside counsel. The Company was previously unaware of any of these allegations, and remains committed to bringing the truth to light. In the course of the investigation, the Company found that these four individuals were disgruntled for various reasons, and have been attempting to damage the company by making false accusations. Specifically, Hough was terminated after several incidents of incompetence, negligence, and threatening a senior CB manager with bodily harm. Craun, Collings and Errante voluntarily resigned after only a few days of work, and have been disputing their final pay resolution with the company over having to pay back their cash and travel advances. Upon learning that he would have to reimburse the Company for cash and travel advances, Craun told other CB staff that he would call the company “baby killers” to the press if they did not pay him more. Collings, several weeks after these incidents, offered to provide written statements to the Company “disavowing” what Hough and others would say if Custer Battles would pay him money.

Custer Battles provided several letters and emails to NBC, as well as assigning a dedicated individual to making documentation and individuals available for interview, and cooperated fully with all aspects of NBC’s enquiry. To date, not one shred of corroborating evidence to support the sensational allegations of these disgruntled contractors has been brought to light. Anyone who’s operated in Iraq knows full well that there would be substantial physical evidence of these allegations, yet NBC and Custer Battles’ investigations have unearthed no witnesses, no family members, no hospital or police records. The reason for this is that these incidents simply did not occur.

As part of its investigation, the Company had its external counsel telephonically interview all of the individuals who may have had knowledge of these allegations, and their information completely supports the conclusion that these allegations are baseless. The Company dispatched two senior managers to Iraq to interview individuals and gather evidence, and their information completely supports the conclusion that these allegations are baseless. Custer Battles feels that it has done everything that a good corporate citizen should do in the face of these allegations, and at every corner have found that these allegations are unequivocally the result of malicious and false accusations from disgruntled contractors.

Custer Battles has no tolerance for acts of misconduct, excessive force or violations of ethics, and the company remains committed to ensuring the truth comes to light. Given the overwhelming facts that Custer Battles has been able to uncover through over six weeks of continued investigation, the only conclusion available is that these four disgruntled contractors have conspired to falsely cause malicious damage to Custer Battles. Custer Battles remains committed to its high standards of ethics and professionalism and continues to support the reconstruction of Iraq.

Custer Battles is the leading provider of tailored risk management solutions. Their suite of services is designed to allow senior management teams to understand the risk environment and identify profitable courses of action to maneuver with minimal exposure to risk. Client service offerings including business intelligence, global risk consulting, due diligence and litigation support, are designed to cover the full spectrum of risk management and mitigation, which can be applied collectively or individually to fit the client's specific needs.

For more information, please contact (401) 848-7500.

SOTB

16 February 2005, 13:46

Edited out by me....

magician

16 February 2005, 14:58

From: URL: http://www.msnbc.msn.com/id/6947745/page/2/.

U.S. contractors in Iraq allege abuses
Four men say they witnessed shooting of unarmed civilians
By Lisa Myers & the NBC investigative unit
Updated: 7:43 p.m. ET Feb. 15, 2005

There are new allegations that heavily armed private security contractors in Iraq are brutalizing Iraqi civilians. In an exclusive interview, four former security contractors told NBC News that they watched as innocent Iraqi civilians were fired upon, and one crushed by a truck. The contractors worked for an American company paid by U.S. taxpayers. The Army is looking into the allegations.

The four men are all retired military veterans: Capt. Bill Craun, Army Rangers; Sgt. Jim Errante, military police; Cpl. Ernest Colling, U.S. Army; and Will Hough, U.S. Marines. All went to Iraq months ago as private security contractors.

"I went there for the money," says Hough.

"I'm a patriot," says Craun.

"You can't turn off being a soldier," says Colling.

They worked for an American company named Custer Battles, hired by the Pentagon to conduct dangerous missions guarding supply convoys. They were so upset by what they saw, three quit after only one or two missions.

"What we saw, I know the American population wouldn't stand for," says Craun.

They claim heavily armed security operators on Custer Battles' missions — among them poorly trained young Kurds, who have historical resentments against other Iraqis — terrorized civilians, shooting indiscriminately as they ran for cover, smashing into and shooting up cars.

On a mission on Nov. 8, escorting ammunition and equipment for the Iraqi army, they claim a Kurd guarding the convoy allegedly shot into a passenger car to clear a traffic jam.

"[He] sighted down his AK-47 and started firing," says Colling. "It went through the window. As far as I could see, it hit a passenger. And they didn't even know we were there."

Later, the convoy came upon two teenagers by the road. One allegedly was gunned down.

"The rear gunner in my vehicle shot him," says Colling. "Unarmed, walking kids."

In another traffic jam, they claim a Ford 350 pickup truck smashed into, then rolled up and over the back of a small sedan full of Iraqis.

"The front of the truck came down," says Craun. "I could see two children sitting in the back seat of that car with their eyes looking up at the axle as it came down and pulverized the back."

"I said, 'Wow, what hit this car?'" remembers Hough.

Could anyone have survived?

"Probably not. Not from what I saw," says Hough.

The men assume that in all three incidents the Iraqis were seriously hurt or killed. But they can't be sure.

"It was chaos and carnage and destruction the whole day," says Craun.

Two of the men — Craun and Colling — say they quit immediately.

Craun, in an e-mail two days later to a friend at the Pentagon, wrote: "I didn't want any part of an organization that deliberately murders children and innocent civilians."

Errante says he also quit after witnessing wild, indiscriminate shootings on two other missions.**

"I said I didn't want to be a witness to any of these, what could be classified as a war crime," says Errante.

Once back in the U.S., Craun — recipient of the Bronze Star — took the allegations to Army criminal investigators. The Army tells NBC News it's looking into the matter.*

This is not the firm’s first brush with controversy. Custer Battles is a relatively new company in the booming field of so-called "private military companies" in Iraq providing veteran soldiers from around the world for various security jobs. Named for founders Michael Battles and Scott Custer, who are military veterans, the company quickly nabbed lucrative contracts in Iraq, where U.S. authorities needed firms who were willing to accept high-risk assignments.

The company is already under criminal investigation for allegations of fraud centering on the way it billed the government. Those allegations are also at the heart of a lawsuit by former associates. In September, the military banned the firm and its associates from obtaining new federal contracts or subcontracts.

Custer Battles denies it committed any fraud, and says the company has been the target of "baseless allegations" made by "disgruntled former employees" and competitors. It has said it hopes that the government will overturn the suspension on new contracts.

In any case, the ban didn’t stop the company from fulfilling its old contracts, such as the missions performed by Craun, Hough, Colling and Errante.

"These aren't insurgents that we're brutalizing," says Craun. "It was local civilians on their way to work. It's wrong."

Anyone who's been there says Iraq is a brutal, deadly place. So why do the men blame Custer Battles?

"Simply, they're negligent," says Colling. "[Just] throwing people out there and then forcing us to use these brutal tactics. They're responsible, absolutely."

Custer Battles declined to be interviewed on camera. The CEO calls the allegations "completely baseless and without merit" and says there's "no evidence" to support them. He adds that the Kurds worked for a subcontractor, not Custer Battles.

The company provided conflicting information about the crushed car but arranged for NBC News to talk to the man who who oversaw the mission on Nov. 8, 2004.* Shawn Greene, who still works for Custer Battles in Iraq, spoke by phone with NBC News. He acknowledges that during the mission a pickup truck did roll over the bumper and taillight area of a sedan, which he says refused to move out of the way. Greene denies anyone was injured in the incident.

"There were no children in that vehicle," he insists.

As the leader of the mission, Greene ordered the lead driver to push the vehicle since there had been attacks against convoys in that area in the past.*

"He came directly in front of my lead vehicle," says Greene. "That is how that car got in our path. And why he had to be pushed out the way when he refused to move. It wasn't that we went out of our way in any way looking for a car to hit. We don't do that."

But because of the dangers on Iraqi roads, Greene says employees of Custer Battles do sometimes push Iraqi civilian vehicles out of their way if they refuse to move.*

"Usually, you know, we give them a tap at about 20 miles an hour or so," he says.

The company also arranged for a phone conversation with its country manager in Iraq, Paul Christopher. The company points out that Christopher is a retired lieutenant colonel who authored a book on the ethics of war and ran the philosophy program at West Point. Christopher maintains the Nov. 8 mission was the only case where a civilian car was damaged by the company in Iraq.

The company provided a photo to NBC News, which it says is the car in question, to prove that the damage was not that severe. In the photo, the passenger compartment of the car seems to be intact.

Craun, Colling and Hough say it's not the same car.

As for the incidents of allegedly wild shooting, Greene also disputes that any innocent Iraqis were killed by gunfire during the mission, although he agrees there were warning shots fired on several legs of the mission.

Likewise, Christopher insists "there has absolutely never been a case of anyone being hurt or killed to my knowledge, except for people who were actively engaged in shooting at us first."

Certainly the company does experience genuine combat conditions. In fact, on one leg of the November mission, the convoy came under a serious attack by Iraqi insurgents. First, the pickup truck driven by Hough was struck by an improvised explosive device, or IED, which killed one of the Iraqi Kurd guards. Then the men fought a pitched firefight against insurgents until the U.S. military arrived.

However, Custer Battles claims all these men are "disgruntled" former employees, who believe the company still owes them money. It says Hough was fired and that Craun once confided to a colleague that he knew the company didn't really kill any children.

So why are these men going public with these allegations now? They say because they care about American soldiers and about winning the war.

"If we continue to let this happen, those people will hate us even more than they already do," says Craun.

And they say that only makes Iraq more dangerous for American soldiers.

magician

17 February 2005, 10:24

there sure are a lot of "disgruntled" people running around, in litigation with this company.

has anyone done a hard count, yet, of the number of legal battles that Custer Battles is currently fighting?

magician

20 February 2005, 14:57

Another article from CorpWatch: http://www.corpwatch.org/article.php?id=11645 .

Here is my question: does the guy still have "total confidence" in Scott Custer, when Scott Custer claims to have been assigned to the 3d Ranger Battalion?

This guy Donovan very well may have a very rude awakening coming to him.

-----------------

USA: Custer Battles Fights Federal Inquiry

Justice Department documents say two former managers of Custer Battles brought a civil suit under the federal whistle-blower act charging the company with fraud.

by*John Chappell,*The Pilot
November 6th, 2004

The company seeking to build a security training school outside Carthage is under federal investigation.

Acting on a complaint from the U.S. Air Force, the Pentagon suspended Custer Battles from bidding on government contracts Sept. 30.

A report in The New York Times cited a memorandum filed in connection with a whistle-blower lawsuit that alleges a pattern of fraudulent billing practices.

Documents unsealed by the Justice Department say two former managers of Custer Battles, William Baldwin and Robert Isaakson, brought a civil suit under the federal whistle-blower act charging the company with fraud.

The Pentagon has held up a final $10 million in payments on a $21 million contract pending results of the investigation.

The company has called the charges baseless, characterizing the complaint as the work of “a competitor and a disgruntled employee.”

Million of dollars in rewards could go to the two if their charges hold up.

Custer Battles, a security firm founded by Army veterans Scott Custer and Michael Battles, started operations in Afghanistan following the 2001 fall of Kabul. They won a $16.5 million contract from occupation authorities to provide security for the Baghdad airport in June 2003, and business really took off.

The investigation will not affect Custer Battles’ plans in Moore County, according to Jack Donovan, director of training. A proposed Tarheel Security Training Center is to be built on 222.43 acres in Deep River township.

A hearing on the fraud accusations has yet to be scheduled.

“It has not been cleared up,” Donovan said.

At the same time, the company has 700 employees doing dangerous work all around the globe, he said.

“Custer Battles is doing great work in Qatar, in Abu Dhabi, in Kuwait,” Donovan said. “We are heavily involved in Iraq. Sadly, we had two employees killed there last week in an ambush.”

It was the same kind of attack that has taken so many lives of U.S. Forces there: an improvised explosive device, or IED, detonates as a convoy is passing.

“Usually an IED starts the ambush,” Donovan said. “There’s a spotter who says, ‘Here come the Americans.’ Boom! Hits the IED, gets the two people killed, a fire fight ensues, the ambush and so forth. We had another ambush the other night.”

Vehicles are armored, at least on their sides, but that protection has its own costs.

“One of the things that you run into, if you remember the problems with Humvees a few years ago, is gross weight,” he said. “In a 120-degree environment, the cooling system can’t keep up with the gain. You can’t drive fast. And, guess what you have to do if you get in a situation you need to get out of? You need to drive fast.”

*

*

*

Battling the Suspension

In the meantime, Custer Battles battles the suspension.

“We continue to do great work worldwide, but we are under a temporary suspension,” he said. “What that means is — actually, the term is ‘indefinite’ — pending a hearing. Actually, we are flabbergasted, dismayed, embarrassed. Very, very upset.

“You don’t receive a letter saying, ‘you are hereby suspended.’ You have to go to a Web site and pull from it. One of our employees who is in our office of corporate integrity told us to go to that Web site and look up Custer Battles.”

That site is the Excluded Parties Listing System (www.epls.gov) and lists Custer Battles with a “Code B” exclusion.

According to the agency, such a suspension is pending “completion of investigation or legal proceedings … based on (a) an indictment for, or adequate evidence of, the commission of fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements, or other offenses indicating a lack of business integrity; or (b) adequate evidence of any other cause of a serious and compelling nature.”

EPLS stresses that the suspension is a temporary action.

Donovan was surprised that a complaint from the Air Force caused the bidding suspension.

“We have never entered into any contract, or competed for contracts, with the Air Force,” he said. “A former subcontractor of ours and a partner of his, who is a former employee of Custer Battles, lodged a complaint with the Air Force. I don’t know why they went to the Air Force. I could guess, but it is not smart on my part to do projections.”

Donovan will leave it to the public to guess, adding that nobody at the company was contacted prior to the suspension.

“The Air Force decided to conduct an investigation,” he said. “They never spoke to anyone at Custer Battles about the case. Again, this is bizarre. Normally, when you investigate something, to get all the facts you call all the parties.

“You don’t see this happening to large defense contractors. Do you think a large corporation could stand by, even for 24 hours? Their reputation would be tarnished beyond repair. We are really, really upset about this. We responded immediately to supply all the facts. The Air Force has indicated that they received all that paperwork, and will schedule a hearing. We are still waiting for that to happen.”

*

*

*

‘Quite Confident’

Custer Battles will come out on top, Donovan said.

“We are quite confident that we will be exonerated,” he said. “We will then expect the Air Force to acknowledge publicly that we were not in violation of anything, and to regain the great reputation the company had.”

Meanwhile, bidding suspension is taking a toll inside the company as the head office waits for an opportunity to make its case in a fair hearing.

“We can’t bid on any contracts until this is cleared up,” he said. “We are waiting for the phone call any second, but we are at the mercy of the Air Force in this case.”

At first, Iraq was in a state of utter turmoil where contracts were concerned, according to Donovan.

“When it first started, there were no controls on contractors,” he said. “I know a retired U.S. Army three-star general who went over there to work for our ambassador. He sat down at his desk in his office in the palace. He opened the bottom right hand drawer, and there was $7,000 just sitting there. Money was all over the place.”

He acknowledged errors took place, but contends they were nothing more than mistakes in the heat of combat zone operation.

“Did we make mistakes? Sure we did, but not germane to this lawsuit,” he said. “We, like every other company big and small, were under the microscope of Defense Contracting Agency, DCA. They investigated us. We provided all the documents they wanted. We were completely exonerated.”

The Carthage training center will be set up as a completely separate entity, though wholly owned by the parent company. It will have its own set of books and its own audit trail.

“I started as a private, retired as a colonel,” Donovan said. “I’ve got three children. I was called back to service by our country following 9/11 to start the federal air marshals program. I am not the kind of person who is going to associate my name with any company that is less than reputable. I don’t have to work. I want to work, and I believe in this project.

“I believe in Scott Custer. He was one of my best soldiers. I got him a commission, and he did a great job as a commissioned officer. If I didn’t believe in him, I wouldn’t associate myself with him.”

Donovan relies on his faith and trust in a man he once commanded.

“I have total confidence in Scott Custer,” he said.

magician

20 February 2005, 15:12

from : Daily KOS : http://jfern.dailykos.com/story/2005/2/16/1628/08340

Custer Battles: Harvest of Shame
by smintheus
Tue Feb 15th, 2005 at 22:06:28 PST

The bizarre history of Custer Battles has been coming out in dribs and drabs on dKos, but no single diary has put more than a few of the many pieces together. *This absurdly corrupt company is on trial for fraudulent claims made to DOD for its rather meager security services in Iraq. *Much information came out last week at the Democratic hearings chaired by Byron Dorgan, but the MSM did little digging. *This article by Griff Witte in WaPo of Feb. 15 sheds some light, but you really would need more information in order to understand fully what CB represents about the colossal failure of the Iraq reconstruction effort. * *Over at World O'Crap today S.Z. has done the necessary work, by comparing Witte's article with an Aug. 14 piece for the AP by Neil King Jr.. *Do check her out. *More below the break.

Diaries :: smintheus's diary ::

The AP piece is a profile of Battles and his company. *Besides the two articles that S.Z. discusses, there is another article co-written by King at the WSJ from Aug. 24, which adds some further info. *It is a strange puff piece about Custer Battle's absolutely mahvalous success as a new startup company--yet it includes enough information about their checkered history and weird practices as to give anybody but a reader of WSJ the dry heaves.

*Briefly, these are some of the highlights of what we know: *Custer Battles was a small and utterly undistinguished domestic security firm, on the verge of bankruptcy, when in May 2003 co-founder Michael Battles borrowed money to fly to Iraq in a desperate search for any kind of business. *Battles had made a failed run for Congress in RI as a Republican in 2002, and as far as I can figure out he also had just incorporated some kind of real estate firm in RI in May. Custer Battles had no background that prepared it for any of the reconstruction or security work in Iraq.

With no real plans once in Baghdad, he hung out in the hallways of the Occupational Authority handing out business cards, until he heard that the Baghdad airport's security contract was going up for bid. *Having no experience with the difficulty of managing such an operation, Battles submitted a hail-mary bid promising to get a security force in place weeks before any experienced contractor thought practical. *That was enough to get awarded the contract! *Custer Battles had no money and little infrastructure, could not even get a loan from a bank to start hiring people, so Bremer's people decided to cancel the contract--no wait, they called Battles into their offices and piled two million dollars in cash into his duffel bag. *On that basis, CB hired a ragtag security force, set themselves up like potentates in the airport, and began a career in corruption.

They seized material from Iraqis, and then charged the CAP obscene fees for 'renting' it. *The airport went out of use for the most part (there's a story), so CB shifted personnel to other activities but continued to charge for airport security as if all their employees were still doing that job. *They created front companies, and subcontracted goods and services back and forth to inflate the charges billed to the CAP. *The Coalition Provisional Authority accidently stumbled across one of CB's records where they bragged about their success in overbilling the US. *Yet they got plenty of other contracts. *One contract in particular became notorious back in DC. *CB was awarded $12,000,000 to guard high-voltage towers under repair. *The company pocketed $8,000,000 and did nothing, while subcontracting the actual work to an Iraqi company for only $4,000,000. *Many of the contracts CB obtained were awarded with little or no competition. *Battles reportedly has claimed to have contacts in the White House with whom he speaks regularly.

At long last Custer Battles was prohibited from bidding on any further contracts, and now is going on trial in Virginia for some of this fraud. *The justice department originally looked into cooperating with DOD in the trial, but has now decided that it does not have an interest in taking part. *For its sake, CB claims that it has done nothing illegal--because Iraqi law had no force under the Occupation, and US courts have no jurisdiction in Iraq--and therefore the remaining payments on its contracts must be paid in full.

That, in brief, is the sad story of the CAP and the almost unmitigated disaster that Bush's "reconstruction" of Iraq has been. *From this distance, it appears that many of the people involved in CPA or as official contractors in the reconstruction can boast of some combination of the following skills: incompetence; amateurishness; stupidity; cupidity; corruption; arrogance; dishonesty; brutality. *Did I leave out anything essential?

Btw, here are links to some of the previous diaries that have mentioned Custer Battles prominently: One of the earliest diaries was by USAmnesia on Oct. 13. *There was a very good diary on war profiteering by firedoglake on Jan. 3. *Here is a diary with much discussion of why payments were being made in duffel bags of cash in Iraq by RangerShade on Feb. 13. *On Feb. 15 zenbowl linked to an NBC report about allegations that employees of Custer Battles brutalized civilians in Iraq.

magician

20 February 2005, 15:13

from: http://www.spokesmanreview.com/breaking/story.asp?submitdate=200481385640

Amid chaos in Iraq security firm found opportunity

NEIL KING JR
AP
August 13, 2004

BAGHDAD, Iraq _ Many large, established security companies streamed into Iraq after the war. Then came Custer Battles LLC.

In July last year, Scott Custer and Michael Battles, two former Army Rangers in their mid-30s, found themselves in charge of a $16 million contract to guard Baghdad's airport. Barely funded with credit cards and money borrowed from a friend, their nine-month-old company had neither guns, accountants nor guards. It had to hire Nepalese Gurkhas to staff the project. Since then, the company has squabbled with corporate clients and Pentagon auditors. Four employees have been killed.

But through street smarts and canny use of their military experience, the two New Englanders have become a rarity in Iraq: a U.S. business success story amid the country's haphazard reconstruction. Custer Battles now employs around 700 people and is expanding beyond Iraq's war zone, with plans to get into shrimp farming and home loans. It expects to garner revenue of $200 million next year.

The surge in violence that followed the overthrow of Saddam Hussein provided an opportunity not only for established security firms, but also for the entrepreneurially minded who arrived in Baghdad armed with little more than moxie. The Pentagon estimates that as much as a quarter of the money spent on rebuilding in Iraq goes for security. These companies employ more than 15,000 people and some move about with the freedom of small military units.

"For us, the fear and disorder offered real promise," says Mr. Battles, 34 years old, a onetime bull rider who served three years as a Central Intelligence Agency operative.

The company that became Custer Battles could hardly have sprung from shallower roots. In late 2002, it was still in search of a name. Its co-founders considered Azimuth Partners, after the name of a compass point, but instead chose to name the company after themselves. Mr. Custer, 35, a distant relation of the ill-fated Gen. George Custer, concedes they draw giggles in Iraq, where it's often noted that Custer was defeated by the locals. "We don't really have a comeback," he says.

As the first prospectors poured into Baghdad in mid-2003, Custer Battles was trying to carve out a niche in the security-services industry with a small office in a Washington suburb and some contracts to teach states how to protect drinking-water supplies from terrorist attacks. Money was so tight that Messrs. Custer and Battles put the company's June 2003 payroll on their credit cards and borrowed $10,000 from a friend to fund an exploratory trip to Iraq.

Mr. Battles, a West Point graduate who once ran for Congress, arrived in Baghdad in a cab from Jordan in May 2003. He had $450 in cash and vague plans to open a hotel for foreign businessmen, an idea he soon scrapped.

The real action was at the Republican Palace, the former ceremonial seat of Mr. Hussein's government, where U.S. officials were struggling to form an occupation authority. While passing out his business card in the clogged hallways, Mr. Battles heard about the airport contract and persuaded an official to put Custer Battles on a list of potential bidders. The request for bids was sent out three weeks later. Mr. Custer, in Nevada on a water-security job, stayed up three nights to complete their offer.

Two days later, the company won the contract, beating companies with long histories in the business, including Texas-based Dyncorp International, a unit of Computer Sciences Corp., and the U.K.'s Armor Group International Ltd. Custer Battles's bid was cheaper, but more important, it promised to have 138 guards on the ground within two weeks, faster than the others.

"We got that contract because we were young and dumb and didn't know better," says Mr. Custer, a former Army captain who studied at Oxford and Georgetown universities. "Anyone with experience would have said they'd be there in eight weeks."

Frank Hatfield, the senior U.S. airport official in Iraq at the time, says speed _ not cost _ was the deciding factor. All he wanted, he says, was an assurance Custer Battles could handle the contract.

Custer Battles lacked more than experience. No banks would lend it money. In the end, the U.S.-led Coalition Provisional Authority lent it $2 million in $100 bills that Mr. Battles stuffed into a duffel bag and personally deposited in a bank in Lebanon.

They had only two weeks to set up the project. In mid-July last year, new hires mustered in Jordan and had to be convoyed across the desert. The company had to buy all its equipment from the U.S. with only three full-time employees in its Virginia office to help.

It found half of the guards it needed in Nepal, a common source of private security guards, and the rest in the U.S., mostly ex-soldiers hired through word of mouth. Mr. Custer flew in an accountant from Deloitte & Touche LLP, who immediately bought a safe.

The airport facilities were littered with broken glass and human excrement. Expecting to stay indefinitely, Custer Battles rehabbed the offices with carpet and wallpaper, installed showers in the bathrooms and added a wireless Internet connection. A short distance away, the company built a trailer park to house employees, complete with swimming pool and pool table. This was done partly to demonstrate Custer Battles's seriousness to potential clients.

They got the men in place two days early but had to sacrifice basic logistics, such as payroll systems. Mr. Custer says the company didn't figure out how to pay people until well into the next month.

Less than 10 miles from the city center, Baghdad International Airport quickly emerged as perhaps the safest and best-placed real estate in Iraq. The company took full advantage. Custer Battles built kennels for 18 bomb-sniffing dogs beside the camp and has parlayed the animals into $16 million in Army contracts. It also used a terminal to house 40 Filipinos brought in to provide catering services.

Frank Willis, one of several officials hired by the Coalition Provisional Authority to handle aviation issues, watched with shock and awe. As officials tried to get Custer Battles to explain the dogs and the Filipinos, the company had ready explanations. "It was always some colonel or ministry official who'd given the OK," says Mr. Willis. "These guys were absolute masters at working the chaos of a combat zone and cutting corners to make a profit."

Mr. Custer acknowledges he had run-ins with Mr. Willis and other officials. He says the company won approval for its work from the Army, which controlled the airport.

In September, U.S. officials in Baghdad hired Custer Battles to help organize the process of replacing Iraq's old currency. That meant building camps in northern, central and southern Iraq where Custer Battles would house and feed hundreds of U.S. and Iraqi workers involved in the switchover.

Contracting was erratic at best in those months. Part of the contract was set at a fixed price, with the rest to be billed according to cost. But the job's size kept increasing. The Baghdad camp, located beside the airport, was supposed to house 185 people. At its height it housed 450. A two-month supply of bottled water vanished in a week. The sewage system overflowed.

Mr. Battles says Custer Battles is still owed millions of dollars from that job. Custer Battles got the job through the Coalition Provisional Authority, but that entity was dissolved at the end of June. The company's lawyers are now trying to pin down who to hit up for the remainder of the bill. U.S. officials in Baghdad say they are unaware of outstanding disputes with Custer Battles.

In November, Washington Group International Inc., a big engineering company, asked Custer Battles to provide 700 men to guard electrical towers that curved through the tumultuous "Sunni Triangle" area of Iraq north and west of Baghdad. Under contract with the Army Corps of Engineers, Idaho-based Washington Group planned to install high-voltage wires and repair the towers.

Mr. Custer says that from the outset he viewed the job as extremely high risk _ he expected at least 12 guards would die _ and priced the job accordingly. Three months of protection, he told the engineering company, would cost $12 million. Washington Group accepted and ended up extending the contract to six months for $20 million.

When the bills arrived at the Pentagon, government auditors threw a fit, according to correspondence between the parties. Most of the guards hired by Custer Battles came from a Kurdish subcontractor who paid its employees less than $200 a month. Pentagon auditors contend that more than two-thirds of the bill is unwarranted. They're refusing to pay Washington Group more than $5 million. The engineering company has paid Custer Battles in full.

Jack Herrmann, Washington Group's spokesman, says that Custer Battles "did a good job with a unique assignment," and that he's confident the auditing dispute will be resolved.

Mr. Custer says his company did nothing wrong. Three vehicles were destroyed in various attacks; no guards died. "I built a lot of profit into that contract because there was so much risk," he says. "I wouldn't do it any differently now."

The company's breakneck expansion caused plenty of heartburn. Mr. Custer says he fired two senior employees, one for stealing money and the other for lying about work he didn't perform. Dozens of qualified men left, often with the aim of starting their own businesses. In April, 15 Custer Battles guards disappeared while on the job with both weapons and credentials, the company says. It's not clear where those people are.

The company suffered its first fatality April 8 outside the town of Hit, about 120 miles west of Baghdad. As guards transported a group of Army Corps of Engineers officials in a convoy of SUVs, they ran into an anti-American demonstration. In its haste to flee, one SUV became stuck in the mud. Michael Bloss, a 38-year-old former paratrooper from Wales, was shot in the head by a demonstrator. He had been in Iraq for less than a month.

Mr. Custer got the word at 3:30 a.m. He was in Rhode Island and his wife was in labor with their first child. "It was devastating," he says. "It took the wind out of everyone's sails." Three more employees, including one American, were killed last month when a rocket-propelled grenade slammed into their convoy near the city of Mosul.

Many guards say they are in Iraq primarily for the money. Salaries can run as high as $20,000 a month for top ex-soldiers, who say opportunities are much better there than in the U.S. Kurt Gutierrez, an Army veteran and co-director of Custer Battles's Iraq operations, says his family continually asks him to come home. He says he has been fired on twice by insurgents and recently found himself trapped in his car by stone-throwing Iraqis.

The company's inexperience led to some misunderstandings. Employees of consulting firm BearingPoint Inc., which hired Custer Battles to provide security, treated their bodyguards more like servants, says Mr. Custer, complaining about issues such as a lack of toilet paper. That led to a minor staff revolt, Mr. Custer says. "Our immaturity as a company didn't mesh well with that job." He ended the contract six months early. BearingPoint declined to comment.

Mr. Custer is now intent on expanding beyond the war zone. He hopes that less than half of next year's revenue will come from Iraq, compared with about 90 percent now. The company has opened an office in Qatar and Mr. Battles says it has $35 million in commitments for a fund that will invest in projects such as a shrimp farm in southern Iraq and home-loan financing operations in Eastern Europe. The company is also setting up a 227-acre corporate training center near Fort Bragg in North Carolina.

Custer Battles is no longer guarding the Baghdad airport. Constant feuding with Coalition Provisional Authority officials and an expansion in the contract's scope to cover ports, prompted the company not to rebid for the work. Airport security is now run by London-based Global Risk Strategies Ltd., one of the largest Western security firms in Iraq.

Messrs. Custer and Battles, both married with children, now spend little time in Iraq, preferring to run operations from a drab office park alongside other defense contractors on the outskirts of Newport, R.I. Several people have expressed interest in buying into the company, the partners say, but there are no serious discussions. They worry that a single calamity or mistake could topple their young operation, which they say has paid them well, but not stupendously. Mr. Custer says the two have reinvested "the majority of profits back into the company."

BadMuther

20 February 2005, 15:52

Interesting article MagicMan.....I'm interested on hearing from those who know (if they care to comment) how accurate is it?

magician

20 February 2005, 16:07

From: World O' Crap : http://blogs.salon.com/0002874/

War, Huh!* What*is it Good For?

*

For today's lesson, let's review*the Washington Post's*"Lawmakers Told About Contract Abuse in Iraq" (hey, it's not abuse, since I've heard that*many contracts undergo much the same thing as part of fraternity hazing):

A government contractor defrauded the Coalition Provisional Authority of tens of millions of dollars in Iraq reconstruction funds and the Bush administration has done little to try to recover the money, an attorney for two whistle-blowers told Democratic lawmakers yesterday.

The lawyer, Alan Grayson, represents two former employees who charged in a federal lawsuit that the security firm Custer Battles LLC of Fairfax was paid approximately $15 million to provide security for civilian flights at Baghdad International Airport, even though no planes flew during the contract term. Grayson said the firm received $100 million in contracts in 2003 and 2004, despite a thin track record and evidence the government was not getting its money's worth.

Yes, reportedly there were*few, if any, governmental flights coming into the Baghdad airport during the contract period, so Custer Battles reassigned most of its security personnel to other jobs -- but continued to bill the Coalition Provisional Authority (CPA) at the original contract price,*submitting monthly invoices which falsely claimed that all 130 security personnel were there at the airport, doing what they were contracted to do.

You can see the lawsuit here.*The airport scam is just one of the allegations.*

Others include:

While working on a $21 million contract to safeguard Iraq's new currency as it was being distributed, Custer Battles set*up shell companies through which to bill*items needed for the contract so they could*"inflate costs and create a mark-up in excess of that normally permitted under a cost-plus contract."

Custer Battles*(CB) arranged for the forklifts used for moving*Iraqi currency to be shown as being leased through*their shell companies (at a cost of*thousands of dollars per month per forklift).* At least one of the forklifts (and perhaps as many as*eight of them)*had actually been "liberated" from*Iraqi Airways.* When it*first set up shop at the airport, CB ordered its employees to*confiscate the forklifts (which Iraqi Airways had been*forced to abandon during the war), and paint over the*Iraqi Airways insignia.* The shell companies then made up*lease documents so that the*CGA could be billed*for CB's use of the equipment which CB had appropriated.

And, one of my favorite stories:

A firm called Washington Group International had an Army Corps of Engineers contract*to work on the reconstruction of the*power lines in northern Iraq.* Custer Battles got the $12 subcontract to provide security for the project -- and reportedly*the bidding process*involved*little or no competition.**CB subcontracted the job to*a Kurdish company, Falcon Security, for $4 million, giving CB a profit of $8 million.*

Here are more details,*from*an*A.P.*story from August 2004:

Mr. Custer says that from the outset he viewed the job as extremely high risk --*he expected at least 12 guards would die -- and priced the job accordingly. Three months of protection, he told the engineering company, would cost $12 million. Washington Group accepted and ended up extending the contract to six months for $20 million.

When the bills arrived at the Pentagon, government auditors threw a fit, according to correspondence between the parties. Most of the guards hired by Custer Battles came from a Kurdish subcontractor who paid its employees less than $200 a month. Pentagon auditors contend that more than two-thirds of the bill is unwarranted. [...]

Mr. Custer says his company did nothing wrong. Three vehicles were destroyed in various attacks; no guards died. "I built a lot of profit into that contract because there was so much risk," he says. "I wouldn't do it any differently now."

Um, yeah.* The local Iraqis who actually did the work could have been killed while toiling*for $200 a month, and so*Custer Battles deserves $8 million for assuming all that risk.

Anyway, back to the Wash Post story:

Yesterday's appearances were organized by the Democratic Policy Committee. Its chairman, Sen. Byron L. Dorgan (D-N.D.), said the witnesses were called in response to a recent report by the inspector general for Iraqi reconstruction that concluded that the governing authority had inadequate controls over $8.8 billion in Iraqi funds it was supposed to oversee. Former administrator L. Paul Bremer has denied those allegations. Dorgan said Democrats had attempted to get Republican colleagues to hold hearings on the issue but were unsuccessful.

"There is a massive amount of waste, fraud and abuse going on here, and nobody seems to care very much," Dorgan said.

Hey, it's only tens of millions of dollars in tax-payer funds -- why should anybody care about that?*

The Pentagon has suspended Custer Battles from receiving new contracts, but Grayson said the Justice Department declined last fall to help pursue the case, now pending in federal court in Alexandria.

Lawyers representing Custer Battles have denied the charges and have argued that the case should be dismissed because the money that was allegedly stolen belonged to Iraqis, not to Americans. Grayson said that argument has the potential to turn Iraq during the authority's administration of the country into "a fraud-free zone," with contractors not subject to Iraqi or American law.

What a great scheme!* Since the PGA was run by Tommy Franks and Paul Bremer, it means that*Iraqi law doesn't apply.* And*since the misused funds were*Iraqi oil revenue (the revenue that was supposed to pay for the country's reconstruction), then American law doesn't apply either.* Meanwhile, American taxpayers have to foot the bill for the even more reconstruction costs -- and Michael Battles and his company get rich through fraud, and the White House and the Republicans don't seem to care.* Gee, I wonder why that might*be?

Michael Battles and Scott K. Custer, both former U.S. Special Operations soldiers, founded the company in 2002. Battles ran unsuccessfully as the Republican candidate for Congress in Rhode Island that year.

After an interview with Custer in January 2004, agents from the Pentagon inspector general's office wrote, "Battles is very active in the Republican Party and speaks to individuals he knows at the White House almost daily, according to Custer." A White House spokesman had no immediate comment.

No, of course not.* Why would the White House want to comment on corruption,*incompetence, cronyism, and war profiteering in relation to the glorious Iraq campaign (the Iraqis*just had an election, you know -- so it's all been worth while, and there's no need to look too hard at the things that happened in the past).

Anyway, here's more on the history of Custer Battles, a true American success story:

The founders, Scott Custer and Michael Battles, are both former Army Rangers now in their mid-30s.

Battles, a West Point grad, also reportedly worked as a CIA officer for three years.* In 2002 he ran for a congressional seat in Rhode Island*-- he was the Republican pick to run against incumbent*Democrat Congressman Patrick Kennedy.* Battles, described by the RI press as a "businessman" and a "political newcomer," was endorsed by the state GOP -- his platform was based on*stressing*his*military background while criticizing Kennedy's voting record on small business and trade issues.* However, a*former Navy SEAL named David Rogers also decided to*run as a Republican.* Rogers won*the Republican primary,*went up against*Kennedy, and lost.*

Let's go back to that A.P story for what happened next:

In mid-2003,*Custer Battles was trying to carve out a niche in the security-services industry with a small office in a Washington suburb and some contracts to teach states how to protect drinking-water supplies from terrorist attacks. Money was so tight that Messrs. Custer and Battles put the company's June 2003 payroll on their credit cards and borrowed $10,000 from a friend to fund an exploratory trip to Iraq.

In*May 2003, Battles arrived in*Baghdad.*"He had $450 in cash and vague plans to open a hotel for foreign businessmen, an idea he soon scrapped."* While hanging out in the Republican Palace, passing out his card and schmoozing members of the CPA, he heard about the airport security contract and persuaded an official to put him on a list of*bidders.* Two days later, CP won the contract, beating out the*real security companies with actual experience by saying it could do the job cheaper and*have security forces in place quicker*(in just two weeks).*

But no bank would loan Custer Battles the money needed to buy equipment and take care of*other startup costs -- so the CPA lent them $2 million in $100 bills, which Battles took to the bank in a duffle bag.* (Per Franklin Willis, a former CPA official, CB got $2 million*in cash from the CPA on at least two occasions.)* Then*Custer Battles*managed to hire*enough*Nepalese guards and*American ex-soldiers*to*fulfill their contract,*and they made the airport their own personal turf.* And the scam was on!

Sure, then came*complaints, lawsuits, accusations, and other unpleasantness, but, per that*Aug. A.P. story,*the company now employs over 700 people, and expects to garner $200 million in revenue this year. Not bad for a company that had to put the payroll on personal credit cards less than two years ago!

Per their website, the Custer Battles motto*is "Transforming risk into opportunity."* Or, in other words, "Profiting from war."* To quote the Simpsons, "What a brave corporate logo!" ("I accept the challenge of Mr. Sparkle.")

We don't know the identity of*those individuals in the*White House whom Michael Battles is supposed to talk to almost every day, but we are sure that his reported Republican ties have*nothing to do with why*the*Gonzales-headed DOJ doesn't want to prosecute anybody for fraud, and why*the Republicans in congress*don't seem to want to*help recover any of the stolen loot.* No, we think it can all be explained by the administration's reluctance to admit that*anything has ever gone wrong in George Bush's war.**

magician

20 February 2005, 16:13

from : http://www.dailykos.com/story/2004/10/13/191519/44

Back in August, I wrote this about Custer Battles:

In May 2003, Michael Battles set out for Baghdad with $450 in cash with the intention of opening a hotel for foreigners. After a month of schmoozing at the Coalition Provisional Authority, he managed to convince a CPA official to put Custer Battles on the list of potential bidders for the airport security contract. Custer Battles had $16 million and two weeks to scrounge up 138 guards (mostly Nepalese Gurkhas) to protect the airport, its first military security contract. The company now has over 700 employees, and has numerous contracts guarding reconstruction projects throughout the country.

Via Body and Soul, L.A. Times updates us on the fate of the company and its contract to guard the airport.

Any takers on what happened?

It turns out that this company was - take a deep breath - bilking our government of the funds we appropriated for reconstruction and security operations in Iraq. *Under investigation by the FBI and the Defense Criminal Investigative Services for sending millions of dollars of fake bills, Custer Battles joins the pathetic ranks of those who saw the disaster in Iraq as a profit-booster.

How many more times will we need to ask why the reconstruction choked? *

Back in July, failed-congressional-candidate-turned-defense-contractor-CEO Michael Battles told AP's Matthew Barakat that insecurity (it's primary contract) accounted for the unspent reconstruction funds (then at a mere 2%). *Nancy Updike spoke with a member of Custer Battles in This American Life's important piece on contractors.

In May of this year, Custer Battles was fined $50,000 for recruiting 250 soldiers from Fiji to fight in Iraq without filling out the Labor Ministry's forms. *Custer Battles LLC denied that they had any operations in Fiji or connection to Custer Battles (no LLC), which held a recruitment at a high school at which more than 1000 former soldiers showed up.

There's an expression in Arabic that says, roughly, that when the dancer dies her torso keeps twitching. *Though the CPA is no more and its practitioners can retire to defending the actions of their short-lived authority, Iraq continues to bleed.

[posted additionally at American Amnesia]

magician

20 February 2005, 16:26

from : http://www.dailykos.com/story/2005/2/15/204855/182

Privatization kills
by zenbowl
[Unsubscribe]

Tue Feb 15th, 2005 at 17:48:55 PST

An NBC report details the stories of four former Custer Battles employees who witnessed the deliberate killing of unarmed Iraqi civilians by private contractors.

There are new allegations that heavily armed private security contractors in Iraq are brutalizing Iraqi civilians. In an exclusive interview, four former security contractors told NBC News that they watched as innocent Iraqi civilians were fired upon, and one crushed by a truck. The contractors worked for an American company paid by U.S. taxpayers. The Army is looking into the allegations.

It's not bad enough that the Army deliberately broke its own rules to provide Halliburton with payments despite the ongoing audit of the firm. *Now a firm which claims immunity from fraud laws is being paid by the government to kill civilians. *More below the fold.

Diaries :: zenbowl's diary ::

For me, this embodies one of the core problems with privatizing the military: a lack of oversight and responsibility. *The use of mercenaries has long been a symbol of a depraved and irresponsible government unable to fight its way out of the situations that it worked its way into. *Now we have Iraqi children being crushed to death by paid mercenaries.

For shame.

magician

20 February 2005, 16:29

http://www.truthout.org/docs_2005/021505D.shtml

Ex-U.S. Official in Iraq Says CPA Was 'Wild West'
****By Sue Pleming
****Reuters

****WASHINGTON (Reuters) - The U.S. occupation authority in Iraq had a chaotic, "Wild West" approach to contracting there which opened up the system to abuse and waste, a former employee from the authority said Monday.

****Ex-Coalition Provisional Authority official Franklin Willis cited examples of this "chaos" at a hearing of the Senate Democratic Policy Committee and said he believed most abuse and waste could have been avoided.

****Willis showed a picture of himself and other U.S. officials holding up plastic-wrapped 'bricks' of $100 bills worth $2 million to pay security contractor Custer Battles, which the Defense Department has since suspended due to billing issues.

****"The Custer Battles case, which while anecdotal, reflects a general pattern of waste and inefficiencies which could have been avoided," said Willis of contracting abuses in Iraq.

****"In sum, inexperienced officials, fear of decision-making, lack of communications, minimal security, no banks and lots of money to spread around. This chaos I have referred to as a 'Wild West'," Willis, who was a senior aviation official for the CPA, told the hearing.

****Democrats have called for a full congressional hearing on what they say is a pattern of contracting abuses in Iraq, from overcharging by lead contractor Halliburton to poor planning and mismanagement.

****Audits last month by the Special Inspector General for Iraq Reconstruction were particularly scathing over the CPA's handling of more than $20 billion of Iraq's own money and said lack of oversight opened up these funds to corruption.

****Melting Funds

****North Dakota Sen. Byron Dorgan (news, bio, voting record) said passing money stuffed into plastic bags to contractors made it all the more difficult to track funds.

****"Your description of passing money around sounds like passing an ice cube around. By the time the person gets the ice cube at the end of the line, it's much smaller," he said.

****"There is a lot here that should be the subject of aggressive oversight hearings," he said.

****Defense department spokesman Lt. Col. Joe Yoswa said the CPA operated under extremely difficult conditions from its inception until its job was over in June 2004.

****"Throughout, the CPA strived for sound management, transparency and oversight," he told Reuters.

****The United States Congress set aside $18.4 billion for rebuilding Iraq, of which about 15 percent has been spent.

****A lawyer representing two "whistle-blowers" in the Custer Battles case, Alan Grayson, said his clients wanted to provide testimony at the hearing but had been too afraid to attend because of death threats, and because they feared retaliation from the Bush administration.

****"In our case the Bush administration has not lifted a finger to recover tens of millions of dollars that our whistle-blowers allege was stolen from the government."

magician

20 February 2005, 16:41

frpom : http://www.philly.com/mld/inquirer/news/nation/9873847.htm?1c

Posted on Sat, Oct. 09, 2004

2 allege fraud in Iraq contract

Ex-workers of Custer Battles say it wrongly gained tens of millions of dollars. The firm denies that.

By Seth Borenstein

Inquirer Washington Bureau

WASHINGTON - A politically connected start-up firm, awarded a no-bid contract to provide security for Baghdad's airport, defrauded U.S. taxpayers of tens of millions of dollars, two top former workers say in a lawsuit unsealed yesterday.

The Bush administration decided not to join the whistle-blowers' civil suit against the company, run by a former Republican congressional candidate.

The whistle-blowers' attorney said a Justice Department lawyer had told him that was because the alleged victim was the U.S.-financed and -led Coalition Provisional Authority, not the U.S. government. Justice Department spokesman Mark Corallo said the department did not comment on why it declined to join such suits.

It is unusual for the Justice Department to decline to join a document-rich suit when prosecution is likely, said Patrick Burns of Taxpayers Against Fraud, which monitors citizen suits.

On Sept. 30, the Pentagon put the firm, Custer Battles LLC of Fairfax, Va., on a list that bars it from getting federal contracts, citing "adequate evidence of the commission of fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements or any other offenses indicating a lack of business integrity."

The whistle-blowers said they had been in contact with Justice and Defense Department investigators about a criminal investigation. Both agencies said they did not comment on or confirm the existence of ongoing cases.

"We don't think the allegations have any merit," Custer Battles lawyer Richard Sauber said yesterday. He called the accusers "a disgruntled employee and a competitor" and said the government not joining the case was a sign of "no credible evidence." He said Custer Battles was not given a chance to explain what happened before the Pentagon suspended it.

The whistle-blowers - Robert J. Isakson, a former FBI agent who investigated white-collar crime and was managing director for a Custer Battles partner, and W.D. "Pete" Baldwin, Custer Battles' former in-country manager - alleged that Custer Battles set up four shell companies in the Cayman Islands, Beirut and Cyprus to help inflate bills that were passed on to taxpayers.

Experts in contracting said the firm had little business until it got the Iraq contract in 2003, then it exploded into more than $100 million a year in revenues. Its founders are Scott Custer, a former Army Ranger and defense consultant, and ex-CIA officer Michael Battles, who was a 2002 GOP candidate for Congress from Rhode Island.

Though it was a new company, Custer Battles got a no-bid, $16.8 million contract in July 2003 to secure Baghdad's airport, according to the CPA's inspector general. The contract was cost-plus, meaning the firm passes along all its costs, plus a percentage profit.

Isakson and Baldwin said - and provided lease documents as proof - that Custer Battles set up shell companies to inflate the costs of cabins, trucks and other items to get more money from the government.

Isakson, as managing director for Custer Battles' partner DRC Inc., helped Custer Battles set up operations in Iraq. He said that when he told the company a cost-plus contract would not bring much profit in a war zone because such contracts generally are capped at 5 percent, the firm's officials told him they planned to form shell companies and buy or lease products from them to Custer Battles at higher prices.

Isakson said he was isolated after he objected. He said that in July 2003 when he had finished setting up the company's camp at the airport, two armed company leaders detained him, his 13-year-old son, and his brother. He said they took his money, identification and gun, and left them on their own to get out of war-torn Iraq.

Soon after Isakson left, Baldwin was hired to be Custer Battles' in-country manager. "It was quite a nightmare," Baldwin said in a phone interview from Baghdad, where he started his own firm after quitting Custer Battles in March.

Baldwin said that setting up shell companies wasn't wrong but that inflating prices and telling the government Custer Battles couldn't get receipts to justify the higher prices was, and that he refused to do it.

from : http://www.philly.com/mld/inquirer/news/nation/9873847.htm?1c

magician

20 February 2005, 16:48

from : http://www.thislife.org/pages/descriptions/04/266.html

Tuesday*4th*January*2005 (18h07) :
Whistleblowers Expose How Private Contractors Loot US Taxpayers -
1 comment(s).

Former managers working with Custer Battles, a high-profile private security company in Iraq, are accusing the firm of using affiliated "shell" companies in the Cayman Islands and other "tax haven" countries to fraudulently overcharge on government contracts by tens of millions of dollars. The accusations are spelled out in a lawsuit filed under the False Claims Act and made public October 8.

Custer Battles, headquartered in McLean, Virginia, first grabbed headlines after winning a $16.5 million contract in June 2003 to provide security for the Baghdad International Airport by hiring Nepalese Gurkhas. It was the first major assignment for the fledgling firm after being launched in October 2001.

Founded by two Army veterans, Scott Custer and Michael Battles -- a former Republican candidate for Congress in Rhode Island -- the firm had little experience in private security and employed only a handful of people at the time. The two entrepreneurs, both in their mid-30s, made their first payroll with credit cards and personal loans. Since then, Custer Battles has landed security contracts totaling an estimated $100 million that include protecting Iraq’s new currency and training the Iraqi army.

But during those early months in Iraq, the company resorted to using crooked accounting and "sham" companies in far-flung countries including the Cayman Islands, Cyprus and Lebanon, to dramatically pump up charges on contracts by as much as 162 percent on equipment, construction supplies and services, claim plaintiffs’ Robert Isakson and W.D."Pete" Baldwin, both of who worked for Custer Battles.

"When I see crooks come into a war zone where people are fighting and dying, I just turn them in," Isakson says. "In my opinion they were cheating the government and taxpayers and just being rewarded with more contracts."

Since the 1991 Gulf War, Isakson says his disaster relief and construction company, DRC of Mobile, Ala., has worked in support of the military and others as a subcontractor in Kuwait, Somalia and Kosovo. The former FBI investigator says he has blown the whistle on other frauds in the past, but Custer Battles trumps everything he has seen.

Custer Battles denies the allegations as "baseless" and portrays Isakson and Baldwin as in "direct competition" with the company. Custer Battles spokeswoman Jennifer Martin referred inquires about the lawsuit to an October 8 press release. "We believe that the individuals filed this claim solely as a last ditch effort to achieve a competitive edge over CB," the release says.

Nevertheless, the Pentagon temporarily banned the company from future government contracts on September 30 until legal proceedings are resolved. In an Air Force memo calling for the government-wide suspension, Custer Battles and its officers are accused of creating "sham" and "interlocked" foreign companies to fraudulently increase profits and inflate costs charged to the Coalition Provisional Authority (CPA), the temporary governing body in Iraq largely led and funded by the U.S. government.

"Adequate evidence" establishes that the conduct of Custer Battles and top individuals associated with the firm "is of so serious or compelling a nature that it affects their present responsibility to be government contractors or subcontractors," the memo concludes.

During one contract meeting with CPA officials, the Air Force claims that Battles absentmindedly dropped a spreadsheet on a table reflecting an attempted billing of $9,801,550 for expenses that cost the company $3,738,592. Under the contract, actual costs and invoiced costs should have been the same, the memo says, but had been marked up 162 percent.

The Air Force also makes additional accusations against the company, which include a $2.7 million bill fabricated from "forged leases, inflated invoices and duplication," as well as a $157,000 charge for a $95,000 helicopter pad in Mosul, Iraq.

Offshore tax havens popular with government contractors

Custer Battles is just one of many government contractors known to use offshore companies in countries commonly known as "tax havens," according to recent reports by the Government Accountability Office, the investigative arm of Congress.

One study, made public in February, finds that 59 of the 100 largest federal contractors in 2001 reported having subsidiaries in approximately 39 countries identified as tax havens. Such countries, including the Cayman Islands and Cyprus, levy negligible taxes on corporate income and provide privacy laws that shield businesses from international scrutiny.

Many of the federal contractors named by GAO also hold multi-million dollar contracts in Iraq, including Fluor, Foster Wheeler (which is incorporated in Bermuda), Computer Associates International, Bearing Point, Harris, and others. (A separate GAO report released in August found that such companies enjoy a substantial competitive edge in winning contract awards over government contractors without such offshore operations.)

Houston-based Halliburton, the largest contractor in Iraq, holds billions of dollars in reconstruction and logistics contracts. It operated 17 subsidiaries in tax haven nations as of 2001, according to GAO.

CorpWatch has found that Halliburton makes use of one Cayman Island subsidiary, Service Employees International, Inc., to employ an estimated 70 percent of its workers from the United States and elsewhere for a major Pentagon contract for military support services.

Company spokeswoman Cathy Gist offered no comment on this employment practice but said in an e-mail earlier this summer that all Service Employees International, Inc. employees are covered by U.S. workplace rules.

A number of other companies contacted by for this report declined to comment on GAO’s findings of offshore subsidiaries or if such operations are used in their Iraq contracts.

Titan, a contractor that provided interpreters accused of being involved with torture incidents at Abu Ghraib prison, may have had as many as three offshore subsidiaries but they probably became dormant or recently dissolved because they were acquired through acquisitions of other companies, according to company spokesman Wil Williams.

"We can confirm that no bids - particularly U.S. government bids - or revenues were received or made out of these entities as far back as we can see," Williams says.

Bearing Point, which holds contracts worth up to $240 million for famine relief and directing Iraq’s transition to a sustainable market-driven economic system, is also identified by GAO as having operated 22 subsidiaries in tax haven countries during 2001.

Bearing Point spokesman John Schneidawind acknowledged existence of the subsidiaries but cautioned that his company never "availed itself" to accomplish tax savings as "some other entities are thought to."

Schneidawind also declined comment on a BearingPoint contract with Custer Battles for security that was reportedly terminated six months prematurely because of the fledgling firm’s inexperience and misunderstanding of the agreement.

According to a September 20 USAID Inspector General report, security costs grew 49 percent under Bearing Point’s Iraq Economic Reform Program.

"Bearing Point, in its cost proposal, proposed to spend approximately $894,000 for security costs during the base year of the contract, but later estimated its actual security costs at closer to $37 million," the report states.

Custer Battles also worked in tandem with Bearing Point on the Iraqi Currency Exchange (ICE), a 2003 effort that introduced new currency in Iraq, but performed security support, transportation and the building of new camps in Iraq to house and feed workers involved in the program under a contract directly with the CPA. Cayman Island subsidiaries

The allegations against Custer Battle’s use of offshore firms open a window into the possible ways such companies may be leveraged to raise profit margins, mask overcharges and conceal company costs. Those possible manipulations go far beyond the scope of recent GAO investigations focusing on potential tax avoidance through the use of "tax haven" subsidiaries.

"By conspiring to bill fictive costs generated by their shell entities," the lawsuit against Custer Battles contends, defendants fraudulently increased profits by including "artificial markups paid to shell entities owned or controlled by the defendants, but which themselves provided no additional service or item."

While the ICE contract allowed for a 25 percent profit over actual costs, Custer Battles made use of Cayman Islands operations, Secure Global Distribution and Middle East Leasing, to collect and inflate charges for even larger profits, according to the lawsuit. It claims that equipment, trucks and prefabricated buildings were leased through these companies at costs that were sometimes doubled in the process. When asked to justify the high costs by the ICE Supervising Board, Custer Battles allegedly said that the leasing companies would not make leasing records available.

"Defendants Custer and Battles withheld from the ICE Board the fact that they, along with other defendants, owned or controlled these so-called leasing companies," the lawsuit says.

The lawsuit also claims that Abu Darwish, an alleged business associate of Custer Battles, was recently discovered on a plane leased by the firm with $12 million dollars worth of dinars, the Iraqi currency. The cash was confiscated by customs in Lebanon, where Darwish resides, the lawsuit claims.

Efforts to locate Darwish for comment have been unsuccessful, but Custer Battles attorney Annemarie Carney said the allegation "is entirely inaccurate."

Baghdad airport

Isakson says he began to protest to Custer Battles about fraudulent practices after his company modified an airport terminal into an operational post for Custer Battles at a cost of several million dollars.

During that time, Isakson says he witnessed Custer Battles bill for work that was never performed and equipment that was never delivered. The company also leased eight stolen forklifts belonging to Iraqi Airways to the CPA after repainting them, he says.

Contract requirements for 138 security guards at Baghdad International Airport were never met, but the company continued to charge for that amount of service, according to the compliant. Originally a $13.6 million contract, the price soon rose to $16.5 million after the award was made.

Isakson claims that top associates with Custer Battles attempted to recruit him in fraudulent schemes but he rebuffed their efforts."I refused to cooperate with them," he says.

Within a month, Isakson says, tensions ran so high that Custer Battles employees drew their weapons on Isakson, his 14-year-old son and another worker. He says they were then stripped of their security IDs and guns and escorted to the airport gate.

Having little money to stay at a hotel and no ID for access to the CPA Green Zone, the three fled through war-torn Iraq until they reached Amman, Jordan, and then traveled back to the United States.

"I had no money, no ID, no weapons and we were left outside the gate in a war zone," Isakson says."What was I supposed to do?"

Isakson and Baldwin both say they wanted to report Custer Battles to authorities in Iraq, but did not know who to report their allegations to until returning to the United States.

To this day, Isakson maintains that Custer Battles owes his Alabama company several million dollars for unpaid work and several hundred thousand more in personal loans he made to help Custer Battles through its first month in Iraq.

The FBI and U.S. Justice Department have been investigating the allegations against Custer Battles since February, said attorney Alan Grayson, who is representing Isakson and Baldwin. On October 4, the Justice Department formally rejected Grayson’s request to join the lawsuit filed under the False Claims Act to recover tens of millions of dollars in taxpayer money.

The Justice Department offered no explanation for declining to join the case, but false claim complaints generally stand a far better chance in court when they receive government backing. Custer Battles now believes that because the Justice Department declined to participate, the firm will soon be absolved of the charges made in the lawsuit.

Grayson interprets the Justice Department decision as a backroom political deal, noting that Michael Battles, a cofounder of Custer Battles ran as a Republican candidate for Congress in Rhode Island against Democrat Representative Patrick Kennedy in 2002. Although he lost the race, Battles received backing during the campaign from Haley Barbor, a former chairman of the Republican National Committee. Battles has also worked as a commentator for the Fox News network.

"Justice said it has no interest in this case because the contracts were through the Coalition Provisional Authority even though it was funded with taxpayer money," Grayson says.

Justice spokesman Charles Miller says he is aware of the Grayson’s views, but that the department does not comment on such cases.

The plaintiffs, he points out, are "free to pursue their case."

Meanwhile, Custer Battles continues to build its business. Although the security contract for Baghdad airport has ended -- reportedly because of constant feuding with CPA officials and an addition to the contract’s scope for covering cover ports -- the company projects $200 million in business by next year.

Much of that new business is hoped to be outside of Iraq, which presently comprises 90 percent of its work, according to the Associated Press. Custer Battles opened a new office in Qatar in July is reported to have $35 million in commitments to invest in projects such as a shrimp farm in southern Iraq and home-loan financing operations in Eastern Europe. The company also is setting up a 227-acre corporate training center near Fort Bragg in North Carolina, the report said.

In March, Custer Battles also established what it calls an "office of corporate integrity," according to a press release posted on its Web site.

"Integrity is a core principle of Custer Battles’ corporate values," Custer said in the release. "The OCI will help to ensure that everything Custer Battles does, as a company, complies with the highest ethical standards that are expected of ourselves and our employees."

Download a pdf copy of the lawsuit
http://www.corpwatch.org/downloads/...

Contact the author, David Phinney, at phinneydavid@yahoo.com.

http://www.corpwatch.org/article.ph...

By : David Phinney
Tuesday*4th*January*2005

magician

20 February 2005, 16:57

from : http://www.boston.com/news/local/rhode_island/articles/2005/02/14/ri_contractor_defends_payments_it_received_in_iraq/

R.I. contractor defends payments it received in Iraq

February 14, 2005

PROVIDENCE, R.I. -- A Rhode Island contractor on Monday said it maintained strict controls on the huge cash payments it received from American military officials in Iraq.

ADVERTISEMENT

The system of payments to several contractors -- including Custer Battles, a security firm based in Middletown, R.I. -- was the subject of a Democratic congressional hearing Monday on alleged financial fraud and abuse in Iraq.

Frank Willis, a former U.S. adviser in Iraq, told the Senate Democratic Policy Committee that the system was chaotic and lacked accounting controls, leading to a "Wild West" mentality.

For example, Willis said, he watched $2 million in cash be put in a gunnysack for Custer Battles as payment for its services.

"It was time for payment," he told the party committee hearing. "We told them to come in and bring a bag."

Willis said the payment was one of many such payouts made to numerous contractors by the Coalition Provisional Authority, the American governing body in the country. He said the payment system did not track where the money went after it was given to contractors, and those contracts were poorly supervised.

Custer Battles, which was awarded a contract by the CPA in June 2003 to provide security at Baghdad International Airport for civilian passengers, said in an e-mail Monday that it received several cash payments of up to $2 million each for the first several months of the contract.

The money came from seized Iraqi assets and was handed out at the presidential compound, according to Jennifer Christensen, a company spokeswoman. The arrangement was necessary, Christensen said, because "the CPA had no electronic means of providing payment to its contractors."

She said the payments were legitimate, and that Custer Battles' contract called for payments that were fixed at the start of the contract and were not tied to the costs it would incur. She added that Custer Battles spent money to ensure the cash's safe transfer to a bank.

"While this means of payment was by no means preferable, it was understandable given the CPA's unique situation of having to develop, implement and supervise contracting procedures as part of a multinational coalition working in a hostile environment," she wrote.

Besides providing airport security, Custer Battles has joined with another local business, Northeast Engineers & Consultants, to do survey work on Baghdad's sewer system, which serves about 7 million people. One of the company's principals is Mike Battles, a former Army Ranger and CIA officer who lost in a Republican primary for Congress in 2002.*

magician

20 February 2005, 17:01

from : http://66.98.181.12/newsources/Nov1604c.htm

From:
Mobile, Alabama Register

Date:
November 08, 2004

Byline:
Eddie Curran

Accusations by Mobile firm
spark probe of Iraq contracts

Spearheaded by a former CIA agent and a retired Army Ranger, Custer Battles LLC arrived in Iraq with more moxie than money, and the young firm's success in winning millions of dollars in contracts to provide security at the Baghdad airport captivated the national press.

Now the Virginia-based international security firm that has claimed to have employed more than 1,300 people in Iraq finds itself in a public relations meltdown.

Accusations contained in a pair of lawsuits by Mobile-based disaster services firm DRC Inc., and its manager and co-owner, Bob Isakson, have put Custer Battles in the crosshairs of a federal investigation into its billings to the Coalition Provisional Authority, and in the pages of some of the country's leading newspapers.

Those lawsuits, as well as company memos made public by DRC's attorneys, describe a host of schemes said to have been employed by Custer Battles to defraud the coalition authority.

Among other activities, the company forged invoices and used offshore companies to create sham transactions, according to the court filings. Custer Battles did so to create records showing its costs were far higher than they actually were, then using those records to justify its bills to the coalition authority, DRC contends.

On Sept. 30, the company formed by Mike Battles and Scott Custer suffered the ignominious distinction of being blacklisted by the federal government.

In placing Custer Battles on the list of contractors forbidden to receive federal contracts, the U.S. Air Force cited evidence of "fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements or any other offenses indicating a lack of business integrity."

In a posting on the company Web site last month, Custer Battles pledged that it would be cleared of the charges that the company blamed on "baseless allegations" brought by DRC.

As recently as August, Custer Battles was the subject of a largely positive front page article in the Wall Street Journal.

Previous stories, in Fortune and other national publications, told of the firm's seat-of-the-pants quest to compete against much larger, more established companies to win the Baghdad airport contract.

These days, the news hasn't been good for Custer Battles.

Isakson said Thursday night that he and others whom he declined to identify were interviewed by the FBI in Mobile as recently as this week.

"I talked to them yesterday," he said. "They're hard at it -- the FBI and the Department of Defense."

The FBI has a policy of not commenting on its investigations. A recent court filing by Custer Battles in U.S. District Court in Mobile, however, refers to an earlier FBI report of an interview with Isakson.

Front-page story

Two weeks ago, the New York Times published a front-page story detailing findings from internal Custer Battles memos written by a company manager, Peter Miskovich. The memos were provided to the Times by lawyers for DRC, the paper reported.

The memos described a host of improprieties in the company's charges to the American-led coalition that governed Iraq until the United States turned that role over to the Iraqis in June.

Among the findings presented in the memos:

That Custer Battles billed the coalition authority for the use of equipment that it had stolen, painted over and claimed to be leasing.

That the company substantially padded its bills, in part by using "sham" offshore companies. In one case, the firm charged the coalition $250,000 for a helicopter pad that cost it $95,000.

That the firm submitted a substantial number of forged invoices, including some related to the helicopter pad.

In his summary, Miskovich wrote that there were "enormous discrepancies and irregularities that lend themselves to criminal fraud."

The Times quoted company officials stating that Miskovich -- who remains with the company -- now feels that he overstated the seriousness of the issues.

Most of the problems cited in his memos were an understandable result of the confusion of being in a war zone, not fraud, and the coalition authority was not overcharged, said John T. Boese, a Washington, D.C., attorney who represents Custer Battles.

"This was a war situation. We're sitting in Virginia or Mobile, and we're making judgments here. If we need something, we go down the street and buy it," Boese said Friday in a telephone interview.

"(Baghdad) was an impossible situation, and they did a remarkable job just getting it done," Boese said.

"The company believes very strongly that they did not over-bill anyone," he said.

The internal memos -- also provided to the Mobile Register by a lawyer for DRC -- were based to a considerable degree on e-mails from former Point Clear resident Pete Baldwin, an associate of Isakson's who worked with DRC and Custer Battles in Iraq.

In those e-mails to Custer Battles officials, which were attached to the memos, Baldwin described in detail the activities he believed involved criminal acts.

Firms part ways

DRC, which focuses on post-storm cleanup contracts and security work in war zones, is largely run by Isakson, a former FBI agent. His partner is Mobile lawyer and businessman Tommy Marr.

In 2003, DRC became a subcontractor of sorts on a Custer Battles contract to provide security and other services at the Baghdad airport seized after American troops invaded Iraq.

By all accounts, DRC and Custer Battles suffered a nasty parting of ways early this year.

In a posting on its Web site last month that was intended to deflect growing criticism of its business practices, Custer Battles stated that its business relationship with DRC "soured because of DRC's poor contract performance."

Isakson, Baldwin and DRC have made their accusations "solely as a last-ditch effort to win a competitive advantage" over Custer Battles in winning contracts in Iraq, the company asserted.

In September, an attorney for Custer Battles, Ann Marie Carney, told the Mobile Register that the accusations in a DRC lawsuit brought in Baldwin County were "ridiculous."

Her comment was included in a September story about that lawsuit, which has since been moved to federal court in Mobile.

In that lawsuit, Isakson claims that he and his 14-year-old son were kidnapped at gunpoint by Custer Battles officials, led from the safe confines of the airport complex and forced to flee to Jordan through some of the most dangerous areas of Iraq.

DRC is demanding compensation from Custer Battles for about $10 million it claims to be due for services rendered on the Baghdad contract.

That sum includes costs incurred by DRC when it "recruited, provisioned and leased over 50 ex-British Army Gurkha soldiers from the country of Nepal, transported these men to Iraq and leased them to Custer Battles" to provide security at the Iraqi airport, according to the court filing.

In a previous interview, Isakson described the Himalayan fighting men from the tiny country of Nepal as "the most fearless warriors on Earth."

Whistleblower case

Also this summer, DRC, Isakson and Baldwin filed a whistleblower lawsuit against Custer Battles under what's known as the federal False Claims Act. The plaintiffs alleged that Custer Battles defrauded the coalition authority out of tens of millions of dollars.

In such cases, plaintiffs file sealed lawsuits against companies they accuse of defrauding the government. If successful, plaintiffs can receive up to 30 percent of funds collected by the government as a result of the cases.

False claims lawsuits remain sealed pending a decision by the government to join in the cases. On Oct. 8, DRC's whistleblower case was unsealed, with the federal government deciding not to participate -- a decision that ordinarily does not bode well for such cases.

The U.S. Justice Department elected not to join with DRC because the alleged fraud was against the coalition authority, which while heavily funded by the United States, was not in itself a federal agency, said a Virginia-based lawyer for DRC.

Boese, who specializes in defending false claims lawsuits, said he expects the case to be dismissed, for the very reasons the Justice Department declined to participate.

On its Web site, Custer Battles stated that the government's decision not to join the lawsuit reflects that the federal government "has found no credible evidence" that the company committed fraud.

The unsealing of the case led to a spate of stories in the national media, including New York Times, Los Angeles Times and Associated Press articles detailing the accusations against Custer Battles.

Isakson said Thursday night that Custer Battles' actions on the Iraq work are "a disgrace" that "makes you want to throw up."

DRC, he said, remains active in Iraq, and recently entered into a one-year, $30 million contract to provide security for a private firm that is building cellular telephone towers in Iraq.

To secure the telephone towers, DRC has hired more than a thousand people, including Gurkhas and Iraqis, Isakson said.

magician

20 February 2005, 17:09

from : http://www.theledger.com/apps/pbcs.dll/article?AID=/20041023/ZNYT03/410230417

Published Saturday, October 23, 2004

Memos Warned of Billing Fraud by Firm in Iraq

By ERIK ECKHOLM
New York Times

Managers of a security firm that won large contracts in Iraq warned their bosses in February of what they called a pattern of fraudulent billing practices, internal company memorandums suggest.

The memorandums, written primarily by two company managers, charged that the security firm, Custer Battles, repeatedly billed the occupation authorities for nonexistent services or at grossly inflated prices.

The company, which quickly grew to garner security contracts worth $100 million in little more than a year, denies the charges. It argues that the managers confused sincere attempts to document jobs done in a hurry, in a war zone, with deliberate deception and that the company provided all contracted services for the agreed-upon price.

The memos and a lawsuit filed by former employees cite several specific instances, including billing the Coalition Provisional Authority $157,000 for a helicopter pad that in fact cost $95,000, and repainting forklifts abandoned by Baghdad Airways and then charging the authority thousands of dollars a month, claiming that the forklifts were leased.

One of the managers was later fired by the company and is part of a lawsuit charging Custer Battles with defrauding the federal government of tens of millions of dollars. The other manager, who has since been appointed to a high-level position with the company, recently declared that after further research, he believed that any questionable practices were the fault of a few individuals and had not been condoned by the owners.

On Sept. 30, the Pentagon, concerned by the allegations raised by the employees, barred Custer Battles from receiving further military contracts, and it has withheld at least $10 million in payments to the company. The company is appealing the ban.

The charges swirling around Custer Battles in part reflect a problem that American government auditors have acknowledged: the inability of the Iraq occupation authority, particularly in its first year, to monitor properly the performance of hundreds of companies, large and small, that flocked to Baghdad seeking contracts for everything from building materials to armed guards.

The memorandums, provided by a lawyer for the managers who filed the lawsuit against Custer Battles, charge that the company submitted invoices from supposed subcontractors or suppliers that - unbeknownst to the American officials who paid the final tab - were virtual shells, newly created by Custer Battles executives and their partners.

Custer Battles, founded in 2001 by Scott Custer and Michael Battles, both in their 30's, says it has about 700 employees.

Pete Baldwin, then the Iraq facilities manager, wrote in a Feb. 2 memorandum that in one typical invoice, Custer Battles claimed that one of its shell companies had installed a helicopter pad for $157,000. In fact, Custer Battles had hired a different company to build the pad for $95,000, he asserted. He wrote that "every line item on that invoice," which was submitted for a total of $250,000, was just as "false, fabricated, inflated."

Mr. Baldwin wrote that he had repeatedly informed Mr. Custer, the company co-owner, of similar practices, but to no avail. A lawyer for Custer Battles, Richard Sauber, said that Mr. Custer had subsequently brought accountants to Iraq to clear up incomplete books but that they had not found fraud.

Mr. Baldwin said in the memorandum that after he began raising alarms, an executive with the company tried to fire him. Mr. Baldwin was given notice on Feb. 20 - he has said because of his charges of fraud. Larry Robbins, a lawyer for Custer Battles, says he was fired for "incompetence.''

Last week, documents unsealed by the Justice Department disclosed that two former managers of Custer Battles, including Mr. Baldwin, had brought a civil suit under the federal whistle-blower act charging the company with fraud.

The company called those charges baseless and the work of "a competitor and a disgruntled employee." The two former managers could win million of dollars in rewards if the charges hold up.

In a memorandum dated Feb. 28, 2004, Peter Miskovich, who was manager of the company's $21 million contract to safeguard Iraq's new currency as it was being distributed, gave a scathing review of the project, which he took over in midstream. Mr. Miskovich - who is not part of the whistle-blower lawsuit - wrote to his superior, Charles Baumann, then the country manager, that the records provided "prima facie evidence of a course of conduct consistent with criminal activity and intent."

Mr. Miskovich was later named director of the company's new Office of Corporate Integrity. In an Oct. 13 affidavit, he said that after further review, he had concluded that financial improprieties were more isolated than he had declared in February. He said that "I do not believe, based on what I learned during my tenure" as a project manager, "that Scott Custer or Mike Battles was involved in the questionable conduct."

Reached by telephone this week, Mr. Miskovich refused to speak to a reporter. Mr. Baldwin could not be reached for comment.

The Air Force, which suspended the Custer Battles contract, wrote a memorandum citing suspicion of repeated fraud. The Air Force quotes Mr. Miskovich's Feb. 28 memorandum, and calls the evidence of company misconduct "of so serious or compelling a nature that it affects their present responsibility to be government contractors or subcontractors."

In the case of the currency exchange project, said Mr. Sauber, the lawyer for Custer Battles, the occupation authority agreed on a final fee of $21 million, but the Pentagon has held up the final $10 million in payments while it investigates the contract.

Earlier this month, the Justice Department declined to prosecute Custer Battles, though the civil suit continues under the whistle-blower law. The department gave no public explanation, but officials had previously told lawyers in the lawsuit that because the alleged fraud was against the Coalition Provisional Authority, federal prosecutors did not have jurisdiction. Some experts have questioned that reasoning.

The company founders, Scott Custer and Michael Battles, are both Army veterans. Mr. Battles unsuccessfully ran for Congress in Rhode Island as a Republican two years ago.

The two started out by offering security services to nongovernmental organizations in Afghanistan after the fall of Kabul in late 2001.

But their business really took hold in June 2003, soon after the fall of Baghdad. The men obtained a $16.5 million contract from the occupation authorities to provide security for the Baghdad airport.

That one-year contract was not renewed, but the company had already begun pulling in others, directly with the Coalition Provisional Authority or as a subcontractor to other companies.

As it cut a quick and profitable swath, Custer Battles sometimes angered more experienced security companies with its aggressive recruitment of scarce security experts and claims to industry leadership. The company describes itself as "the premier security company in Iraq" on its corporate Web site.

The two founders have received praise for their entrepreneurship. The internal memorandums charge that part of that success, at least, was built on questionable practices.

One example captures some of the fog of post-invasion Iraq. With forged invoices, Mr. Miskovich wrote, Custer Battles billed for providing a security detail for the road delivery from Baghdad to Mosul of prefabricated cabins. The housing was urgently required by teams carrying out the currency exchange.

Not only did the company provide no guards for the trip, Mr. Miskovich said in his Feb. 28 memo, but the convoy was also somehow lost for a week, officials in Mosul had to sleep in tents, and the company had to offer a reward to locate the cabins.

magician

20 February 2005, 17:13

from : http://www.theleftcoaster.com/archives/003086.html

Two Kings, The Sequel

Do you remember Three Kings, David Russell's 'screw-loose war picture' starring George Clooney as the American soldier who slips into Iraq during the Gulf War ostensibly to steal Iraqi gold but who winds up saving hundreds of desperate Iraqi citizens? Roger Ebert was favorably impressed:

A political undercurrent bubbles all through the film. A truce has been declared, and Hussein's men have stopped shooting at Americans and fallen back to the secondary assignment of taming unhappy Iraqis who were expecting him to be overthrown. ("Bush told the people to rise up against Saddam. They thought they'd have our support. They didn't. Now they're being slaughtered.") Strange, the irony in Iraqis killing Iraqis while American gold thieves benefit from the confusion.

The movie was pure fiction, of course. But if Ebert thought the irony was 'strange' in that film, what would he make of its real-life sequel? We might title it Two Kings, The Sequel: 'Custer Battles'?

Today's New York Times finally gets around to reporting another depressing tale of the Bush administration's roaring incompetence as it pursues its criminal designs. Erik Eckholm is late to the party, to be sure. He's playing catch-up to The LA Times, a number of blogs, and wire service reporters who first broke the story almost three weeks ago when a qui tam lawsuit was filed by two former employees of one of the most beknighted U.S. contractors in Iraq -- second, perhaps, only to Halliburton.

At the center of this new tale is a company calling itself Custer Battles. (I'm not making this up). The company is owned by Scott Custer and Michael Battles. (Get it? Custer and Battles. Really. I'm not making this up.) Battles was, wouldn't you know, an unsuccessful Republican candidate for Congress two years ago in Rhode Island. (I swear this is true). Blogger Mark Kleiman of Body and Soul also has pegged him as "a Fox news commentator." (So help me, this is true, too.)

Kleiman has a good summary --

Custer Battles seems to have proceeded to steal everything that wasn't nailed down and to pry up most of what was. With a few shell companies to do phony invoicing, it managed to inflate $3 million in costs on a cost-plus contract to $9 million. One estimate of the total fraud reaches $50 million.
* * *
The company hired Nepalese Gurkhas to fill out its limited staff and quickly expanded its presence. It won a contract in August 2003 to provide logistical support for a massive currency exchange in which Iraqis turned in trillions of old dinars for the nation's new currency.

That contract committed the Coalition Provisional Authority to paying for all the company's costs for setting up centers where the exchanges would take place, plus a 25% markup for overhead and profit, according to the Air Force memo signed by Deputy General Counsel Steven A. Shaw.

Custer Battles then purchased trucks, equipment and housing units to carry out the contract. It created a series of "sham companies" registered in the Cayman Islands and Lebanon, the memo said.

The companies were then used to create false invoices making it appear as though they were leasing the trucks and other equipment to Custer Battles. The scheme inflated the 25% markup allowed under the contract, the memo said.
In October 2003, company representatives accidentally left a spreadsheet in a meeting and it was later discovered by CPA employees. The spreadsheet showed that the currency exchange operation had cost the company $3,738,592, but the CPA was billed $9,801,550 — a markup of 162%.

In another case, a Custer Battles employee wrote in a report that a $2.7-million invoice was based on "forged leases, inflated invoices and duplication," the Air Force memo said. In yet another case cited by the memo, Custer Battles billed the government $157,000 to build a helicopter pad that cost $95,000.

Although tardy, Eckholm's account does contribute to the script.

With forged invoices, Mr. Miskovich wrote, Custer Battles billed for providing a security detail for the road delivery from Baghdad to Mosul of prefabricated cabins. The housing was urgently required by teams carrying out the currency exchange.
Not only did the company provide no guards for the trip...but the convoy was also somehow lost for a week, officials in Mosul had to sleep in tents, and the company had to offer a reward to locate the cabins.

Eckholm rather forgivingly characterizes the episode as exemplifying the "fog of post-invasion Iraq." Maybe that's a typo. He must have meant "the fraud of war."

Just like the original Hollywood blockbuster, Two Kings: The Sequel is a tale of unimaginable riches, swarthy-looking exotics, Carribean shell corporations, hilarious hijinks in the desert, a corrupt American television news network, and dramatic tension mounting from the valiant heroics of lower level employees who want to set things right and catch the crooks.

But here's the denouement: When the whistle finally is blown and the cavalry is called, the Bush administration's Justice Department declines to ride to the rescue.

The Bush administration decided not to join the whistleblowers' civil suit alleging fraud against the company, run by a former Republican congressional candidate. The whistleblowers' attorney said a Justice Department lawyer told him the reason was that the alleged victim was the U.S.-financed and led Coalition Provisional Authority, not the U.S. government.

Justice Department spokesman Mark Corallo said the department didn't comment on why it declined to join such suits.

It's unusual for the Justice Department to decline to join a suit that has a load of documents and when criminal prosecution is likely, said Patrick Burns, a spokesman for Taxpayers Against Fraud, a group that monitors citizen suits.

Only a Bushy could come up with the excuse that the CPA was unrelated to the US government.

So, now you have it: Truth not only is stranger than fiction, sometimes it turns fiction on its head. In the original Three Kings, the bad guys quietly slip into Iraq, unexpectedly turn good, give up their treasure, and risk all to save lives. In the Republican sequel, the bad guys openly invade Iraq, promise to save lives, defraud their own country, and wind up stealing millions with the Bush administration's blessings while hundreds of Iraqis die every day.

Sounds like a block buster to me. Maybe Sinclair Broadcasting would like to join Fox News in airing a preview.

larre :: 8:50 AM :: Comments (9) :: TrackBack (1) Other blogs commenting on this post

magician

20 February 2005, 17:16

from : http://www.taf.org/cbcontract.htm

The Plain Letter of an Iraq
Coalition Provision Authority (CPA) Contract

The Los Angeles Times reports that "Attorneys for a U.S.-based security company [Custer Battles] accused of setting up sham companies in a multimillion-dollar fraud scheme in Iraq are contending in court that the company cannot be sued under the False Claims Act, a key federal anti-corruption law, because the allegedly stolen money belonged to Iraqis, not Americans."

Unfortunately for Custer Battles, however, the document below makes clear that the contract was with the U.S. Army and the United States of America. The contracting officer was an American signing on behalf of the United States of America, and the check was to come from the 336th Finance Command based in Lake Charles, Louisiana (detailed to Camp Arifjan, a U.S. Army base in Kuwait).

A guide to the contract and what the letters and numbers on the contract mean:

*

Box 1: DPAS stands for "Defense Priorities and Allocations System" and "15 CFR 700" means that it is "in support of authorized national defense programs". The Army here is the United States Army, and the "national defense" is the defense of the United States and its troops.

Box 2: The contract number begins with the numbers DA, which stands for "Department of the U.S. Army".

Box 21: The number "21X2089" means that, for accounting purposes, this contract should be charged to the "Iraq Relief and Reconstruction Fund, Army" -- i.e. the U.S. Army.

Box 25: "Payment will be made by 336th FINCOM" means that the bill will be paid by the 336th Finance Command stationed in Lake Charles. Louisiana. "APO AE 09366" is a U.S. Military postal code (APO) for Europe (AE). Camp Arifjan is a U.S. Army base in Kuwait and is run by the US Central Command (USCENTCOM).

Box 26: "Patricia G. Logsdon" is the American contracting officer from the 336th Finance Command stationed in Lake Charles, Louisiana.

Box 27: Patricia G. Logsdon signs on behalf of the "United States of America." This is the entity with whom the contract is with.

Standard Form 33 Prescribed by GSA - FAR (48 CFR) 53.214c: The letters "GSA" stands for U.S. "General Services Administration," and FAR stands for "Federal Acquisition Regulation". This note is proof that this is an official contract of the United States Government.

magician

20 February 2005, 17:20

from : http://earthhopenetwork.net/Iraq_Occupation_Ran_On_Policy_of_Corruption.htm

Iraq Occupation Ran On Policy
of Corruption, Witnesses Say

by Brian Dominick* February 16, 2005 **NewStandard

Prompted by an absence of standard oversight, congressional Democrats heard testimony Monday about policies of massive waste and mismanagement involving a mercenary firm and a US-funded propaganda TV network.

Witnesses testifying at a special Congressional hearing yesterday told Democratic lawmakers about severe and rampant mishandling of American and Iraqi funds managed by the former US-run occupation government, as well as censorship and manipulation of Iraqi media in the service of pro-American propaganda.

One former senior advisor to the Coalition Provisional Authority (CPA), the organization established to administer the US occupation of Iraq during the first year following the March 2003 invasion, testified that massive amounts of freshly minted American cash were distributed regularly to Iraqi ministries and American companies.

On at least one known occasion, cash was handed to a private US mercenary firm, ostensibly to be spent on its operations in Iraq, though the cash was not properly accounted for once it was paid. Former CPA employee Frank Willis said that company, Custer Battles, was handed $2 million in shrink-wrapped $100 bills in his presence, and he displayed a photograph taken just moments before the handing over to prove it.

A lawyer attended the hearings to represent two former associates of Custer Battles who declined at the last minute to testify in person for fear of retribution from both the mercenary firm and the Bush administration. Alan Grayson said his clients have filed a sealed claim against Custer Battles alleging, in part, that the company accepted $15 million from the CPA to provide security for Iraq’s civilian airline, which was in fact grounded for the duration of the contract and in no need of the company’s services.

The hearing was called by Senator Byron Dorgan (D-North Dakota), chairperson of the Democratic Policy Committee, in lieu of oversight activities that should have been held by Congressional committees with actual jurisdiction over US policy toward Iraq, in Dorgan’s view.

Senator Harry Reid (D-Nevada) and Representative Henry Waxman (D-California) joined Dorgan on the committee, which heard testimony from four witnesses, including two who worked in Iraq and personally witnessed what they termed the misuse of Iraqi and American monies intended for reconstruction-related projects. The committee members said the hearing was inspired by a recent report by the inspector general for Iraqi reconstruction, which found nearly $9 billion in mismanaged or missing funds that were supposedly under CPA control.

Theft By Any Other Name

Grayson read from an internal memo compiled by a Custer Battles field manager, which drew damning conclusions about Custer Battles’ top executives, apparently regarding the company’s fulfillment of a $21 million contract to guard the exchange of Iraq’s Saddam Hussein-era currency for US-minted bills in late 2003 and early 2004. Based on information provided by one of Grayson’s clients, the memo stated:

Indicated in this report are enormous areas of discrepancies and irregularities that lend themselves to criminal fraud. A broader issue of criminal intent has become evident. The documents are prima facia evidence of a course of conduct consistent with criminal activity and intent. The concerns and issues raised by [whistleblower Pete Baldwin], in his response to my email, significantly reinforces my concern that criminal activity transpired here on the money exchange project.

The memo goes on to cite "a clear and definite pattern of deception and misrepresentation" and recommends, "Further discussions and decisions concerning the [money exchange] project should be coordinated through the corporate criminal defense attorney."

In his testimony, Grayson mistakenly referred to the author of that memorandum as Custer Battles’ "corporate integrity officer." But according to a New York Times article published last October, it was only after that memo was written that the man who penned it, Peter Miskovich, found himself promoted from a field manager to the position of corporate integrity officer. At that point, Miskovich recanted the findings reported in his memo and revised attribution of blame to individual lower-level employees, insisting that neither Scott Custer nor Mike Battles, the company’s founders, "was involved in the questionable conduct." Prior to his change in title, Miskovich oversaw the money exchange project, reported the Times.

Assistant US Attorney Richard Sponseller, according to Grayson, has suggested that any fraud committed against the CPA should not be equated with theft from the United States, since the CPA was an international organization. But when President George Bush signed the CPA’s original funding mandate, it clearly referred to the organization as "an entity of the United States."

Custer Battles has reached the same conclusion about its own lack of culpability, but for different reasons. The company’s lawyers told CorpWatch, a website that monitors the activity of war profiteers, that the claim against them should be dismissed because the money allegedly stolen was rightfully that of Iraqis, not Americans.

Grayson told the committee that the Bush administration has so far declined to respond to the claim he filed on behalf of the two men previously affiliated with Custer Battles.

Grayson pointed out that for a full year after the federal government had conclusive evidence that Custer Battles was committing crimes against the United States, the CPA continued to award hefty contracts to the firm. Finally, on September 30, 2004, the US Air Force placed Custer Battles on a government blacklist under a code that excludes contracting with organizations involved in "fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements or any other offenses indicating a lack of business integrity."

In an October 2004 press release, Custer Battles denied all claims of misconduct and speculated that the two ex-associates, identified as former employee Pete Baldwin and contractor Bob Isakson, filed their claim as "a last ditch effort to achieve a competitive edge over [Custer Battles]." Isakson runs a disaster relief firm that Custer Battles said competes with it for contracts.

magician

20 February 2005, 17:24

from: http://www.therabbittrail.com/the_rabbit_trail/2004/10/custer_battles.html

Custer Battles...

their asses off to not look like a bunch of swine sucking leeches. Today in the NYTimes Erik Eckholm has an article about Custer Battles, a security firm playing the field in Iraq. Seems Custer is now the target of a lawsuit by former employes for defrauding the government for millions of dollars. You'd think this might spark an investigation but seems Asscroft and the Justice Department's decided to sit this one out because, well we apparently don't really know, no public statements as yet, probably concocting an illegitimate excuse right at this very moment. Eckholm writes that,

officials had previously told lawyers in the lawsuit that because the alleged fraud was against the Coalition Provisional Authority, federal prosecutors did not have jurisdiction. Some experts have questioned that reasoning.

The memorandums that got this ball rolling were written primarily by two employes, one former, one current. The former employe, Pete Baldwin, Custer axed citing, and don't they always, "incompetence." The current employee, Peter Miskovich, has been recently promoted to, ironically, Director of the company's new Office of Corporate Integrity and is now claiming the whole thing's a big mistake. After reviewing the matter further, Miskovich found no evidence of wrong doing, just a few rotten apples, no systemic corruption.

So what's in these memorandums? They charge that Custer,

repeatedly billed the occupation authorities for nonexistent services or at grossly inflated prices.

Some of the specific instances of puke inducing thievery inluded,

billing the Coalition Provisional Authority $157,000 for a helicopter pad that in fact cost $95,000, and repainting forklifts abandoned by Baghdad Airways and then charging the authority thousands of dollars a month, claiming that the forklifts were leased.

Even Mr. Miskovich, in the days prior to the cushy new office and who once wrote that Custer's internal records provided "prima facie evidence of a course of conduct consistent with criminal activity and intent," charged that with forged invoices Custer,

billed for providing a security detail for the road delivery from Baghdad to Mosul of prefabricated cabins.

The Times article states that,

The housing was urgently required by teams carrying out the currency exchange...Not only did the company provide no guards for the trip, Mr. Miskovich said in his Feb. 28 memo, but the convoy was also somehow lost for a week, officials in Mosul had to sleep in tents, and the company had to offer a reward to locate the cabins.

What to make of this? Need I even say a word? This stuff makes me gag and don't think for a moment Custer's alone. I can only imagine the feeding freenzy that occured and is still occuring in Iraq with regard to rebuilding and security. You put capitalists into a country with no regulations, little guidance, and an almost unlimited amount of unregulated money and you better get the hell outta the way or you'll have your face ripped off. These people take lying, cheating, and swindling dead serious. It's a way of life, not an indulgence.

For more info on this and the people behind Custer, surprise, surprise, RePub flunkies, check out, via Atrios:

BodyandSoul
Mark A. R. Kleiman
And Google baby, Google...right below Kotter, loyal Protector of The Trail.

RangerRuss

21 February 2005, 04:48

Even Mr. Miskovich, in the days prior to the cushy new office and who once wrote that Custer's internal records provided "prima facie evidence of a course of conduct consistent with criminal activity and intent," charged that with forged invoices Custer, billed for providing a security detail for the road delivery from Baghdad to Mosul of prefabricated cabins.

The Times article states that, The housing was urgently required by teams carrying out the currency exchange...Not only did the company provide no guards for the trip, Mr. Miskovich said in his Feb. 28 memo, but the convoy was also somehow lost for a week, officials in Mosul had to sleep in tents, and the company had to offer a reward to locate the cabins.

i can't find that story in the nyt... but there was no security detail. period. ask froggie...

magician

21 February 2005, 05:59

from: http://www.al.com/news/mobileregister/index.ssf?/base/news/109498071087860.xml

Kidnapped in Iraq?

Sunday, September 12, 2004
By EDDIE CURRAN
Staff Reporter

In a lawsuit that reads like a proposal for a Hollywood movie, Mobile businessman Robert Isakson, his brother Bud and 14-year-old son Bobby have accused a company led by an ex-CIA agent of kidnapping them at gunpoint and forcing them to flee "through the Sunni Triangle, the most dangerous area of Iraq ... without weapons, security or guards."

The story told in the lawsuit puts the Mobile-based disaster services firm that Isakson co-owns, DRC Inc., in the middle of the action in Iraq and at the center of a web of intrigue that includes offshore companies, overbilling on a war contract and a much-reported incident involving a mysterious flight out of Baghdad by a Lebanese businessman toting some $12 million in new Iraqi money.

Advertisement

DRC, as described in its lawsuit, is the good guy. The bad guy, the company claims, is Virginia-based Custer Battles LLC.

As told in the legal filings, Custer Battles took revenge against Isakson and DRC after Isakson accused Custer Battles of defrauding the Coalition Provisional Authority, the American-led body that governed Iraq until the United States turned that role over to the Iraqis in June.

On Thursday, an attorney for Custer Battles, Ann Marie Carney, called the accusations in the lawsuit "ridiculous." She declined to say more, though, citing company policy against commenting about ongoing litigation.

The story of Custer Battles' birth as a start-up without employees or financing to its emergence as a significant contractor providing security and other services in Iraq and elsewhere has been told in numerous newspaper and magazine articles, most recently an Aug. 13 front-page story in The Wall Street Journal.

DRC, which is co-owned by Mobile lawyer and businessman Tommy Marr, operates out of a modest office in the largely vacant shopping center where Spring Hill Avenue ends at the foot of Langan Municipal Park.

Isakson and the company have been the subject of numerous Mobile Register stories, including a 1999 series that described the company's work throughout the world providing cleanup and other services in areas decimated by natural disasters and war.

DRC's projects have ranged from a major tornado cleanup contract in Oklahoma to post-storm assignments in Guam and Honduras, and war reconstruction contracts after the first Iraqi conflict and, later, in the former Yugoslavia.

In its lawsuit, DRC contends that Custer Battles and related defendants owe DRC about $20 million in actual damages and also seeks more than $50 million in punitive damages. Of the $20 million, $904,455.10 is due as a result of Custer Battles' false imprisonment of the Isaksons, according to the lawsuit.

The court filings, which provide only a skeletal description of events, do not give the date of the alleged kidnapping.

According to the suit, DRC's work at the Baghdad airport ended when Custer Battles co-owner Scott Custer and Joseph T. Morris, a company employee and a co-defendant in the case, "caused" Isakson, his son, Robert J. "Bobby" Isakson, and his brother, Albert J. "Bud" Isakson, "to be held at machine gunpoint in Iraq against their will."

The Isaksons were escorted to the front gate of the airport, where their security badges were "forcibly removed." No longer within the safe confines of the airport, the three Isaksons were left to fend for themselves in a "war-torn and extremely dangerous area without sufficient transportation, funds or provisions for their safety," the lawsuit states.

They managed to escape safely, arriving in Amman, Jordan, at 3 a.m., according to the claim.

Another record, not included in the lawsuit, offers a somewhat different version of events than the one filed in court. Last December, Isakson sent a Mobile Register editor a what-I-did-over-the-summer story that his son had written for class at Cottage Hill Christian School, and suggested that the paper consider publishing it.

Bobby Isakson's well-written, interesting report describes his adventures getting to Iraq in the summer of 2003. At his dad's instructions, he flew with $9,000 strapped to his chest, because his father said U.S. cash was the only currency of any value in Iraq.

He and his father's caterer, Peno, flew from Miami to Paris, then to Amman, Jordan, he wrote. From there, Bobby was driven to the Iraqi border, and met his uncle, Bud Isakson. "Both he and his driver were armed with automatic pistols and fully automatic AK-47 machine guns," Bobby Isakson wrote.

"For the first day, I stayed at the base and met everybody. Everyone was relatively nice. Joe Morris was the only one whom I disliked. He believed that I was too young to be in Iraq, and he was very mean to everybody," he wrote, referring to the man who, according to the lawsuit, would later hold the Isaksons at gunpoint.

On his last night, Bobby wrote, his father and uncle gave him a tour of Baghdad, and he went to dinner at the Baghdad Hotel. The following day, Bobby met his father at a bridge, and they rented a Chevrolet Suburban, and soon after "drove straight to the border," Bobby Isakson wrote.

That story makes no mention of being kidnapped at gunpoint and being forcibly removed from the airport compound -- and there's a reason for that, the boy's father said Saturday.

"I asked him not to put that in there, because I didn't think that was appropriate to include," Isakson said from Florida, where DRC is working on storm cleanup contracts after Hurricane Frances.

Isakson said he couldn't comment on the other matters in the case. He said the federal government is investigating some of the activities described in the lawsuit and has put him under a gag order.

In its lawsuit, DRC demands compensation for, among other things, money it spent when it "recruited, provisioned and leased over 50 ex-British Army Gurkha soldiers from the country of Nepal, transported these men to Iraq and leased them to Custer Battles" to provide security at the Baghdad airport for at least a year.

In a 1999 interview with the Register, Isakson described the Himalayan fighting men from the tiny country of Nepal as "the most fearless warriors on Earth."

"If I dropped in 30 Gurkhas, they would be fighting against 1,000 ... 2,000 ... 3,000 Angolans at a time, with no air support or munitions support. My Gurkhas said, 'We will do it,'" Isakson said then.

DRC is hardly alone in using Gurkhas. Defense and security companies worldwide regularly employ them.

In addition to Custer Battles the company, defendants in the DRC lawsuit include: company co-founders Scott Custer and Michael Battles; Lebanese businessman Muhammed Issam Abu Darwish; London-based Pakistani businessman Murtaza Lakhani; Secure Global Distribution and Mid East Leasing, described as being companies associated with Custer Battles and based in the Cayman Islands; and former Point Clear resident William D. "Pete" Baldwin.

DRC has a history of filing claims seeking additional payment on government jobs and suing sub-contractors and companies it has worked with. In some cases, government clients have accused DRC of padding its bills, for example, by claiming work that wasn't necessary or wasn't specified in a contract.

At this stage in the DRC lawsuit, the litigants are fighting over where the case should be tried -- in Baldwin County Circuit Court or in a federal court -- and not about the actual allegations and description of events by DRC.

In a court filing Wednesday, Custer Battles described Pete Baldwin as a "sham defendant" thrown in so that DRC could justify trying the case in Baldwin County. That Wednesday filing was made in U.S. District Court in Mobile, where Custer Battles had the case transferred, at least for the time being.

Pete Baldwin is a former employee of DRC who worked on the Baghdad airport contract before switching companies and joining Custer Battles, according to the suit.

In its Wednesday filing, Custer Battles states that Baldwin and Isakson remain business partners and have formed a new company called the American-Iraqi Solutions Group. That company's Web site at www.solutionsgroupinternational.net has biographies of Isakson and Baldwin and claims the AISG "team includes over 56,000 Iraqis, of which over 3,600 are full-time employees."

Baldwin no longer lives in Alabama, and may be in Iraq, according to court records.

Stories about Custer Battles in Fortune magazine, The New York Times and other major news sources generally focus on the company's beginnings in early 2002 and its unlikely but successful bid to provide security at the Baghdad airport.

"Barely funded with credit cards and money borrowed from a friend, their 9-month-old company had neither guns, accountants nor guards," reporters with the Wall Street Journal wrote last month. "It had to hire Nepalese Gurkhas to staff the project.

"Since then, the company has squabbled with corporate clients and Pentagon auditors. Four employees have been killed," the Journal reported, in what was largely a positive story about the company.

Nowhere in that story -- or in many other reports on the company found in newspaper databases -- is there any mention of Isakson or DRC.

Even the DRC lawsuit doesn't clearly define the Mobile company's role on the airport contract. It's unclear, for example, whether DRC was a subcontractor or a partner on the deal.

The lawsuit indicates, however, that DRC's role in Custer Battles' Baghdad airport work was substantial.

In its filings, Custer Battles doesn't deny working with DRC but states that all its business relations with the company occurred outside of Alabama and therefore shouldn't be litigated in an Alabama court.

In addition to providing 50 Gurkha soldiers, DRC claims to have:

Helped Custer Battles bid the initial contract to provide security at the airport.

Paid for and built a temporary camp used by more than 100 personnel.

Fed those people, cleaned their laundry, and provided all manner of support systems, including access to satellite television and other amenities.

Built a permanent camp at the airport, provided food and other services for 150 people and helped Custer Battles purchase goods from various Mideast countries.

After DRC completed this work, Custer Battles fired the company, according to the lawsuit.

One reason for this, according to DRC: Isakson told a Custer Battles official that he knew the company was purchasing goods and services from its offshore subsidiaries, then leasing or selling those goods to itself at inflated prices. Custer Battles, which was on a cost-plus contract, passed on the inflated costs to the U.S.-funded governing authority, the company contends.

In an attachment to its lawsuit, DRC asks Custer Battles and co-defendant Abu Darwish to produce all records related to the latter's January 2003 arrest at the Beirut airport. Abu Darwish, according to DRC, formed the Lebanese company called Custer Battles Levant that is co-owned by Custer and Battles.

As described in the lawsuit and in news stories in papers throughout the world, airport security personnel in Beirut arrested Abu Darwish after finding about $12 million worth of new Iraqi dinars in his luggage.

The New York Times described Abu Darwish as "the scion of a prominent Shiite family from southern Lebanon" who went to Baghdad after the war and formed a private security company.

Darwish told the Times and others that he had been authorized by the American-led authority to take the money to Lebanon, where he intended to purchase armored cars to be delivered to Baghdad.

That story was subsequently backed up by Paul Bremer, the top American official in Iraq at the time, who said that the funds were for an urgent purchase of armored vehicles and security equipment.

Still, hundreds of Iraqis protested outside Bremer's offices and accused appointed Iraqi officials of corruption. Also, government watchdogs have expressed doubt about Bremer's version, according to news reporters.

Although Abu Darwish is named as a defendant, DRC's court filing doesn't provide any relation between the Beirut flight and its claimed losses at the hands of Custer Battles.

magician

21 February 2005, 06:13

i can't find that story in the nyt... but there was no security detail. period. ask froggie...

I think that this particular debacle preceded my arrival.

It bears an interesting similarity to another convoy, however, where vehicles were escorted into Iraq, delivered their goods....in this particular case, as memory serves, it was a bunch of vehicles....many for the MX project, some for Bearing Point, and some for CB proper....

anyway, the convoy arrived, delivered its cargo, and then was ready to return to Kuwait. The delivery contract with the shipping company dictated that CB was to provide security personnel on both the inbound and the outbound, return trip.

Joe Morris decided that not only would CB not provide the Arab drivers any amenities, like lodging, or food, or water (I took chow and water out to them personally, at risk of my job, as they bunked down in the cabs of their trucks)....he decided that he would not allocate any security personnel for the return trip.

So...the trucks left, and sure enough, one of them was ambushed and seized by insurgents or highway robbers. As I recall hearing the tale around the conference table at the Mansour mansion, CB was billed a couple of hundred thousand dollars for the missing vehicle, as Joe Morris technically put the company in breach of contract when he refused to send any security to escort the vehicles back to Kuwait.

My understanding is, that bad decision, as well as the fact that all the company's Iraqi staff were in an uproar over the Thursday night parties that were held at the Mansour mansion, which included prostitutes procured by George Boustany, led to the firing of Joe Morris, even though he was a West Point classmate of Custer and Battles, and I believe, other guys who started showing up around the time.

That company was a disaster.

magician

21 February 2005, 06:19

from : http://www.occupationwatch.org/article.php?id=2973

Baghdad leaders reveal that coup plot duped MI6

Julie Flint explains how rumours of Saddam's overthrow caused British intelligence to miss vital information about Iraq's weapons programme

by*Julie Flint,*The Observer
February 8th, 2004

British intelligence took its eyes off Saddam Hussein's weapons programmes because it had been duped into believing a military coup would leave Sunni Muslims in power in Iraq.

Sources in the country say what they missed was a push to convert chemical and biological organisms into dry agents that could be hidden until pressure on the regime was lifted. 'From the second half of 2000, the focus of the British was not on finding weapons,' says a member of Iraq's Governing Council. 'They wanted to avoid war by making a coup. M16 went out of their way to make a coup.'

Once-exiled leaders now back in Baghdad say M16 and the CIA were led to believe that the head of the Mukhabarat, the most powerful of Iraq's three intelligence agencies, would lead a coup against Saddam that would safeguard Sunni power and keep Iraq's Shia majority on the political sidelines. The link men were two Lebanese from the Beirut suburb of Haret Hreik - Issam abu Darwish and Imad el Hajj.

'Abu Darwish and El Hajj went to Baghdad to contact and turn the head of the Mukhabarat, Tahir Jalil al Habbush,' says one source. 'They told M16 and the CIA they made contact with Habbush. M16 thought they could penetrate Saddam Hussein's intelligence at the highest level. They were stupid on Iraq.'

Days before American and British forces invaded Iraq, as Habbush remained loyal to the regime, El Hajj brokered an eleventh-hour attempt by Saddam to avert war without stepping down. Washington rejected the overture.

Habbush, a member of Saddam's Tikriti clan and sixteenth in the United States's pack of 55 most wanted Baathists, is still at large. Abu Darwish's son, Mohammed, now enjoys a lucrative contract as head of security at Baghdad airport.

M16 does not comment on its undercover activities. A Foreign Office spokesman says encouraging coups 'would be just one of a range of things they would be looking at', then added: 'It's nothing we would want to comment on.'

Iraqis who were cultivated by the intelligence community say interest in Saddam's weapons programmes only returned to centre stage in April 2002 - as President Bush began planning for war in Iraq after failing to capture Osama bin Laden in Afghanistan. M16's first port of call was the Iraqi National Accord, a London-based group funded by the CIA.

The INA's leader, Ayad Allawi, has acknowledged passing a number of reports to M16 'in the spring and summer of 2002' - among them, the claim that Saddam Hussein had battlefield WMD that could be fired in less than 45 minutes.

'M16 went on a fishing expedition for weapons,' says one of Allawi's colleagues. 'Their political bosses wanted justification for war. Ayad said M16 was knocking at his door all the time. They were clearly under pressure to get information.'

Iraqis say that what M16 missed in seeking information that would justify an invasion were efforts to convert VX and anthrax, Saddam's biological and chemical agents of choice, into stable, dry forms that could be concealed until Iraq's WMD capability was rebuilt and work on weaponisation could continue unhindered. (Before UN inspections destroyed it, Iraq's main chemical and biological weapons facility covered 25 sq km. Such establishments are not rebuilt overnight.) At the same time, Iraq's refusal to admit UN inspectors between December 1998 and November 2002, and the decision by some exile groups to encourage the overthrow of the regime in the framework of 'the war against terror', shut down past information flows about weapons activity.

Iraqis who interacted with Western governments are reluctant to talk publicly about weapons today. Accused for years of passing on self-serving and incorrect information, they do not want to be accused now of withholding information that might have undercut the argument that Iraq was, as Tony Blair put it, a 'present' threat.

'We wanted the Americans to remove Saddam,' says one. 'We had no interest in making an inspections regime work. The worse it got, the better it was for us.'

Speaking on condition of anonymity, however, one source says the expulsion of UN weapons inspectors in December 1998, and the establishment of a new inspection regime a year later, prompted feverish efforts to make and store VX salt and powdered anthrax - forms that are much safer to keep and easier to hide.

'Saddam was trying to dry anthrax and aerosolise it for delivery as a terrorist weapon,' he says, citing scientists who were involved in weapons programmes after UN inspectors were expelled in 1998. 'There were plans to disseminate it from crop-dusters and from canisters placed on top of high buildings in an American city.'

After 9/11, he adds: 'Saddam hid everything in anticipation of being hit.'

VX is a nerve agent so powerful that a single drop on the skin can result in death in 15 minutes. Once fired, it remains toxic for at least several days. In salt form, stabilised, it can be preserved for centuries. Anthrax, a biological agent, kills by causing extensive haemorrhaging. In dry, powdered form, it can be stored for decades.

Western experts doubt that Iraq succeeded in weaponising VX salt. 'The chemistry for VX is incredibly difficult,' says Ron Manley, a British inspector. 'Transferring it to a weapon and making it would be very difficult. But I can quite believe Iraq would have tried it because that's their nature. It was a "suck it and see" culture.'

But experts say Saddam's reported attempts to weaponise powdered anthrax confirm existing concerns.

'In 2002, 25 metric tons of aerosil were ordered for, allegedly, the Samarra Drug Industries - far in excess to what SDI could use,' says Richard Spertzel, head of Unscom's biological weapons section from 1994-99. 'SDI was involved in CW and BW activities in the 1980s. Aerosil is used by the pharmaceutical industry for inhalant medication, but can also be used in powdered BW products and in "dusty" chemical agents that will penetrate many protective suits. Where is it now?"

magician

21 February 2005, 06:53

from : http://www.axisoflogic.com/artman/publish/article_4767.shtml

Fisk: How the 19 billion 'dirty dinars' were quickly cleaned up, The Independent, January 21, 2004
By Robert Fisk in Beirut
Jan 22, 2004, 13:31

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When a private Lebanese jet arrived at Beirut International Airport packed with 19 billion new Iraqi dinars in banknotes (about £6.5m), the authorities immediately impounded the aircraft and arrested the three men aboard. It was a coup that seemed likely to earn the favour of the US, which has, for years, been threatening Lebanon with financial sanctions if it allows dirty money to cross its frontiers.

But an astonishing series of revelations - including a faxed message from the American-appointed Iraqi Ministry of Interior in Baghdad - suggests that the cash was being sent to Beirut with the full permission of US military authorities to be used to buy armoured vehicles for the American army from a British company. The three men aboard the cargo jet have told the Lebanese authorities that they were cleared to leave Iraq by American officials at the US base at Baghdad airport.

Nevertheless, the Lebanese state prosecutor, Adnan Addoum, arrested the three men and a Beirut exchange dealer, who is a relative of the former Lebanese president Amin Gemayel, and demanded an explanation from Iraq's Charge d'Affaires in Beirut, Tahseen Aina.

Mr Aina told Mr Addoum that the Iraqi Central Bank Governor was unaware of any such money transfer. So the four men, Mohamed Issam Abu Darwish - who stated openly that he was undertaking business operations on behalf of the US authorities in Iraq - Richard Jreisati, a former Phalangist militia official in Lebanon, Mazen Bsat, the owner of the plane, and Michel Mukattaf, who runs an exchange company in Lebanon, were all held by the authorities.

Then two days ago, the Iraqi Ministry of Interior - which is, in effect, run by American officials working for the US proconsul in Iraq, Paul Bremer - sent a fax to the Lebanese government stating that the money was being legally transferred for the "urgent purchase" from a British company of armoured vehicles and "sophisticated equipment intended to confront the dangerous security situation in Iraq".

All four men arrested by the Lebanese were freed, although the Beirut authorities have ordered the men on the plane to surrender their passports until they receive a letter from the Iraqi Ministry of Foreign Affairs explaining why so large an amount of money was being sent to Britain via Lebanon. The British company was not named.

In Baghdad, meanwhile, several hundred Iraqis protested in front of Bremer's offices to demand the resignation of the US-appointed interior minister, Nouri Badrane, accusing him of "corruption" for allowing 19 billion Iraqi dinars to be transferred out of the country.

The new notes have just replaced the old dinar notes that carried a portrait of Saddam Hussein's head. Those have been declared worthless by the occupation powers in Iraq.

In Iraq, however, there have been widespread claims from Western businessmen that the American authorities and the Iraqi officials who work for them - not the businessmen with whom they deal - are guilty of fraud. Several have told The Independent that Iraqi sub-contractors are being asked to give cash commissions of between 5 per cent and 10 per cent of any contract awarded to them to one of five Americans working in the city.

In Iran, meanwhile, the authorities have been trying to find out how up to 200 earth-moving vehicles have turned up for sale in southern Iranian cities. The vehicles appear to have been sent across the border from Iraq and were originally intended to be part of a rebuilding programme. Several non-governmental organisations in Iraq have complained that millions of dollars of aid intended to help rebuild the country have gone missing.

magician

21 February 2005, 07:05

from : http://www.occupationwatch.org/article.php?id=2613

Lebanese Seize Plane With Billions of Dinars
by*Neela Banerjee,*New York Times
January 17th, 2004

BAGHDAD, Iraq, Jan. 16 — Lebanese security officials in Beirut on Thursday seized a plane that had arrived from Baghdad carrying 19.5 billion in new Iraqi dinars, or about $12 million, said Lebanese journalists who spoke to the country's prosecutor general. The officials then detained three Lebanese businessmen for questioning on possible smuggling charges, the journalists said.

Separately, in the Shiite holy city of Karbala, a representative of Grand Ayatollah Ali al-Sistani told worshipers at Friday Prayers that protests would be held if the American-led administration of Iraq refused to hold direct elections as part of its effort to turn over governance of the country to Iraqis by July 1.

One of the men detained in Lebanon, Muhammad Issam Abu Darwish, the scion of a prominent Shiite family from southern Lebanon, told investigators that the money had come from the American-led Coalition Provisional Authority in Baghdad and was intended to buy armored cars. Mr. Darwish went to Iraq after the fall of Saddam Hussein and opened a private security company, the journalists said the prosecutor's office had told them.

The old dinars with Mr. Hussein's likeness were fully phased out on Thursday and replaced with new notes with pictures of Iraqi landmarks. But the value of the dinar has risen considerably against the dollar over the last month, going from 1,600 dinars to the dollar to about 1,200 now, opening ripe opportunities for currency speculation.

Many Iraqis believe that the value of the dinar is rising in large part because of such speculation as well as smuggling, because both activities take money out of circulation. With the dollar weaker, those Iraqis who work for the state and whose salaries are pegged to the dollar have seen their earnings in dinars fall, while prices of goods in dinars have stayed the same.

The Coalition Provisional Authority did not return calls seeking comment on the issue.

In Baghdad, the deputy commander of the Army's First Armored Division, which has oversight for much of the city, told The Associated Press that there would be fewer patrols by American soldiers and fewer garrisons after his unit turned over security for the city to a new unit arriving over the next few months.

Attacks on Americans and Iraqis still shake Baghdad daily, however. A 15-year-old Iraqi boy who was watching American soldiers and Iraqi policemen trying to defuse a roadside bomb was killed by shrapnel when the device exploded. Five others were wounded, two seriously. The Iraqi police told Agence France-Presse that the bomb had been detonated with a remote-control device.

In Karbala, Sheik Abdel Mahdi al-Karbalai threatened to unleash a campaign against the Americans if they continue to resist direct elections. "In the coming days and months, we're going to see protests and strikes and civil disobedience, and perhaps confrontations with the occupying force," he said. Protests have already spread through the Shiite south of Iraq, with 30,000 demonstrating in Basra on Thursday.

In Beirut, the prosecutor general, Adnan Adoum, who insisted on speaking only to local journalists, said that the flight carrying the new dinars had not been secret and that the money had not been hidden in the small twin-engine plane. But the shipment lacked proper documentation. Mr. Adoum has asked the Iraqi chargé d'affaires in Beirut to find out from the Coalition Provisional Authority if the money was in fact intended for purchasing armored cars.

The impounded plane was piloted by Mazen Bsat, a prominent Beirut businessman who owns a chain of pharmacies and a company that leases planes for charter flights. With him was Mr. Darwish and Richard Jreissati, who held the portfolio for foreign affairs of the Christian right-wing Lebanese Forces Militia during the country's civil war. Waiting to meet the plane was Michel Mkattaf, who owns a foreign exchange business and is married to the only daughter of a former Lebanese president, Amin Geymael.

Mr. Bsat, the pilot, was questioned and released Thursday evening. But the other three men remain in custody. Under Lebanese law, they can be held for up to four days for questioning, after which they must be charged with a crime or released.

magician

21 February 2005, 13:14

from : http://www.altpressonline.com/modules.php?name=News&file=print&sid=309

War Profiteering and “The War on Terror”
Date: Friday, December 03 @ 13:09:12 EST
Topic: International News

By Grady Hawkins

The so-called War on Terror is hardly a war at all; it’s a going concern. And business is very, very good. The now well-known military-industrial complex, made infamous in President Dwight Eisenhower’s farewell address, is closing deals and collecting contracts for jobs all over the globe. Mercenaries have morphed themselves into respectable button-down corporations, and the world’s oldest profession (or second oldest??) is cashing in as well.

Lockheed Martin, based in Bethesda, Maryland, was awarded military contracts for fiscal 2003 totaling more than 69 billion dollars. Its campaign contributions in 2002 were more than nine million dollars, so the return on the initial investment is more than reasonable. That year, Lockheed Martin CEO Vance Coffman collected a hefty 25 million dollar salary. Lockheed Martin manufactures F-16 and F/A-22 jet fighters, the world-famous C-130 Hercules transport plane, and the lethal Hellfire and Javelin missiles. Hellfire missiles have been used to whack terrorists from the Gaza Strip to the Khyber Pass and beyond.

Next in line and always a contender, we have Boeing. Now headquartered in Chicago, this giant aircraft maker generated 60 billion in government business in 2003. But Boeing was a bit savvier than Lockheed Martin; it only had to shell out four million dollars in campaign contributions. Phillip Condit, the CEO, collected a measly four million in salary. The stockholders must be pleased, as the number for both companies seem to wash each other out. Boeing manufacturers the F-15, C-17 transport plane, the Apache Helicopter, and numerous brands of “smart” bombs, that somehow managed to wipe out mostly the wrong targets.

But to be fair, these two blue-chip name companies, in the market for decades, are the 800-pound gorillas of arms manufacturing global corporations. They have produced some of the most famous combat aircraft of all time, and they sell to clients all over the globe. They proudly put their cost-over runs out in the open for everyone to see, and war profiteering to them has been propagandized into nothing more than the cost of R & D and doing business the American Way. Milo Minderbinder would be proud.

These companies didn’t necessarily have to ride the hysterics, uncertainty, and fear of post 9/11 to make millions. But there is one company that did.

Custer Battles

I am not making this up. The name of the company IS Custer Battles. Two Army veterans, Scott Custer and Michael Battles, established this business in October 2001. These two thirty-something entrepreneurs had little experience in private security. But Mike Battles had political experience, having been a former Republican Congressional candidate in Rhode Island. He and Custer set up shop in McClean, Virginia, and then headed to Washington and the Pentagon to make their fortune. They were lucky or good or connected, because in June 2003, they won a 16.5 million dollar deal to guard Baghdad International Airport. Having no troops of their own, they ended up by hiring Nepalese mercenaries, the guys with the knives, who had served in the British Army’s Gurkha Regiments. Using folks from Nepal has become popular. At $1,000 U.S. a month, they are paid less, even poorly, than the average merc. But take look at the map. Nepal is in the middle of the Himalayas, where jobs are few and not even Wal-Mart has a foothold. For some soldier-of-fortune wannabees, this could be the ticket to sea-level. It was the first major contract for the security neophytes. Since then, Custer Battles has generated more than $100 million in deals. One contract calls for that company to train the newly formed and since unraveling Iraqi Army, but then EVERYONE has a contract to train the Iraqi Army. Another contract has the company protecting the new currency in Iraq.

Custer Battles’ Last Stand??

The company is now charged with over charging the Federales by tens of millions of dollars. Made public on October 8, a lawsuit was filed under the False Claims Act. The U.S. Air Force alleges that Custer Battles marked up invoices by as much as 162 percent. The Pentagon has banned the company from any further government contracts under the matter is resolved.

Custer Battles Calls the Charges “Baseless”

The above-mentioned currency protection amounts to little more than well-armed payroll guards, but it can get tricky. Last December, British-based Global Risk Strategies, a well-known private military contractor, was contracted to oversee a portion of the changeover of Iraq’s currency from that of the former regime. On December 1, Fiji mercenaries (that’s right, I said Fiji mercenaries) hired by Global Risk randomly opened fire after a currency changeover convoy in their charge came under attack. Ten Iraqi civilians were killed, and dozens were wounded. Fijian mercenaries are also popular to hire, as they contract out at the aforementioned $1,000 U.S. a month. I was unaware that Fiji had any military tradition whatsoever.

While the Fijians’ military skills may or may not be in question, their skill as negotiators certainly is. As mercenaries go, they are definitely bottom feeders. A thousand dollars a month is less that chicken feed. At the top of the mercenary heap are the British and the South Africans. No self-respecting ex-Special Air Service (SAS) operative would strap on a weapon for less than a $1,000 U.S. A DAY. Not to be outdone, American firms are working hard to close the gap. Black Water Corp., based in North Carolina, is staffed by ex-U.S. Special Forces, SEALs, and Army Rangers. These fellows also know how the Pentagon works when it comes to payroll and potential risk. Convoy escort duty in a nasty place such as Fallujah can get downright dangerous. Black Water is paying its troops as much a $1,500 U.S. a day. Of course, Black Water bills Uncle Sam and the American taxpayer. Black Water also has hired 60 Chilean ex-commandos. But salaries for them remain unclear.

The amount of money up for bid is staggering. The details are hard to come by, but the latest estimate is that, of the last $18.6 billion dollars that the Bush administration has shelled out for Iraq reconstruction, 25 percent will be used for to pay security companies. No wonder the Iraqi mercenary gold rush was on. David Claridge, managing director of the Risk Advisory Group, has said that annual revenue has increased for just the Brits to more than $1.7 billion U.S. Risk Advisory Group, a company that advises governments and leading businesses on security matters, is one of many British private military contractors cashing in on the Iraq reconstruction bonanza.

The contracts have gotten so lucrative that many soldiers on both sides of the Atlantic are taking stock. Many have left the service (before the stop loss orders went into effect) and have returned to Iraq as private employees. The risks are indeed the same, but the pay is much better. Of course, you can’t get paid if you are dead.

Many private soldiers take the money and run; there is no contractual obligation for them to put themselves in harm’s way. The U.S. taxpayer is left to pay the bill.

magician

21 February 2005, 13:18

from : http://www.activelink.ie/ce/active.php?id=1829

CUSTER BATTLES: At the end of September, the Defense Department suspended Custer Battles (the name comes from the company's two principle founders - Michael Battles and Scott Custer) and 13 associated individuals and affiliated corporations from all federal contracts for fraudulent billing practices involving the use of sham corporations set up in Lebanon and the Cayman Islands. The CPA caught the company after it left a spreadsheet behind at a meeting with CPA employees. The spreadsheet revealed that the company had marked up certain expenses associated with a currency exchange contract by 162 percent.

magician

21 February 2005, 13:32

from : http://www.projo.com/news/content/projo_20050217_custer17.258d79b.html

R.I. firm dogged by charges over its work in Iraq

A network television news report accusing Custer Battles of mistreating Iraqi civilains is only the latest issue to surface regarding the company's performance in Iraq.

01:00 AM EST on Thursday, February 17, 2005

BY MICHAEL CORKERY
Journal Staff Writer

A Rhode Island company that was awarded millions of dollars worth of contracts in Iraq is being accused by four former employees of committing violence "the American population wouldn't stand for," according to a network television news report.

The former employees of Custer Battles, a private security firm based in Middletown, told NBC News that they witnessed fellow employees shoot at unarmed Iraqi civilians and possibly crush others with a truck.

Three of the employees told the network that they quit Custer Battles because they were upset by the alleged incidents. The men could not be reached for comment yesterday.

Custer Battles denied the allegations and yesterday released company documents which it said raise questions about the former workers' credibility and motives for their allegations.

The company provided an e-mail from one of the four employees, stating he would "dis-acknowledge" the accusations if he was paid money he thought the company owed him.

Members of Congress have criticized the use of heavily armed private security firms, such as Custer Battles, which operate under less scrutiny than the U.S. military but engage in similar combat activities.

Sen. Jack Reed said the NBC News report underscores the lack of oversight of private security firms and called for the Pentagon to investigate the allegations against Custer Battles.

"The report of indiscriminate violence by private contractors in Iraq is deeply disturbing," Reed said in a statement yesterday.

It's been a tough week for Custer Battles, which was co-founded by a onetime Rhode Island congressional candidate, West Point graduate and former CIA employee, Michael J. Battles.

On Monday, before a Democratic congressional committee, the company found itself at the center of a controversy over how U.S.-occupation forces in post-invasion Iraq disbursed and accounted for hundreds of millions of dollars.

The hearing came just two weeks after a special inspector general's audit of the Coalition Provisional Authority -- the agency that ran Iraq immediately after the fall of Saddam Husein's regime -- found that the agency had failed to provide proper oversight of ministry spending, issued unauthorized contracts and lost track of $9 billion in Iraqi funds.

At Monday's hearing, Franklin Willis, a former official with the CPA, told the Senate Democratic Policy Commmittee that Iraq after the fall of Saddam was "like the Wild West -- awash in $100 bills."

He described how, during one point in the summer of 2003, Custer Battles was paid with $2 million in fresh U.S. bills, stuffed into a gunnysack.

Also on Monday, the committee heard testimony from a lawyer representing two self-described whistle blowers, who are suing the company for fraud. The Pentagon has barred the company from government contracts, pending an investigation. The Justice Department declined to prosecute the company.

Shortly after the 2003 invasion of Iraq, Custer Battles was hired to guard the civilian side of the Baghdad airport and escort supply convoys along hazardous highways, among other duties.

Battles said the suit was brought by an employee who was fired in 2003 and a former subcontractor who was rebuffed in his effort to become an equity partner in Custer Battles.

The NBC News report, which aired Tuesday night, quotes four other former Custer Battles employees: Bill Craun, Jim Errante, Ernest Colling and Will Hough.

"What we saw, I know the American population wouldn't stand for," Craun told NBC News.

The men, who are identified as ex-soldiers and ex-Marines, told NBC News that on Nov. 8 they were working for Custer Battles, escorting a convoy of equipment bound for the Iraqi Army.

The men said that a Kurdish employee, who was working for a Custer Battles sub-contractor, fired into a passenger car to clear a traffic jam.

In another incident that day, Colling said that the rear gunner in his vehicle shot at a teenager passing along on a road. "Unarmed, walking kids," said Colling.

Craun told NBC News that later a Custer Battles pickup truck smashed into and rolled over the back of a sedan full of Iraqis.

According to the news report, Craun said, "I could see children sitting in the back seat of that car with their eyes looking up at the axle as it came down and pulverized the back."

The men told NBC News News they assume that the civilians were hurt in all three incidents, but they were not sure.

Craun and Colling said that they quit the company immediately after these incidents, according to NBC News. Errante said he quit after "witnessing wild, indiscriminate shootings on two other missions," NBC News reported.

Battles said yesterday, "we categorically deny these allegations." He said the company investigated the allegations, with the help of the law firm Edwards & Angell, which interviewed company employees in Iraq.

In a statement, a company official said there's no corroborating evidence to support the allegations, which they said they first learned about in late December when contacted by NBC News.

"NBC and Custer Battles investigations have unearthed no witnesses, no family members, no hospital or police records. The reason for this is that these incidents simply did not occur," the company said.

According to the statement, "these four individuals were disgruntled for various reasons, and have been attempting to damage the company by making false accusations."

"Specifically, Hough was terminated after several incidents of incompetence, negligence and threatening a Custer Battles manager with bodily harm.

"Craun, Colling and Errante voluntarily resigned after only a few days of work, and have been disputing their final pay resolution with the company over having to pay back their cash and travel advances.

"Upon learning that he would have to reimburse the company for cash and travel advances, Craun told other Custer Battles staff that he would call the company 'baby killers' to the press if they did not pay him more."

Custer Battles provided to the Journal a Nov. 29 e-mail from Colling to company co-founder Scott Custer. The e-mail states: "I prefer not to say why I left. I felt that it wasn't right."

The e-mail continues: "I just want to get paid for the time I was there nothing more. . . . If you do that, I will give a statement that will dis-acknowledge what Will Hough and others have to say."

Custer Battles also provided a photograph of a car that company officials say was the one damaged during the Nov. 8 convoy escort mission. From the picture, it's difficult to see the extent of damage to the rear of the car. But the passenger compartment does not appear to be totally damaged.

In a company e-mail, also provided to the Journal, Tim Teets, who was the Custer Battles "team leader" on the Nov. 8 mission, acknowledged that the car "was pushed out of the way."

Teets said an explosive device had gone off behind the convoy as it was traveling on a highway ramp crowded with cars.

All of the cars, except one, were moving out of the way to make room for the convoy. Teets said the lead Custer Battles truck pushed that car to the side. "The speed of the push was no more than 5 miles per hour. At no time did our company vehicle run over this vehicle," Teets wrote.

Battles said the company is still working in Iraq guarding convoys and doing other security work.

"We understand that Iraq is a very dangerous place to operate," Michael Battles said yesterday. "We also know that the U.S. involvement in Iraq has become a very controversial topic and it is used to further groups' agendas.

"We, as good corporate citizens, will continue to work toward the aim of reconstructing Iraq."

Digital Extra: See how the Middletown security firm of Custer Battles describes its services, at:

http://www.custerbattles.com

magician

21 February 2005, 13:51

from : http://www.zetatalk.com/index/signoc10.htm

Signs of the Times #1168

Contractor Accused of Fraud in Iraq [Oct 9]
‘One of the U.S. security companies operating in Iraq has been suspended from doing business with the U.S. government after being accused of overbilling millions of dollars through a series of sham companies. Security company Custer Battles sent fake bills to the U.S.-financed Coalition Provisional Authority, which ran Iraq under American occupation, according to a U.S. Air Force memo obtained by the Los Angeles Times. The company, which provided security at the Baghdad airport, is also the target of a suit unsealed yesterday accusing it of systematically bilking U.S. taxpayers. The company is also under investigation by the FBI and the Pentagon Inspector General's Defense Criminal Investigative Services. The company's founders are Scott Custer, a former Army Ranger and defense consultant, and former CIA officer Michael Battles, who ran for Congress in Rhode Island in 2002 and was defeated in the Republican primary. The Federal Election Commission fined Battles for misrepresenting campaign contributions. Battles is a Fox News Channel commentator. Several other former Republican officials have come under investigation in connection with other Iraq contracts. The Pentagon's inspector general has asked the FBI to look into a deputy undersecretary of defense in connection with a police radio contract. A former top Republican official in the Transportation Department was investigated in connection with an airport contract, U.S. officials have said. Custer Battles was a newly formed company with no experience in the security industry when it landed one of the first contracts issued in Iraq in the spring of 2003 to secure the airport. The no-bid contract was worth $16 million when it was awarded in the chaos after the fall of Saddam Hussein.’ [Note: Republicans all.]

magician

5 March 2005, 01:33

CusterBattles is reaping the whirlwind.

from: http://biz.yahoo.com/law/050304/a9b875664d6d13df15d108085092e6f9_1.html?printer=1

Law.com
How a Contractor Cashed In on Iraq
Friday March 4, 3:00 am ET
Jason McLure, Legal Times

A $33,000 food order in Mosul was billed to the U.S.-led interim government of Iraq at $432,000. Electricity that cost $74,000 was invoiced at $400,000. Even $10 kettles got a 400 percent markup.

Documents unearthed as part of a whistleblower suit against Fairfax, Va.'s Custer Battles reveal for the first time the extent to which the defense contractor is accused of gouging the Coalition Provisional Authority, which governed Iraq following the U.S. invasion of the country in 2003.

Among those documents is a spreadsheet that appears to show the company billing the government nearly $10 million for dozens of items, including food, vehicles, and cooking pots. The total cost to Custer Battles, according to the spreadsheet, was less than $4 million -- a profit margin of 150 percent, far higher than the 25 percent margin allowed under its contract.

For critics of the Bush administration's handling of postwar Iraq, Custer Battles has become something of a symbol of contractor excess during the 14-month period that the Coalition Provisional Authority governed Iraq. The company was able to secure tens of millions of dollars' worth of security and logistical contracts from the CPA -- despite the fact that it didn't even exist until just months before the invasion of Iraq.

Last fall, Custer Battles was suspended from government contracting after Pentagon investigators documented evidence indicating that the company had defrauded the CPA by inflating its costs. The scheme, according to the investigation, involved a series of "sham" companies that were used to produce false invoices and hide the actual costs of items.

Now, much of that evidence is coming to light through the whistleblower suit in the U.S. District Court for the Eastern District of Virginia. Legal Times obtained access to the spreadsheet and hundreds of other previously confidential documents from the government's investigation of Custer Battles. The spreadsheet and other documents were provided to Legal Times by the whistleblowers' lawyers, who obtained the material from Custer Battles as part of the discovery process.

A spokeswoman for Custer Battles declined to comment for this article. But a lawyer representing the company in the whistleblower suit, John Boese of the D.C. office of Fried, Frank, Harris, Shriver & Jacobson, issued a response to a series of detailed questions referencing the documents. In an e-mailed statement, he said that the issues raised "do not demonstrate any type of fraud or wrong-doing by the company or any of its employees, and the company vigorously denies any such conduct or allegations."

In the statement, Boese also maintains that the documents were subject to a court-issued protective order, and thus "we do not believe it is appropriate to comment on the contents of confidential documents."

Alan Grayson, a lawyer for the plaintiffs, disputes that assessment, saying that the defense "had withdrawn the [confidential] designation" on the documents reviewed by Legal Times.

A TENSE MEETING

Among the documents in the files is an account of a tense Oct. 18, 2003, meeting in Baghdad's Green Zone between Custer Battles' two principals -- Scott Custer and Michael Battles -- and CPA officials.

The tension arose over questions about Custer Battles' performance and billing practices in a contract to provide logistical support for U.S. efforts to distribute the new Iraqi currency.

One attendee at that October meeting was Jeffrey Ottenbreit, a consultant for BearingPoint, a company contracted to manage the currency-distribution project.

According to a signed statement Ottenbreit provided to the Defense Criminal Investigative Service, the meeting between Battles, Custer, and CPA officials was combative. "At one point during the contentious discussion," Ottenbreit states, "both [Custer and Battles] stood from their chairs and threatened to walk out of the room as well as pull their company from the project." (Through a BearingPoint spokesman, Ottenbreit declined comment.)

If CPA officials were suspicious of Custer Battles' billings before the meeting, they were even more so after the pair left.

According to an Air Force memo supporting the company's suspension last fall from government contracting, after the meeting "Battles left a spreadsheet labeled 'Iraq Currency Exchange Logistics Support Requirements,' which was discovered by CPA personnel."

The CPA officials couldn't have been pleased with the numbers they found.

Under its contract, Custer Battles was to file invoices with the government for its costs. It was then eligible to be reimbursed for those costs and could receive an additional 25 percent on top of that as profit. The spreadsheet indicated that Custer Battles, by inflating its costs, was reaping a profit roughly six times the allowable amount.

The day after the spreadsheet was discovered, a Sunday, the Defense Department's inspector general's office informed Custer Battles that it would be conducting a review of the company's only other contract with the CPA in Iraq, a $16.8 million project to provide security for Baghdad's airport.

CONTRACTOR AND CANDIDATE

Scott Custer and Michael Battles, both in their 30s at the outset of the invasion of Iraq, had served together in the U.S. Army.

Custer is a former Army Ranger who had worked for Arlington, Va.-based defense contractor Science Applications International Corp. Battles ran unsuccessfully for Congress as a Republican in Rhode Island in 2002 and, according to the record of Custer's interview with the Defense Criminal Investigative Service, is a former Central Intelligence Agency case officer who was -- according to Custer -- "very active in the Republican Party and speaks to individuals he knows at the White House almost daily."

In the fall of 2002, the two founded Custer Battles as a security firm. Within months, President George W. Bush would order U.S. troops into Iraq. Custer Battles was among the first contractors into Baghdad after the fall of Saddam Hussein and, by the end of June 2003, had managed to win the contract to provide security for Baghdad's airport, a contract Custer told investigators was the first time the company had provided actual security for a site.

Two months later, the company bid on and won the contract to support Iraq's currency distribution. The value of the contract, including allowable profit, would eventually be worth approximately $20 million.

To maximize profit from that $20 million, the Air Force suspension memo says, Custer Battles employed a group of "sham companies" to create bogus invoices that vastly overstated the cost of items.

In an interview with government investigators, Scott Custer acknowledged that Custer Battles set up companies in the Cayman Islands named Secure Global Distribution and Mid-East Leasing.

A third company, MT Holdings -- named after the initials of two Custer Battles employees -- was also set up in the Caymans as a holding company for Secure Global and Mid-East Leasing. The offshore companies, Custer told investigators, were designed to limit Custer Battles' liability in the event that its employees were killed or injured in Iraq and to maintain Custer Battles' image as a security contractor by providing a different brand identity for the company when it was providing logistical work.

But several documents -- the company's suspension memorandum from the Air Force, the signed statement from BearingPoint's Ottenbreit, an internal report written in February 2004 by Custer Battles manager Peter Miskovich, and the statements of the two whistleblowers in the current suit -- suggest that Mid-East Leasing and Secure Global were just two of several companies set up to inflate the company's equipment and supply costs.

Custer told investigators he had set up the companies on the advice of Marc Stanislawczyk, an attorney in the D.C. office of Arnold & Porter. Stanislawczyk declined to comment for this article. Stanislawczyk left Arnold & Porter last month to work in the Wilmington, Del., office of pharmaceuticals firm AstraZeneca.

One way the offshore companies were used was in the project involving Iraqi currency. For its work on the project, Custer Battles was advanced the first $3 million of the contract on the condition that it submit invoices reflecting expenditures as they were made.

In reviewing invoices from suppliers submitted by Custer Battles during the fall of 2003, BearingPoint's Ottenbreit told investigators, one receipt in particular stood out.

It was a bill to Custer Battles from Secure Global for leases on trucks, buses and forklifts. That bill showed Secure Global charging Custer Battles rates of $12,500 per month for a single five-ton truck. (The spreadsheet obtained by CPA officials indicates that Custer Battles' actual cost for a five-ton truck was $5,000 per month.)

Ottenbreit also took notice of the fact that Secure Global listed its address as a post office box in Oakton, Va. Ottenbreit said he was unable to locate any reference to the company in an online search. He then searched for the name of the person from Secure Global who signed the invoice for the trucks, buses and forklifts -- and found that she was an employee of Custer Battles.

According to the Air Force suspension letter, Custer Battles created invoices totaling at least $8.5 million in the name of its companies based in Lebanon and the Caribbean. That conclusion is supported by Miskovich's internal report, Ottenbreit's statement to investigators, and court filings of the whistleblowers.

The Air Force noted in its suspension memo last fall that "[Custer Battles] purchased cabins, trucks, and equipment and created false leases between CB and the sham companies, making it appear that the sham companies were leasing the goods to the CPA through CB. The scheme allowed CB to lease the goods to the CPA at prices exceeding the original cost of the goods."

In his interview with government investigators in January 2004, Custer denied inflating supply costs or using the offshore companies to overbill the CPA. When confronted with the invoice from Secure Global, Custer acknowledged that the name on it was that of a woman who had been his personal secretary at Custer Battles.

DOJ DECISIONS

The whistleblower suit that brought the documents to light is being heard by federal Judge T.S. Ellis III in Alexandria, Va. It was filed by a former Custer Battles manager, William Baldwin, and a subcontractor, Robert Isakson, who accuse the company of defrauding the government.

Under the False Claims Act, whistleblowers can file a qui tam suit against a company for bilking the United States. The Justice Department can then choose to join the suit; if successful, the government can collect three times the amount of damages it sustains, plus penalties and fees. The plaintiffs are also eligible for 15 percent to 30 percent of the claim.

In October, the DOJ, without explanation, declined to join the Custer Battles suit, but gave the whistleblowers permission to proceed in the government's name. A Justice Department spokesman declined comment on the case.

Grayson, the whistleblowers' attorney and a partner in McLean, Va.'s Grayson & Kubli, says that the Justice Department declined to join the suit because of uncertainty over whether the CPA was a part of the federal government.

The court is currently considering that question, and Ellis has asked the DOJ to file a brief stating the government's view of the question. On Feb. 25, the Justice Department told the court it would file a brief by April 1.

One senior Pentagon lawyer told Legal Times that a number of other suits have been filed that will turn on this exact question.

Should the court decide that the False Claims Act does not apply to CPA contracts in the Custer Battles case, procurement attorneys say it's unclear how violations of those contracts can be prosecuted in other cases.

"The government has played this both ways," says Steven Schooner, a government contracts expert at George Washington University Law School. "When it's been to the government's advantage to say the CPA was a federal agency, they've said it was a federal agency. When it wasn't, they've said it wasn't."

magician

25 March 2005, 12:21

from : http://rawstory.com/news/2005/index.php?p=72

Advance: Senior coalition official’s testimony on paying contractors with bags of cash

2/14/2005 @ 8:57 am EST

Advance: Testimony of senior coalition official on paying with cash

RAW STORY

The following is the statement of Franklin K. Willis, a senior official in L. Paul Bremer’s Coalition Provisional Authority government in Iraq and senior official at the State and Transportation departments in the 1980s under President Ronald Reagan. Willis will testify during Democrats’ Senate Policy Committee hearings today that Iraqi contractors were paid with bags of cash.

Among other things, he will say that US officials in postwar Iraq paid a Rhode Island contractor by stuffing $2 million worth of crisp bills into a sack and routinely made cash payments around Baghdad from a pickup truck.

STATEMENT of FRANKLIN K. WILLIS before the SENATE DEMOCRATIC POLICY COMMITTEE FEBRUARY 14, 2005

It is a pleasure to appear before the committee this morning to explore the subject of waste and inefficiency in activities of the Coalition Provisional Authority (CPA) in Iraq. The CPA was established by resolution of the United Nations to govern Iraq in the immediate post-war period before sovereignty was returned to the Iraqi people. The CPA governed Iraq for a little over a year, terminating its activities on June 30th last year. Although established by international act, the CPA was largely the creation of and run by the United States.

My name is Franklin Willis. I am the Executive Vice President and Chief Operating Officer of the Lynn Health Science Institute, which is located in Oklahoma City and Colorado Springs and conducts clinical trials for the pharmaceutical industry. I have been employed there for almost eight years. From 1985 to 1997 I worked for a hazardous waste incineration company, Rollins Environmental Services, where I held a number of senior level positions. From 1969 until 1981 I worked at the Legal Advisorâ€™s office in the Department of State. Among the areas I worked in were transportation, anti-terrorism, negotiation of boundary and fisheries agreements with Cuba, Panama Canal negotiations, shipping and aviation agreements with China and Middle East Peace talks. I helped write and signed for the United States the most widely supported treaty against terrorist attacks on civil aviation, The Convention for the Suppression of Unlawful Acts Against Civil Aviation, to which most countries of the world are now party.

I finished my government career as Deputy Assistant Secretary of Transportation For Policy and International Affairs in the Department of Transportation from 1981 to 1983, and then as Deputy Assistant Secretary of State for Transportation and Telecommunications in the Department of State from 1983 to 1985.

In June of 2003 I was asked if I could take a leave of absence from the Lynn Institute to serve in the CPA as Deputy Senior Advisor for Iraqâ€™s Ministry of Transportation and Communications, and as Senior Aviation Official. I arrived in Iraq in the middle of July, 2003 and remained until December 10, 2003. I continued to serve in a consulting role to our transportation team from the United States in the first half of 2004.

Having many years of senior level business and government experience, as well as a senior position in the CPA, I believe I have reasonable perspective and judgment about the performance of the United States as the sovereign government (through the CPA) of Iraq. It is important to note at the outset of course that the environment was unique: we were â€œadvisorsâ€? for ministries but we held the purse strings. The ministries had been stripped of their entire top and many mid-level officials because of the de-Baathification decision (all Baathists were removed from their positions). During the summer of 2003 in large part low-level officials were suddenly thrust into significant positions of responsibility with no experience whatsoever. And for some 25 years of Saddamâ€™s reign, decision-making had been avoided in any event, all such things being passed upward. So there was a generation of people who had been trained to avoid responsibility now occupying mid- and high-level administrative positions. Even when ministers were appointed by Iraqâ€™s Governing Council in late September, with greater experience, their support staff reflected these features.

A second element of this unique situation was lack of security. It was worrisome initially when I was in Iraq, and clearly worsened for CPA civilians over time. As a consequence of our decision to disband the Iraqi army, security was simply a black holeâ€”filled, in part, by private security forces at scandalous cost, or by our armed forces. But there were no Iraqi security forces to figure out what the Iraqis were doing. Lack of security, restricted meetings, difficulty of communication, made every task longer and slowerâ€”in short, severely inhibited out ability to do our job. The difficulty was compounded by the fact that we had to meet face-to-face with our counterparts to accomplish anything because the telecommunications system was for all practical purposes inoperable. A small number of Iraqi officials obtained phones from the MCI system that CPA officials used, but this was limited to the Baghdad area and it was minimal in any event. To call anyone, Iraqi or American, for example in the Port of Um Qsr from Baghdad was impossible.

A third featureâ€”truly uniqueâ€”was that there was no banking system, but a surprising amount of Iraqi dinars or American dollars in circulation. The American dollars, often crisp, new $100 bills, were found throughout Iraq in large amounts by our armed forces as we completed sweeps across the country following the war. This money was stashed in the basement of CPA headquarters and released from time to time to pay contractors for services performed and to pay Iraqi salaries. It was considered Development Fund for Iraq (DFI) money, and pursuant to UN resolution was to be devoted to Iraqi restoration. While I do not have personal knowledge, I have been advised that upwards of $3 billion in cash was in the vault.

In sum: inexperienced officials, fear of decision-making, lack of communications, minimal security, no banks, and lots of money to spread around. This chaos I have referred to as a â€œWild West.â€? I urge the Committee to take account of the environment in which we functioned in its analysis of what went wrong and what can be done in the future. I have never in my life experienced the demands put upon usâ€”15 or more hours working virtually every dayâ€”and the roadblocks to achieve even minor goals.

Nonetheless, was waste of taxpayerâ€™s and Iraqi DFI dollars what it had to be? Were inefficiencies at a high level inevitably mandated by the circumstances? I would give a firm â€œNoâ€? to both questions, and would like to provide the Committee with a case history, the CusterBattles case, which, while anecdotal, reflects a general pattern of waste and inefficiencies that could have been avoided.

In late June 2003, a decision was made to open Baghdad International Airport to limited scheduled civilian aircraft service beginning July 15. A USAID contract had been awarded earlier to a company named Skylink to manage the airport. It is unclear to me why Skylink, the airport manager, was not made responsible, under the AID contract, for providing, by itself or through subcontracting, security for civilians using the new service. Nonetheless, a decision was taken to issue an immediate Request for Proposal (RFP) allowing respondents some three or four days to submit their proposal, and the RFP mandated that respondents would be required to have their security team in place by July 15. Several respondents requested more information as to scope, one established service said it could be ready within six weeks but that July 15 was an impossible deadline, and CusterBattles said it could be ready by July15.

It is not clear to me whether CusterBattles existed prior to this RFP, or had any experience providing security services anywhere, but since they said they would be ready by July 15, they were picked. They were paid $2 million at the end of June and $2 million more at the end of July out of DFI funds from the vault in the basement under the $16 million contract (originally $13 million) they were awarded. I arrived in mid-July and by that time the decision to open Baghdad International had been rescinded for security reasons. There was a small amount of charter traffic, but Baghdad International was never opened for scheduled civilian traffic in the life of the CPA.

Thus the reason for the CusterBattles contract had disappeared, and their presence required searching for a new scope. The contract had not been definitized and consisted solely of their proposal.

I was asked originally to complete the contract work with CusterBattles, among other duties, but was quickly yanked to Amman, Jordan, and began working on the selection process for cellular phone service in Iraq, an arduous process with a mid-September deadline. I was also sent to Tampa for a major conference to evaluate our infrastructure policies in Iraq. On my return in late August I was again to turn to completing the contract with CusterBattles but discovered the work had already been doneâ€”by stapling their proposal to the standard one-page signature sheet usually attached to a definitized contract!

Being simply a proposal with vague terms and loose offerings, CusterBattles interpreted their obligations solely by themselves and continued collecting on the $16 million. They refused to coordinate with Skylink, the airport manager, and became an entity unto themselves at the airport. Having control of civilian entry to the airport by operating the security checkpoint, CusterBattles could facilitate entry to the airport, and used their power to leverage other business interests. On an inspection in early November, I discovered they had beds for more than 150 Filipinos crammed into a few offices in the airportâ€™s Terminal D, which I thought was largely empty. I believe the Filipinos were for a CusterBattles catering service. On the same inspection we discovered an area where dog kennels had been built for another of their businesses. And while they claimed their requirements were for 55 guards under the Baghdad Airport security contract, their â€œvillageâ€? out on the airport grounds (which had been authorized to fulfill the contract) had a capacity for more than 150 people.

On learning in late August that the CusterBattles contract had been â€œcompleted,â€? we assigned a lawyer in the transportation group to definitize the contract post facto, Bill Triplett, who arrived in late September. Triplett narrowly escaped death in the late October attack on the Al Rasheed Hotel, and he returned to the United States, so contract definitization was once again postponed.

In early November another member of our group, Ed McVaney, was assigned to definitize the contract and determine what we were getting for our $16 million. By that time I think CusterBattles concluded they could outlast any civilian CPA employee who sought to supervise them. They basically stiffed every request McVaney made to concretize their obligations under the contract.

McVaney and I concluded the contract should be terminated and started that process with the Contracts Office. McVaney then took a new position with the Interior Ministry and I departed from Iraq in mid-December. I donâ€™t believe the contract was ever definitized.

One other point of detail and then I wish to draw some general conclusions from this vignette. In early September I realized that our civilian CPA members were being pulled and tugged in all directions and no one had time to supervise a â€œsmallâ€? $16 million contract. I knew a very fine graduate of the Air Force Academy with international experience who was a civil engineer supervising contracts at Shaw Air Force Base, Lt. Peter Cusack. I made a named request for him for the sole purpose of supervising the CusterBattles contract. The Air Force was totally supportive, but, after six weeks of my trying, the CPA front office killed the request. I absolutely believe that had Lt. Cusack been in Baghdad assigned solely to supervise the contract, we would have saved $4 million or more, and CusterBattlesâ€™ compliance with ourâ€™s and Skylinkâ€™s requests would have been obtained. CusterBattles would have known Lt. Cusack wasnâ€™t going away.

What lessons do we draw? First, the CusterBattles case is reflective of the fact that we simply didnâ€™t have enough people to do our job. Long hours and crises-to-crises management simply wore us down. I remember working with a very bright attorney from the Legal Advisorâ€™s office at 11:00pm one night, and the analysis got to the edge of incoherent. I said, â€œEric youâ€™ve got to take a vacation on the Red Sea and look at pretty colored fish.â€?

So decisions were made that shouldnâ€™t have been, contracts were made that were mistakes, and were poorly, if at all, supervised, money was spent that could have been saved, if we simply had the right numbers of people. I believe the 500 or so at CPA headquarters should have been 5000, and more effective decision-making and more efficient use of DFI and US taxpayerâ€™s money would have accrued. Some will say there was no space for such numbers, but CusterBattles put 300 in the airport and was still building when I left. Some creativity and substantial use of the airport grounds could have given us the housing.

Second, the clearance process to get people in theater needed wholesale revision. Even for the small numbers who had authorized slots in the CPA, delays in getting them to the job were substantial. For example, we had about 50 slots authorized for the Ministry of Transportation, but never had anywhere near that number while I was in Iraq. Typically, and we never understood why, delays of months would occur and we ran at 50-60 percent of authorized strength.
Each team attached to a Ministry should have had the authority to screen and build its team on an expedited basis. Precious time in the CPAâ€™s one-year existence was lost to bureaucracy. A very fine member of the British team assigned to the CPA, speaking of the CPA, remarked to me in September, â€œIt usually takes three to four years for a bureaucracy to become constipated, youâ€™ve managed it in three months!â€?

Three, there was micromanaging in the Front Office of the CPA that slowed everybody down and made all work less efficient. Without appearing to pat myself on the back, I think many others and I brought substantial experience in our areas and should have been given responsibility to implement many decisions that instead got mired in the Front Office paperwork. This cost us time and money, and restricted the number of problem areas we could cover. We also should have made much better use of the British at the CPA. (After all, they are more experienced than we in this kind of stuff!) Jeremy Greenstock and Andy Bearpark are two of the finest civil servants I have encountered, but they and the other British were not brought into full participation by the American side.

Fourth, I think the de-Baathification decision was too sweeping, and deprived us of good Iraqis whose experience and administrative expertise would have been useful.

Fifth, I think the decision to disband the Iraqi army was a mistake, and complicated our reconstruction efforts by leaving a vacuum of security. I believe many in the army would have been loyal to the new order, but were not given a chance.

Sixth, we simply didnâ€™t do our homework when the CPA was established, and valuable time and opportunity was lost. There is a way to be successful with these things, as our post- World War II experience indicates. I wonder if we spent any time with those still in our midst who implemented the post-Japan or post-German reconstruction? I visited with Professor Emeritus Eric Stein of the University of Michigan Law School (my former professor of international law),who had a similar position to mine with the CPA, except it was as advisor to the Italian Justice Ministry, as the Fascist government crumbled in 1944. I asked how you can tell the good guys from the bad, and he said, â€œIt was impossible for us as Americans. Only the Italians could sort out the evil Fascists from the others.â€? I was disappointed that his wisdom and that of others who experienced that period had not been tapped at the time that we embarked on this extraordinary mission in Iraq.

Finally, I would like to turn to the present situation, because I think inefficiencies and waste of taxpayersâ€™ money abound. Part way through my time in Iraq, we were instructed to prepare problem areas we faced for evaluation by a company called Bearing Point, operating I think under a USAID contract. Their presence was utterly mystifying to us, and we thought how wonderful it would be if the monies dedicated to bringing Bearing Point consultants to Baghdad had simply been devoted to giving us desperately needed personnel. We went through a process of educating the Bearing Point consultants (since no one can really know the Iraqi situation without having lived in it) so they could give us recommendations. Their suggestions in my experience largely related to what we were already doing, or involved proposals so futuristic as to be impracticable. We wondered by what process and with what intent had Bearing Point been selected, and what costs for US taxpayers were involved. I think this would be an interesting area for the Committee to explore.

Along the same lines, I would urge the Committee to examine the contracts being let under the $18 billion Supplemental Authorization approved by the Congress 14 months ago. While a few big infrastructure projects are required, many, many small projects are essential. They can be done by Iraqi companies, they are visible to the populace and the money gets into Iraqi hands and into the Iraqi economy. I fear that contract award dollars and the dollars that actually make it to the Iraqi economy after middleman expenses are taken out are far different. The Committee can examine contract types, and I think it will become self-evident what kind of contracts most efficiently get dollars to their intended use.

For example, Washington Group International has received a $40 million contract to clean, repair and upgrade a portion of the Sadr City wastewater system. Their administrative, management, and security costs I am advised have eaten up $25 million, with minimum salaries for their personnel in place in Baghdad at $250,000 per year. $15 million makes it to the ground for labor and materials. Thatâ€™s 63 percent overhead. Our armed forces are already on the ground, and the Army Corps of Engineers and other Army civil engineers have been supervising contracts adding up to millions of dollars for more than a year. The Army overhead in place is 0 percent; the Army Corps of Engineers 6.5 percent. I was impressed with the civil service outreach of our soldiers while I was in Iraq. They are well-trained, they are gutsy, believe it or not they have superb relations with many of the locals, they are right in place to supervise contracts, and they meet deadlines. One of the untold success stories of Iraq is the Armyâ€™s role in reconstruction involving many of the smaller infrastructure projects, and I urge the Committee to examine it. By contrast, companies like Bechtel, Parsons, Washington Group International, Black and Veatch, etc. have ID/IQ (indefinite delivery/indefinite quantity) open-ended contracts for millions and millions of dollars. How much is eaten up in overhead, what reaches Iraq on the ground?

The Committee is examining waste and inefficiencies during the CPA

period. I have described it elsewhere (in the most favorable terms possible) as â€œleakage.â€? For the reasons cited those problems were real, but must be understood in the context of the unique Iraq post-war environment. A much greater expenditure of U.S. taxpayer money than in the entire CPA period is presented in the contracting of the $18 billion Supplemental Authorization. I hope the Committee will be able to conclude that waste and inefficiency in this program has been minimized.

That concludes my prepared statement and I am ready to answer any questions of the Committee. Thank you.

magician

25 March 2005, 13:08

The legal document linked here consists primarily of an argument against a motion by CB to dismiss the case against them. It is interesting to observers of the case mostly for background information.

For example, the CB ICE/MX manager, Derek Fox, is quoted at length in an email which states straight up that CB is running legal risks, and he then states that he will address these concerns with Mike Battles face-to-face, rather than putting them in writing. (Great tradecraft, there, Derek).

I found this document interesting mostly because it alleges that Joe Morris was fired by CB for theft, which was not an allegation that I had heard previously. I knew Joe Morris. He had his flaws. I highly doubt that he was a thief.

This document also states that the original suspension of CB for bidding on further government contracts has been broadened and extended. Fascinating. The government declines to join the case....and yet, government agencies prohibit any government actors from engaging in further business with CB.

Oh, well. Here is the document: http://64.233.183.104/search?q=cache:-3-hf_d5ACQJ:www.contractwatch.org/datavault/performancedocs/CusterMotionToDismiss.pdf+custerbattles&hl=en&client=safari.

Enjoy.

:)

SOTB

25 March 2005, 13:12

HAHAHAHAHAHA The question is whether CB has someone in Congress who can divert attention from this type of tesitmony and ONCE AGAIN shed oversight and investigation as if they were made of teflon....

magician

25 March 2005, 13:19

here is a letter from Senator Grassley to the Attorney General regarding the case.

lovely.

:)

http://64.233.183.104/search?q=cache:0hhI1VBBEGQJ:66.98.181.12/newsources/grassleytogonzalesrecusterbattles.pdf+custerbattle s&hl=en&client=safari

magician

25 March 2005, 13:27

from : http://yorkshire-ranter.blogspot.com/2005/02/cpa-corruption-case-studies.html

*CPA Corruption: case studies!

The Washington Post reports on a lawsuit that has resulted in the publication of extensive allegations by former Coalition Provisional Authority staff that the organisation was corrupt, incompetent, and spectacularly hopeless with money. Interestingly, much of the dirtstorm centres around the security contractor CusterBattles, who Ranters will remember from this story from January. If you recall, a savage $300 million in raw cash somehow got flown out of Iraq aboard a plane bearing "CusterBattles Levant" titles that happened to have a number of far-right Lebanese political identities on board too. Reportedly the cash was used to purchase arms - from whom, we might well ask - outside the financial controls imposed on the transitional government.

If that wasn't dodgy enough, it now appears that CB was handed impressive sums drawn on Iraqi revenues for work that was never carried out, and indeed was never needed. You can get the text of the CPA's former senior aviation official Franklin Willis's statement here (pdf). It makes damning reading. Willis describes vast amounts of crisp $100 bills literally crammed into a dank basement. Payments to contractors were made by simply handing out bags of cash. CusterBattles were meant to provide security for civilian air operations at Baghdad Airport, but (according to Franklin) no such operations took place. But they still received great wedges of green from the cash basement. They used this to build up a large camp for up to 300 employees and a large number of dogs at the airport, the base for their other business activities.

What is odd about Willis's testimony is that there were - still are - civilian air services to Baghdad. Royal Jordanian Airlines operated daily to Amman through the life of the CPA. Not to mention the cargo charters, from DHL to British Gulf and Air Bas. He describes with vigour an atmosphere of financial anarchy, administrative chaos and incompetence that could well explain how the Boutcos were hired...if it wasn't for the big question. That is, if it was all a mistake in conditions of chaos and raging crisis, why did they try to get Bout off the asset freeze lists instead of immediately and effectively getting rid of all contracts with him, and if possible seizing any aircraft within their control? No-one has yet given a plausible explanation of this paradox.

Unless, of course, this Asia Times report on alleged efforts to arm Sunni "loyalist paramilitaries" in Iraq is true. Back at the start of the story, a source suggested such was the case. I'm not sure if the Asia Times is believable, though.

Another interesting sidelight is this comment by Willis:
"We
also should have made much better use of the British at the CPA. (After all, they are more experienced than we in this kind of stuff!) Jeremy Greenstock and Andy Bearpark are two of the finest civil servants I have encountered, but they and the other British were not brought into full participation by the American side."
Remember this?

LINK and alternate comments posted by Alex : 12:53 PM

magician

25 March 2005, 13:32

from : http://yorkshire-ranter.blogspot.com/2005/01/300-million-flown-out-of-iraq.html

But I think that it makes sense to post it here in the sense that this thread can serve as a repository of all CB misdeeds.

Saturday, January 22, 2005

*$300 Million flown out of Iraq

So what the hell's going on with this? It appears that $300 million in raw cash was sent to the Lebanon in a specially chartered aircraft, supposedly to buy heavy armour for the new Iraqi army in various places, including Poland, Ukraine, the Czech Republic and the US. It also seems that the Iraqi cabinet was kept in the dark. There's also a connection to the latest Ahmed Chalabi-related murkiness - Chalabi seems to have disclosed the cashlift in revenge for the Iraqi Defence Minister's threat to have him arrested and extradited to Jordan.

Now, something of the cynicism involved can probably be gauged by the Minister's statement that Chalabi was to be arrested for "impugning the respect of the Ministry of Defence", a fine dictator's charge if ever there was one. But, according to the Iraqi government, the cash did indeed leave. And Chalabi is after all well worth arresting - there's the bank fraud, the double-agent business, the vanishing secret police files, the computers whose hard drives vanished when the accountants appointed to investigate the "Oil for Food" scandal (that he publicised on the basis, so he said, of those files) turned up...the list goes on. But there is evidently something very bizarre going on here, as hinted at here:
"But one American official with knowledge of the transaction said taking the $300 million out of the country, although unorthodox, was probably the only way for the Iraqi government to buy weapons.

The reason, according to the American official, is that the financial mechanism set up after the war's major combat operation ended requires that Iraqi oil revenues be spent for "humanitarian" purposes. That meant that the Trade Bank of Iraq could not be used for arms purchases, thus necessitating the use of cash."
Back at the start of last year, interestingly, something similar happened with a large quantity of Iraqi currency that was flown out via Beirut, ostensibly to procure armoured vehicles (again) from an unnamed British company. (Robert Fisk report mirrored on Occupation Watch, original is behind a subscription barrier) Now, I wonder whether that might have been connected with the allegation that Chalabi's brother (the Iraqi finance minister) gave the job of disposing of the old Iraqi currency to a firm who might not have disposed of it at all? Mind you, the January 2004 flight also brings up a whole wealth of other dodginess related to Lebanese politics; Amir Gemayel's son-in-law and two prominent figures in the Maronite Christian right just happened to be aboard the aircraft. Today in Iraq charged at the time that they had connections to AIPAC, the American Israel Public Affairs Committee that was exposed last summer as a spy ring. It's rather what you come to expect from these buggers, but the connection TII proposed strikes me as tenuous.

And, as you probably expect from the blogosphere's home of mystery jets, I also have my suspicions as to exactly who the other half of the deal is. Now, the first (January 2004) story is easy to pin as regards the aircraft. Mazen Bsat, mentioned by Fisk, is the boss of Flying Carpet, a Lebanese charter firm that now runs a regular Beirut-Baghdad service. It would appear he's getting rich on the war. And - could you possibly guess this? - his firm's on that list of Defence Department fuel contracts. He's number TBLE01. His firm seems to have graduated from offering scenic trips up the Lebanese coast (if true) to running a Fairchild Metro (serial no. AC604, registration OD-MAB). He's even got a website with a really annoying Flash intro (here - check out the music). This aircraft was photographed in Baghdad a few weeks before the curious incident of the cash in the briefcase carrying extra titles "Custer Battles Levant" on its nose (CusterBattles is a US security contractor). All very interesting, but what about the more recent job?

Back in May, at the time of the initial Boutquake, a source got in touch from Minnesota to suggest that the reason for all the - ahem - dubious contracts was that the Bout system was being used to arm Iraqi forces with ex-Soviet weapons (or possibly copies produced elsewhere). Note the reference to the Ukraine in the NYT story.

LINK and alternate comments posted by Alex : 4:43 PM
(2) comments

magician

25 March 2005, 13:41

from : http://www.occupationwatch.org/article.php?id=2677

How the 19 billion 'dirty dinars' were quickly cleaned up

by*Robert Fisk,*The Independent
January 21st, 2004

When a private Lebanese jet arrived at Beirut International Airport packed with 19 billion new Iraqi dinars in banknotes (about £6.5m), the authorities immediately impounded the aircraft and arrested the three men aboard. It was a coup that seemed likely to earn the favour of the US, which has, for years, been threatening Lebanon with financial sanctions if it allows dirty money to cross its frontiers.

But an astonishing series of revelations - including a faxed message from the American-appointed Iraqi Ministry of Interior in Baghdad - suggests that the cash was being sent to Beirut with the full permission of US military authorities to be used to buy armoured vehicles for the American army from a British company. The three men aboard the cargo jet have told the Lebanese authorities that they were cleared to leave Iraq by American officials at the US base at Baghdad airport.

Nevertheless, the Lebanese state prosecutor, Adnan Addoum, arrested the three men and a Beirut exchange dealer, who is a relative of the former Lebanese president Amin Gemayel, and demanded an explanation from Iraq's Charge d'Affaires in Beirut, Tahseen Aina.

Mr Aina told Mr Addoum that the Iraqi Central Bank Governor was unaware of any such money transfer. So the four men, Mohamed Issam Abu Darwish - who stated openly that he was undertaking business operations on behalf of the US authorities in Iraq - Richard Jreisati, a former Phalangist militia official in Lebanon, Mazen Bsat, the owner of the plane, and Michel Mukattaf, who runs an exchange company in Lebanon, were all held by the authorities.

Then two days ago, the Iraqi Ministry of Interior - which is, in effect, run by American officials working for the US proconsul in Iraq, Paul Bremer - sent a fax to the Lebanese government stating that the money was being legally transferred for the "urgent purchase" from a British company of armoured vehicles and "sophisticated equipment intended to confront the dangerous security situation in Iraq".

All four men arrested by the Lebanese were freed, although the Beirut authorities have ordered the men on the plane to surrender their passports until they receive a letter from the Iraqi Ministry of Foreign Affairs explaining why so large an amount of money was being sent to Britain via Lebanon. The British company was not named.

In Baghdad, meanwhile, several hundred Iraqis protested in front of Bremer's offices to demand the resignation of the US-appointed interior minister, Nouri Badrane, accusing him of "corruption" for allowing 19 billion Iraqi dinars to be transferred out of the country.

The new notes have just replaced the old dinar notes that carried a portrait of Saddam Hussein's head. Those have been declared worthless by the occupation powers in Iraq.

In Iraq, however, there have been widespread claims from Western businessmen that the American authorities and the Iraqi officials who work for them - not the businessmen with whom they deal - are guilty of fraud. Several have told The Independent that Iraqi sub-contractors are being asked to give cash commissions of between 5 per cent and 10 per cent of any contract awarded to them to one of five Americans working in the city.

In Iran, meanwhile, the authorities have been trying to find out how up to 200 earth-moving vehicles have turned up for sale in southern Iranian cities. The vehicles appear to have been sent across the border from Iraq and were originally intended to be part of a rebuilding programme. Several non-governmental organisations in Iraq have complained that millions of dollars of aid intended to help rebuild the country have gone missing.
*
© 2003 Independent Digital (UK) Ltd

magician

25 March 2005, 13:47

from : http://www.corpwatch.org/print_article.php?&id=11856

IRAQ: Millions of Dollars Paid in Cold, Hard Cash to Some Defense Contractors

Franklin Willis, a former official with the Coalition Provision Authority, told the Senate Democratic Policy Commmittee that after the fall of Saddam Hussein, Iraq was "like the Wild West -- awash in $100 bills." One contractor, Custer Battles, was paid with $2 million in fresh U.S. bills, stuffed into a gunnysack, he said.

by*John E. Mulligan,*The Providence Journal
February 15th, 2005

WASHINGTON -- Testimony before a Democratic congressional committee yesterday put a Rhode Island contractor at the center of a controversy over how U.S.-occupation forces in post-invasion Iraq disbursed and accounted for hundreds of millions of dollars.

Franklin Willis, a former official with the Coalition Provision Authority, told the Senate Democratic Policy Commmittee that Iraq, after the fall of Saddam Hussein, was "like the Wild West -- awash in $100 bills."

Willis described how, during one point in the summer of 2003, Middletown-based contractor Custer Battles was paid with $2 million in fresh U.S. bills, stuffed into a gunnysack.

Willis said the cash was a partial payment on a $16-million contract that Custer Battles had won to provide security for eventual civilian flights at the Baghdad International Airport.

Willis noted pointedly such flights have never occurred on a regular basis since the U.S. invasion but that Custer Battles continued to seek and win other kinds of security jobs from the CPA.

"This is a scandal," Senate Minority Leader Harry Reid, D-Nev., said. "This is the tip of the iceberg. This is unbelievable."

Michael J. Battles, a Custer Battles co-founder and a onetime Army officer and GOP congressional candidate, confirmed some of the hearing's more dramatic story lines, including the disbursal of huge sums in shrink-wrapped bricks of cash in the chaotic atmosphere of post-invasion Baghdad in the summer of 2003.

Battles also said in an interview that his company would have prefered to deal in wire transfers or other instruments besides cash and he said he agreed with much of Willis' criticism of the CPA's unorthodox battlefield contracting practices

Yesterday's hearing came just two weeks after an audit of the CPA by the special inspector general for Iraqi reconstruction found the agency had failed to provide proper oversight of ministry spending, issued unauthorized contracts and lost track of $9 billion in Iraqi funds.

In response to that criticism, L. Paul Bremer III, the former administrator of the authority, had strongly defended the agency's financial practices.

Bremer said auditors mistakenly assumed that "Western-style budgeting and accounting procedures could be immediately and fully implemented in the midst of a war."

Also testifying yesterday was Alan M. Grayson, a lawyer representing two self-described "whistleblowers" who worked with Custer Battles in Iraq. Grayson told a panel of two senators and a congressman, "In our case, the Bush administration has not lifted a finger to recover tens of millions of dollars that our whistleblowers allege were stolen from the government."

Battles called it "outrageous" that the committee relied so heavily on allegations by Grayson's clients, whom Battles described as an embittered former employee and a former business associate with a big financial stake in the success of the civil suit against his company.

"I am absolutely mystified that such a biased party as Mr. Grayson was allowed to testify and we were not contacted," said Battles said in a telephone interview. "This has my blood boiling."

Battles noted that the Justice Department examined the allegations contained in the civil suit and declined last October to prosecute Custer Battles.

But Battles acknowledged that the Pentagon has barred his company from government contracts and has withheld payment of millions of dollars, pending its investigation. Battles said that ban, which his company has appealed, was based mainly on what he called the false allegations of a former employee fired in Iraq in 2003 and a former subcontractor who failed in an effort to become an equity partner in Custer Battles.

Sen. Byron L. Dorgan, the North Dakotan who is chairman of the Democratic Policy Committee, acknowledged that he had not invited any representative of Custer Battle to appear at yesterday's hearing. Dorgan said Democrats held a partisan hearing because Republicans in Congress and the Bush administration have not done a good job of investigating alleged contract irregularities in post-war Iraq.

Custer Battles says it won tens of millions of dollars worth of competitively bid government contracts in post-invasion Iraq. Battles said that there were no breaches of airport security during the time that his firm was under government contract. He conceded that the anticipated civilian flights never took place but he ascribed that failure on the unanticipated violence of the continuing insurgency.

Grayson's testimony largely summerized a civil lawsuit brought by his clients, Robert J. Isakson and William D. Baldwin, against Custer Battles early last year. Isakson was a Custer Battles employee for a time and Baldwin was a contractor doing business in Iraq.

They alleged tens of million of dollars of "false claims" under the company's contracts with the CPA -- a charge that Battles and his partner, Scott Custer, have denied.

Justice Department spokesman Charles Miller confirmed yesterday that federal prosecutors had declined to press the case against Custer Battles that Grayson had developed.

Marine Lt. Col. Roseann Lynch, a spokeswoman for the Defense Department, had no comment on whether the Custer Battles contracts are being investigated by the Pentagon's inspector general.

Find out more about the Coalition Provisional Authority, audits of its activities, and the Custer Battles company, via related Web sites, at:

http://projo.com/cgi-bin/include.pl/news/custerbattleslinks.htm

magician

25 March 2005, 14:13

check this out : http://emergencyplanningguide.com/about.html

magician

30 March 2005, 15:59

from: http://www.msnbc.msn.com/id/7306162/site/newsweek/

Follow the Money
Watchdogs are warning that corruption in Iraq is out of control. But will the United States join efforts to clamp down on it?
By Michael Hirsh
Newsweek

April 4 issue - By many accounts, Custer Battles was a nightmare contractor in Iraq. The company's two principals, Mike Battles and Scott Custer, overcharged occupation authorities by millions of dollars, according to a complaint from two former employees. The firm double-billed for salaries and repainted the Iraqi Airways forklifts they found at Baghdad airport—which Custer Battles was contracted to secure—then leased them back to the U.S. government, the complaint says. In the fall of 2004, Deputy General Counsel Steven Shaw of the Air Force asked that the firm be banned from future U.S. contracts, saying Custer Battles had also "created sham companies, whereby [it] fraudulently increased profits by inflating its claimed costs." An Army inspector general, Col. Richard Ballard, concluded as early as November 2003 that the security outfit was incompetent and refused to obey Joint Task Force 7 orders: "What we saw horrified us," Ballard wrote to his superiors in an e-mail obtained by NEWSWEEK.

Yet when the two whistle-blowers sued Custer Battles on behalf of the U.S. government—under a U.S. law intended to punish war profiteering and fraud—the Bush administration declined to take part. "The government has not lifted a finger to get back the $50 million Custer Battles defrauded it of," says Alan Grayson, a lawyer for the two whistle-blowers, Pete Baldwin and Robert Isakson. In recent months the judge in the case, T. S. Ellis III of the U.S. District Court in Virginia, has twice invited the Justice Department to join the lawsuit without response. Even an administration ally, Sen. Charles Grassley, demanded to know in a Feb. 17 letter to Attorney General Alberto Gonzales why the government wasn't backing up the lawsuit. Because this is a "seminal" case—the first to be unsealed against an Iraq contractor—"billions of taxpayer dollars are at stake" based on the precedent it could set, the Iowa Republican said.

Why hasn't the administration joined the case? It has argued privately that the occupation government, known as the Coalition Provisional Authority, was a multinational institution, not an arm of the U.S. government. So the U.S. government was not technically defrauded. Lawyers for the whistle-blowers point out, however, that President George W. Bush signed a 2003 law authorizing $18.7 billion to go to U.S. authorities in Iraq, including the CPA, "as an entity of the United States government." And several contracts with Custer Battles refer to the other party as "the United States of America." Pressure has been building on the administration to join the case—or at least to file a brief saying publicly if it believes defrauding the CPA is the same as defrauding the United States. The judge's latest deadline for that brief is this Friday. But a Justice Department spokesman said last week the government "could" still refuse to take part. "I'll bet you $50 they will not show up," says Richard Sauber, a lawyer for Custer Battles, which is still operating in Iraq. (He also rejects the charges of fraud and incompetence.)

The administration's reluctance to prosecute has turned the Iraq occupation into a "free-fraud zone," says former CPA senior adviser Franklin Willis. After the fall of Baghdad, there was no Iraqi law because Saddam Hussein's regime was dead. But if no U.S. law applied either, then everything was permissible, says Willis. The former CPA official compares Iraq to the "Wild West," saying he delivered one $2 million payment to Custer Battles in bricks of cash. ("We called Mike Battles in and said, 'Bring a bag'," Willis told Congress in February.) Willis and other critics worry that with just $4.1 billion of the $18.7 billion spent so far, the U.S. legal stance will open the door to much more fraud in the future. "If urgent steps are not taken, Iraq ... will become the biggest corruption scandal in history," warned the anti-corruption group Transparency International in a recent report. Grassley adds that if the government decides the False Claims Act doesn't apply to Iraq, "any recovery for fraud, waste and abuse of taxpayer dollars ... would be prohibited."

More than U.S. money is at stake. The administration has harshly criticized the United Nations over hundreds of millions stolen from the Oil-for-Food Program under Saddam. But the successor to Oil-for-Food created under the occupation, called the Development Fund for Iraq, could involve billions of potentially misused dollars. On Jan. 30, the former CPA's own inspector general, Stuart Bowen, concluded that occupation authorities accounted poorly for $8.8 billion in these Iraqi funds. "The CPA did not implement adequate financial controls," Bowen said. U.S. officials argue that it was impossible, in a war environment, to have such controls. Yet now the Bush administration is either ignoring or stalling inquiries into the use of these Iraqi oil funds, according to reports by Democratic Rep. Henry Waxman, and others.

In one case, the Pentagon's own Defense Contract Audit Agency found that the leading U.S. contractor in Iraq, Halliburton subsidiary KBR, overcharged Iraq occupation authorities by $108 million for a task order to deliver fuel. Yet the Pentagon permitted KBR to redact—or black out—almost all negative references to the company in this Oct. 8, 2004, audit. These included any mention of the $108 million in alleged overcharges and the audit's clear conclusion that KBR's price-supporting data were "not adequate." The Defense Department then forwarded this censored version to a U.N. monitoring board that Washington had agreed to under U.N. Resolution 1483. Normally, an audited company is allowed to censor its proprietary or personal information, but "these redactions went beyond anything U.S. law would allow," says Tom Susman, a Washington expert. Halliburton spokeswoman Wendy Hall insists that the company had the right to make such redactions because the audit was "predecisional" and "represented only one side of the case." Hall also denies the company overcharged.

The U.N. audit team, called the International Advisory and Monitoring Board, is angry over these heavily censored reports, officials tell NEWSWEEK. The board last fall asked that a special auditor be hired. But the Pentagon has yet to award that contract after six months of delays. A Pentagon spokeswoman says the U.N. audit team "agreed that the [KBR] information provided was responsive to their request." A U.N. spokesman says this is untrue.

The administration's seemingly detached approach to these cases could have other implications. NEWSWEEK has learned that federal prosecutors plan to indict several U.S. contractors in Iraq on criminal charges but that these could be undercut if the court rules in the Custer Battles case that the CPA was not a U.S. government arm. "If you make the CPA a U.S. entity, you open the door to all sorts of liability claims. But if it's not a U.S. entity, then you can't parade these people through the court," says Jim Mitchell of the CPA inspector general's office. And that could mean Custer Battles and other companies will ultimately answer to no one.

With Babak Dehghanpisheh
© 2005 Newsweek, Inc.

magician

4 April 2005, 03:05

from : http://www.newsmax.com/archives/articles/2005/4/1/220302.shtml

Justice: Iraq Fraud Can Be Tried in U.S.
NewsMax.com Wires
Saturday, April 2, 2005

WASHINGTON -- Contractors for the former Coalition Provisional Authority in Iraq can be sued in U.S. courts under an anti-war-profiteering law, the Justice Department contended in a federal case Friday.

Government lawyers said the federal False Claims Act applies to contracts issued by the CPA, which ran Iraq from shortly after the 2003 invasion until it handed over power to an interim Iraqi government last June.

Story Continues Below

Although much of the money the CPA used was seized from the former government of Saddam Hussein, U.S. government or military workers distributed it, making fraud against the CPA equal to fraud against the U.S., a group of Justice Department lawyers said in a court brief.

The brief came in response to a judge hearing a fraud lawsuit against the security firm Custer Battles LLC. Two former employees are suing Custer Battles, saying the firm fleeced the CPA out of about $50 million. The company denies any wrongdoing.

Custer Battles has argued that it cannot be sued in the U.S. for actions involving the use of seized Iraqi funds. Lawyers for both Custer Battles and its former employees said U.S. officials originally had declined to take the case against Custer Battles for the same reason.

The Justice Department brief offered no opinion on whether Custer Battles defrauded the CPA. But it did say the False Claims Act is an important tool for "rooting out any fraud that might have occurred during the occupation of Iraq."

The Justice Department brief sided with lawyers for the former Custer Battles employees, saying that the U.S. law applied because U.S. officials were handing out the money. Victor Kubli, one of the former employees' lawyers, said the brief raises the "pregnant question" of why U.S. officials originally said CPA contracts were not covered by the U.S. anti-fraud law.

A lawyer for Custer Battles said Friday he believes the False Claims Act only applies to contracts using money from the U.S. Treasury, not the Iraqi funds used in the contracts at issue. John T. Boese said in a statement that the Justice Department "is attempting in this brief to extend the False Claims Act far beyond its intent and purpose."

The former employees, Robert Isakson and William Baldwin, sued under a federal law that allows citizens to sue on behalf of the government when they suspect fraud in federal contracting. Should they win, those who bring the lawsuit can get up to 30 percent of the money recovered from the contractor.

Isakson and Baldwin say they were threatened and fired when they objected to Custer Battles' business practices. The lawsuit says Custer Battles billed the CPA for work that was never done, employees who were never hired and equipment which never arrived.

Custer Battles has denied any wrongdoing and has asked the court to throw out the case.

The company and the former employees have until April 15 to file briefs with U.S. District Judge T.S. Ellis III, who will then decide whether to dismiss the case.

The Justice Department brief also gives details of how the United States moved money to Baghdad to fund the fledgling Iraqi government and pay contractors.

A dozen U.S. military flights carried about $10.3 billion in cash to Baghdad during the time the CPA was governing Iraq, the brief said. That currency was deposited in the Central Bank of Iraq. The CPA used wire transfers to make another $6 billion in payments, the brief said.

© 2005 The Associated Press

magician

4 April 2005, 04:06

from : http://207.70.82.73/pages/descriptions/04/266.html

this is a link to the .pdf transcript of the radio show:

http://207.70.82.73/pdf/266.pdf

pretty funny. Includes an argument between Dave Shoe and an Army Major (lots of "fuck you's"), and the allegation that CB PSD guys fought a gunbattle at the Al Hyatt Hotel....against each other.

:)

magician

4 April 2005, 04:15

from : http://www.democracynow.org/article.pl?sid=05/03/01/1521200

another radio show. Here is the transcript:

Tuesday, March 1st, 2005
Custer Battles: Why Won't the Justice Dept. Intervene to Reclaim Millions From Military Contractor in Iraq?

Two company whistleblowers are charging in a lawsuit that military contractor Custer Battles defrauded the Coalition Provisional Authority of tens of millions of dollars during work in Iraq. The Justice Department has declined to intervene in the suit. We speak with the Alan Grayson, the attorney in the case and investigative journalist, Pratap Chatterjee. [includes rush transcript]

A U.S. military contractor in Iraq is at the center of a controversy over how American-forces disbursed and accounted for hundreds of millions of dollars in Iraq.

The firm, Custer Battles is being charged in a lawsuit of defrauding the Coalition Provisional Authority of tens of millions of dollars during work in Iraq, which included securing Baghdad International Airport.

Two former employees sued the company last year under the False Claims Act, seeking to recover damages on behalf of the US government. They allege that Custer Battles repeatedly billed the occupation authorities for nonexistent services or at grossly inflated prices. A few months after they filed the suit, the Justice Department declined to intervene on the whistle-blowers' behalf.

Because the case is the first to be unsealed involving the charges of fraud in the multibillion-dollar Iraqi reconstruction effort, it could set precedents.

Alan Grayson, attorney in the lawsuit by two former employees of Custer Battles. He testified about the case at a special Congressional hearing in February.

Pratap Chatterjee, the managing director of CorpWatch.org and author of "Iraq, Inc."

RUSH TRANSCRIPT

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AMY GOODMAN: We're joined now by the attorney in the case, Alan Grayson, and in our studio by Pratap Chatterjee, independent reporter, managing editor of CorpWatch.org, and author of the book, Iraq, Inc. Let’s go first to Alan Grayson on the phone. He’s representing the two former employees. What is Custer Battles? First of all, start with the name.

ALAN GRAYSON: Well, Custer Battles was founded by two former army officers, Custer and Battles. Those are the names of the individuals who formed the organization. Custer was someone who tried to drum up mercenary work in Afghanistan when the occupation of Afghanistan began, and he was notably unsuccessful. Battles is someone who ran for Congress against Pat Kennedy in 2002, also notably unsuccessful, but in the course of doing so, he made some very powerful friends, and his leading largest contributor was, in fact, Haley Barbour, the head of the Republican National Committee.

AMY GOODMAN: Can you talk about what the former employees are charging?

ALAN GRAYSON: Certainly. The allegations are that this company committed any kind of fraud that they could imagine over the course of working for the Coalition Provisional Authority and as subcontractors under U.S. contract. For instance, they set up Cayman Islands subsidiaries and subsidiaries of subsidiaries in the Cayman Islands. Then they manufactured out of thin air invoices from these subsidiaries and handed them in under their prime and materials contracts, which basically operated like expense accounts, and they handed in these vouchers that they had created themselves, said that they were from their independent companies which were, in fact, subsidiaries, and they received millions and millions of dollars of reimbursement from the government.

AMY GOODMAN: Pratap Chatterjee, you have been investigating this, as well, for CorpWatch.org. Talk more about the defrauding that is being alleged.

PRATAP CHATTERJEE: There's some very stark examples. An example of a $95,000 helicopter pad that they were supposed to build in Mosul, Iraq, and they billed $157,000 for it. And Mike Battles himself actually absent-mindedly left a piece of paper detailing how $3.74 million in what he had spent had been billed to the U.S. government for $9.8 million. So, you know, markups of 162%, so this is what we as taxpayers had to pay for these services. And basically, what's most interesting I think about this case is not simply that they had these companies – there was a company called Secure Global Distribution and another one called Middle East Leasing in the Cayman Islands -- is that everybody in Iraq does the same thing. Halliburton has a subsidiary called Service Employees International. If you work for Halliburton of Houston, your contract is signed with a company in the Cayman Islands, and it's a tax dodge. We suspect, given that 59 out of 100 top federal military contractors have these offshore subsidiaries is that everybody is using this way to be able to pump up charges.

AMY GOODMAN: And Cayman Islands, that has to do with taxes, as well?

PRATAP CHATTERJEE: Absolutely, because, you know, it's an offshore tax subsidiary, offshore tax haven, and so people place subsidiaries there in order to be able to zero their taxes out.

AMY GOODMAN: Talk about how this case is going, and what Custer Battles is alleging in terms of money coming from the C.P.A., ironically named, the Coalition Provisional Authority, and what the U.S. government is saying about it all.

PRATAP CHATTERJEE: Well, basically, Custer Battles – and maybe Alan can even explain, although this is the case made by the company, so maybe I'll represent the company for a moment if I may, Alan, and then you can tell me what's wrong with this -- but Custer Battles is saying, well, the False Claims Act does not apply. The U.S. government has no jurisdiction over this money, because, a) this is Iraqi money, and b) the C.P.A., they didn't even really exist, and therefore, it is not a legitimate U.S. agency that should be giving out this money. And so, in fact, I think Judge Ellis has asked the U.S. government to tell him whether or not this agency existed, and there's some dispute. The Congressional Research Service, there's a woman by the name of Elaine Halchin who's an expert there who has been unable to decide whether or not the C.P.A., whether Paul Bremer's organization actually existed. It does not appear to have been created under 1483, the resolution of the United Nations Security Council -- or I can't remember the Security Council or the General Assembly -- on May 22, 2003, or if it was created by this thing called National Presidential – I forget what it's called exactly. It's a special directive of the President. It's National Security Presidential Directive. However, this is a Presidential Directive that's never been published, so we don't know. And Alan, in fact, aren't you waiting to hear as to whether, from the federal government, as to whether or not the C.P.A. even existed?

ALAN GRAYSON: Well, in fact, the one thing the federal government has agreed to do grudgingly in our case is to file a brief on April 1, April Fool's Day, about whether, in fact, the False Claims Act applies to C.P.A.-type contracts. But in our mind, it's not a realistic argument that the Senates are making here. This company was doing security work in a war zone under U.S. Military supervision. In fact, they were doing the same kind of work that the U.S. Military was doing in the same place at the same time. They were paid entirely, entirely with U.S. Treasury funds. The first $4 million they received was in cash, in bricks of $100,000, that's 1,000 $100 bills that came directly from the U.S. Mint. And after that, they were paid with U.S. Treasury checks with a Statue of Liberty on them, and with wire transfers from Federal Reserve accounts in New York that were U.S. Treasury accounts.

AMY GOODMAN: Now, Alan Grayson, why isn't the U.S. government helping in this? I mean, it's about getting money back. It's about fraud against the U.S. government.

ALAN GRAYSON: Well, there's no good explanation. There's no good answer to that question. In fact, the U.S. government should be helping, and they're not. The Bush Administration has done nothing up to this point to get this money back. In fact, it was almost a year before they even cut off the flow of new contracts to this contractor. And to this day, Custer Battles is still performing security work in Iraq. In fact, they're responsible for the security involved in the training of Iraqi army personnel right now. In fact, this corrupt contractor, who the government knew on October 18 of 2003, had already stolen $6 million from the government. Right to this day, the U.S. government is still stuffing money in their pockets.

AMY GOODMAN: Pratap Chatterjee.

PRATAP CHATTERJEE: Amy, it's amazing. There's an employee of Custer Battles who took $12 million in cash of the company, put it on a plane -- I kid you not, it’s called the Flying Carpet -- and took it to Beirut for safe keeping. So we're talking -- we have pictures, you know, of and testimony from the people who paid them at the C.P.A. There's a man by the name of Frank Willis, worked for the U.S. government – well, for the Coalition Provisional Authority, really -- and he has provided us with a picture of $2 million in cash that he was handing over. He said there was so much money, they were playing football with it.

AMY GOODMAN: Now, Frank Willis just testified, right, in Congress two weeks ago?

PRATAP CHATTERJEE: Indeed, he did, with Alan Grayson at the Democratic Policy Committee of the Senate.

AMY GOODMAN: So what is this going to come to now? The U.S. government has been putting off saying whether, in fact, the Coalition Provisional Authority that they set up exists at all? Is this one of the stumbling blocks right now, Alan Grayson?

ALAN GRAYSON: Well, in fact, you have to understand how reluctant the government has been to do this. It's only as a result of the hearing, as a result of the fact that Senator Grassley, a republican, the number three republican in the Senate, sent a letter to the Attorney General saying, ‘What the heck is going on here?’ And a result of 325 newspaper articles they saw from the hearing, and perhaps the result of the fact that four former Custer Battles employees were featured on NBC the day after the hearing, and one of them is quoted as saying, “I don't want any part of an organization that deliberately murders children and innocent civilians.” As a result of all that, on the last possible day that they could do so, the government grudgingly agreed to submit a brief to the court explaining not why this money could be recovered, but whether it could be recovered, and doing so on the last possible day, April 1.

PRATAP CHATTERJEE: Let me underline actually again what Alan said about the NBC report. Four soldiers testified that Custer Battles employees were going out in tanks and deliberately targeting U.S. civilians, and not only that –

AMY GOODMAN: U.S. civilians?

PRATAP CHATTERJEE: Iraqi civilians. Not only that, Alan's clients are now being threatened -- have death threats against them.

AMY GOODMAN: We have to leave it there. Pratap Chatterjee, Alan Grayson, thanks for being with us.

To purchase an audio or video copy of this entire program, click here for our new online ordering or call 1*(800)*881-2359.

magician

4 April 2005, 04:50

from : http://peacejournalism.com/ReadArticle.asp?ArticleID=1523

Issue 6 - April, 2005

* By: T. Christian Miller

Posted on: 3/13/2005

A Case Study in Postwar Chaos
****By T. Christian Miller
****The Los Angeles Times

http://www.truthout.org/docs_2005/031205D.shtml

****Saturday 12 March 2005
The dealings of coalition officials in Iraq and a contractor now accused of fraud illustrate what went wrong in early rebuilding efforts.

****Washington - Mike Battles needed money fast. It was June 2003 and his cash-starved company had just won a contract to guard the Baghdad airport.

****Battles turned to a lender that had lots of cash and few questions about how it would be spent: the U.S.-led coalition in charge of Iraq.

****As Battles later told criminal investigators, he descended into a vault in the basement of one of Saddam Hussein's former palaces, where a U.S. government employee handed him $2 million in $100 bills and a handwritten receipt.

****Battles "was informed that the contracting process would catch up" later to account for the money, according to a statement he gave investigators.

****By the time it did, the adventures of his fledgling security company, Custer Battles, had become a case study in what had gone wrong in the early days of the U.S. effort to rebuild Iraq, not least the haphazard and often ineffective U.S. oversight of the projects.

****Today, Battles and his partner, Scott Custer, are facing a criminal investigation, lawsuits by former employees and a federal order suspending them from new government business because of allegations of fraud.

****Neither Custer nor Battles responded to requests for interviews made through their attorney. However, in court records and interviews with criminal investigators, the two men have denied any wrongdoing.

****They have blamed the accusations on disgruntled employees who were fired; on former employees who now compete with Custer Battles for security work in Iraq; and on government officials who harbor grudges against the company.

****Court records, internal company memos, interviews with current and former employees and government investigators, and confidential documents from a Pentagon criminal investigation reviewed by The Times depict a company that ran into trouble almost from the moment it hit the ground in Iraq.

****Company employees allegedly forged invoices, clashed with government officials and tried to dodge taxes. The company is accused of missing deadlines, providing shoddy equipment, failing to deliver services and botching routine security inspections, the records and interviews show.

****Along the way, two of its guards allegedly moved to attack some Iraqi teenagers. And U.S. officials were startled to discover that Custer Battles was also operating a dog kennel and a catering service on airport grounds, according to interviews.

****Just as worrisome as the allegations, perhaps, has been the U.S. government's response.

****Beginning shortly after Custer Battles won its Baghdad airport contract, at least five senior U.S. government officials or consultants came to suspect wrongdoing by the firm or its employees, records show. Yet over the next 14 months, the company continued to win new government business, and even today holds a key contract in the U.S. program to equip and arm Iraq's new security forces.

****Not until September 2004, when the U.S. Air Force acted to prevent the company from receiving any new federal contracts, did Custer Battles' explosive growth slow.

****In most cases, high turnover and enormous workloads among government officials prevented them from taking action against a company that repeatedly deflected attempts to examine its operations, the records and interviews show. It was a messy situation easily exploited.

****"They were the only constant in a sea of change," said Frank Willis, who oversaw civil aviation during a six-month stint working for the now-defunct Coalition Provisional Authority, which administered Iraq. "That's called playing the chaos, and they were masters at it."

****Army Col. Richard Ballard, then inspector general for the U.S.-led forces that invaded Iraq, said he lacked the staff to focus on Custer Battles in the face of other problems such as the Abu Ghraib prison scandal.

****"In an environment where an organization is undermanned, overworked and struggling just to let contracts … there are few checks and balances," said Ballard, who is now retired. "That environment characterized the contracting process in Iraq during the second half of 2003, and probably still does today."

****A series of government audits of the Iraq reconstruction process has confirmed lax oversight and identified billions of unaccounted-for dollars.

****In an interview, the firm's attorney said the company may have made mistakes in paperwork but denied that Custer and Battles had defrauded the government. The attorney, John Boese, said the two men had fulfilled all contract terms in the midst of a war zone.

****"The rules were nightmarish. They didn't really exist. Radar O'Reilly from 'MASH' would clearly go to jail under these rules," said Boese, referring to the television character who was famous for maneuvering through military bureaucracy.

****At first glance, Custer Battles seemed an unlikely candidate to win work on critical missions.

****Before Iraq, Custer Battles had never landed a government contract. The 2-year-old firm booked less than $200,000 in revenue before the war, providing private security services in Afghanistan, its lawyers said.

****The company's two founders were brash, energetic and inexperienced. Custer was a former Army Ranger. Battles was an ex-CIA agent who had made an unsuccessful run for Congress in 2002 as a Rhode Island Republican.

****But within six months of landing the airport deal, Custer Battles had taken in $32 million in revenue from its contracts, records show. The two men built a headquarters, complete with swimming pool, at the airport.

****The company won the $16.8-million contract to protect the airport despite never having guarded a site. It beat two more-experienced firms, according to interviews and records, by promising to start work sooner than anybody else, a key criterion in Iraq's post-invasion mayhem.

****Coalition officials initially expected Custer Battles to perform routine security. Instead, the airport quickly became an insurgent target and the firm was suddenly guarding a fortified facility and surrounding grounds.

****Such rapidly changing missions became a common difficulty in Iraq. Coalition officials frequently altered contract terms, ordering up million-dollar changes with a handwritten scrawl or spoken order.

****Some contractors resisted such haphazard changes, delaying the reconstruction process. Others, like Custer Battles, rolled with the new demands, tallying charges with little paper trail to account for them.

****First to raise concern was Ballard, who found that Custer Battles employees lacked training and equipment. In 20 on-site inspections, Ballard said, he watched guards wave trucks through without inspecting them. He said he never saw Custer Battles use dog teams, as the firm had promised, to screen incoming vehicles.

****Ballard said he also witnessed two company security guards in black fatigues conducting what he termed an unauthorized mission, firing an automatic weapon into the air, in an attempt to stop young Iraqis suspected of firing rounds near an airport checkpoint. He halted the incipient attack.

****Ballard said his attempt to investigate the firm was blocked by Custer, who disputed his authority despite a written order from U.S. Army Lt. Gen. Ricardo Sanchez, the top military official in Iraq. Ballard recommended that the coalition terminate the contract. But he became distracted by the scandal at the Abu Ghraib prison, he said, and took no formal action before leaving Iraq.

****"I concluded that they were intentionally attempting to defraud the government," he said.

****Willis, a retired senior official at the U.S. Department of Transportation who oversaw the civilian side of the Baghdad airport, clashed with Custer Battles repeatedly.

****Without seeking permission, the company opened a dog kennel at the airport, offering bomb-sniffing dogs to other clients, Willis said. It also began mysteriously bringing in Filipino workers, apparently to work on catering contracts. On one visit to Custer Battles headquarters, Willis found 40 Filipinos living in cramped quarters.

****Willis demanded that Custer justify use of the airport to expand his business. He said Custer rebuffed him. Willis left Iraq after six months of service, and again no formal action was taken.

****Custer Battles continued to guard the airport until June 2004. Although the government did not extend the contract, the firm won high praise from Douglas Gould, the fourth coalition official in a year to oversee the airport.

****A U.S. official said Gould, who took over last spring, was aware of "rumors" about problems with Custer Battles. But nobody passed on word that the Pentagon had opened a criminal investigation of a money-exchange contract in October 2003.

****"Nothing was raised as a red flag," the U.S. official said.

****Soon after Custer Battles won the airport deal, it landed a second job: a $9.8-million contract to build housing for workers in a project to exchange Iraq's old currency for newly minted dinars. That contract would grow to be worth as much as $21.4 million.

****The coalition team heading the project soon grew frustrated with Custer Battles. The company had missed deadlines to set up the camps. Its trucks frequently broke down. Subcontractors complained to coalition officials of not being paid, according to a memo from a government consultant obtained by The Times.

****Then the consultant found a spreadsheet that appeared to show that the firm was artificially boosting profit, according to a memo from the consultant. The spreadsheet indicated that the company had invoiced the government $2.1 million for $913,000 worth of work.

****Despite the Pentagon investigation, coalition officials approved an additional $5.6 million in contract changes, saying they would recoup any money paid out on fraudulent invoices later, records show.

****"Termination of work by Custer Battles … would have a disastrous impact on the success of the currency exchange program," Al Runnels, then the chief financial officer for the Coalition Provisional Authority, wrote in a memo in November 2003.

****As the criminal investigation progressed, two Custer Battles insiders came forward and described a complex scheme to defraud the government.

****The insiders told investigators that the company had set up shell companies in the Cayman Islands to create fake invoices. They said Custer Battles submitted the invoices to the government to be reimbursed for work done by the offshore companies without disclosing that it owned them.

****The subsidiaries' invoices were padded with a markup that led to profits of as much as 130%, versus the 25% limit the contract imposed, the whistle-blowers told investigators.

****The two whistle-blowers, William "Pete" Baldwin and Robert Isakson, confirmed their account in interviews with The Times. Both men worked for Custer Battles and left under acrimonious circumstances. They have filed a civil lawsuit under the False Claims Act, which allows private citizens to sue on behalf of the government. If successful, the men are entitled to a portion of the money returned to the government.

****(A firm run by Isakson has since been sued by the U.S. Agency for International Development alleging fraud. The suit claims that the firm, DRC Inc., illicitly profited from a contract for construction work in Honduras after Hurricane Mitch in 1999. Isakson has denied wrongdoing.)

****Pentagon auditors tried to take a look at the company's books on the money-exchange contract in February 2004. But Custer Battles was able to block inquiries from the Defense Contract Audit Agency because there was no provision in the contract for an audit, according to the Pentagon.

****The investigative trail was further obscured by ambiguity in the contract. In denying illegal behavior, lawyers for Custer Battles argued that the company was to be paid a fixed price, which meant there would be no incentive to inflate its costs. But some contract documents reviewed by The Times contradict this interpretation.

****The attorneys for Custer Battles said the fraud allegations were ludicrous because the company had lost money on the contract. Company records submitted by the firm say that the company received about $9 million from the government and spent more than $14 million. The attorneys also said the Cayman Island firms were legitimate businesses.

****"This is not about not delivering," Boese said. "These are questions about accounting and contract interpretation."

****Finally, in September, the Air Force issued what's known in the business as a "death sentence," forbidding any U.S. agency to issue contracts to Custer Battles or a long list of affiliated companies and people. It can, however, fulfill its existing contracts.

****The Justice Department continues a criminal investigation of the company, and the whistle-blower case is proceeding slowly through the courts.

****The case raises questions about the U.S. government's performance in an area as important as the reconstruction of Iraq.

****"We went to Iraq to show them how a nation of laws works," said Patrick Burns, a spokesman for Taxpayers Against Fraud, which monitors fraud and has closely followed the Custer Battles case.

****"Instead, we're teaching them how to get away with fraud."

magician

4 April 2005, 06:26

from: http://www.taf.org/index.html

it includes many .pdf copies of documents that pertain to the case, including many from within CB itself.

for example, Pete Miscovich's memo that states, flat out, that the company engaged in fraud (Miscovich was a CB manager at the time that he wrote this memo) is available on the site (a 7.9MB .pdf download)....the DOJ's 47-page brief stating that CPA contracts are subject to the False Claims Act (deciding against CB's lame-brained argument that they did not engage in actionable fraud because the CPA was not a US government agency, and the funds in question orginated from Iraqi sources, rather than US government accounts) is featured at the top of the page.....it also includes links to a multitude of other articles on other sites.

like I said: it is a gold mine.

here are excerpts just from Pete Miscovich's memo, titled "Final Documentation Concerning Discrepancies." The allegations made in this memo are explosive.

"On Friday, February 27, 2004, I directed an email to various individuals instructing them once again to turn over any and all documentation pertaining to the MX Project. Although some of the informatiopn I received may be redundant in its reporting sequence, I felt that it was important with this final report. As you can see from their responses, there are specific questions of integrity and most importantly, authenticity of supporting documentation."

In this paragraph, Miscovich, in his role as the CB Money Exchange Manager (not sure what happened to Derek Fox), specifically states that he has uncovered evidence of false documentation, and evidence that others within CB engaged in corrupt behavior.

In this excerpt from email sent to him, he lays out evidence that Scott Custer himself engaged in fraudulent billing:

"Sometime around the same time frame, Scott Custer asked me if I had any SGD letterhead for invoicing at the Monsour house. I explained that I did not, and all my invoices were created in QuickBooks at BIAP. He said no problem and said he was invoicing something between SGD and CusterBattles."

Later, Miscovich cites email from Frank Guffey, who was a logistics guy working for Secure Global Distribution....in fact, he may have been its de facto head:

"...that evening I spoke with George Boustany regarding his signature and he said the he didn't sign anything. George met with Amy the following day and George stated that it was not his signature; Amy reviewed 6 months of George's signature and concluded that it was not his signature."

The real whopper emails seem to be from Pete Baldwin, one of the so-called "whistleblowers" who has filed suit against CB on behalf of the US government, citing "fraudulent Laru invoices submitted by CB for payment to CPA," signed by Joe Morris, the senior CB director in Iraq who was allegedly fired by CB for theft. Baldwin later mentions "fraudulent SGD leases," and states that convoy security billing was "falsely represented."

On page seven of the Miscovich memo, Pete Baldwin is cited as stating, "every line item on that invoice which total approximately $250,000.00 were false, fabricated, inflated..."

On page eight, Pete Baldwin states that he suspects that "both Joe Morris and potentially Mohamed (referring to Mohamed Abu Darwish, a Lebanese CB director), were in on these type of transactions as well as others."

Baldwin's comments continue, and are....frankly apocalyptic.

Another whopper included in the Miscovich memo: "Mr. Guffey stated that in front of this writer that SGD currently maintains three ledger books...."

Miscovich sums up, "Indicated in this report are enormous areas of discrepancies and irregularities that lend themselves to elements of criminal fraud." He further states that a "broader issue of criminal intent has become evident," and that "the documents are prima facie evidence of a course of conduct consistent with criminal activity and intent."

Miscovich concludes by recommending that an independent accounting firm be hired to "conduct a forensic and systematic review of the MX funds," as he has identified "a clear and definitive pattern of deception and misrepresentation while the MX Program was in operation."

Awesome.

Miscovich has allegedly since retracted the statements that he made in this memo. Last I heard, Miscovich was still employed by CB.

I bet that they are treating him like gold.

And the Wheel of Kharma churns....

;)

here is a linked article that analyzes the Miscovich memo better:

http://www.theledger.com/apps/pbcs.dll/article?AID=/20041023/ZNYT03/410230417

magician

4 April 2005, 06:50

this is a good one.

from : http://www.thestandard.com.hk/stdn/std/Focus/GC15Dh02.html

Fraud fight rises from ashes of war

March 15, 2005

Mike Battles needed money fast. It was June 2003 and his cash-starved company had just won a contract to guard the Baghdad airport in Iraq.

Battles turned to a lender with lots of cash and few questions about how it would be spent: the US-led coalition in charge of Iraq. As Battles later told criminal investigators, he descended into a vault in the basement of one of Saddam Hussein's palaces, where a US government employee handed him US$2 million (HK$15.6 million) in US$100 bills and a handwritten receipt.

To account for the money, Battles ``was informed that the contracting process would catch up,'' according to a statement Battles gave investigators.

By the time it did, the adventures of his fledgling security company, Custer Battles, had become a case study in all that had gone wrong in the early days of the US effort to rebuild Iraq, not least the haphazard and often ineffective US oversight of the projects.

Today, Battles and his partner, Scott Custer, are facing a criminal investigation, lawsuits by former employees and a federal order suspending them from new government business because of allegations of fraud.

The two men have denied any wrongdoing. They have blamed the accusations on disgruntled employees who were fired; on former employees who now compete with Custer Battles for security work in Iraq; and on government officials who harbor grudges against the company.

Court records, internal company memos, interviews with current and former employees and government investigators, and confidential documents from a Pentagon criminal investigation depict a company that ran into trouble almost from the moment it hit the ground in Iraq. Employees allegedly paid bribes, forged invoices, clashed with government officials and tried to dodge taxes. The company missed deadlines, provided shoddy equipment, failed to deliver services and botched routine security inspections, the records and interviews show.

US officials were startled to discover that Custer Battles was also operating a dog kennel and a catering service on the airport grounds, according to interviews. Just as worrisome as the allegations, perhaps, has been the US government's response.

Beginning shortly after Custer Battles won its Baghdad airport contract, at least five senior US government officials or consultants came to suspect wrongdoing by the company or its employees, records show. Yet over the next 14 months, the company continued to win new government business, and even today holds a key contract in the US effort to equip and arm Iraq's new security forces. Not until last September when the US Air Force acted to prevent the company from receiving any new federal contracts, did Custer Battles' explosive growth slow.

In most cases, high turnover and enormous workloads among government officials prevented them from taking action against a company that repeatedly deflected attempts to examine its operations, the records and interviews show. It was a messy situation easily exploited.

``In an environment where an organization is undermanned, overworked and struggling just to let contracts ... there are few checks and balances,'' said Colonel Richard Ballard, then inspector-general for the US-led forces in Iraq. ``That environment characterized the contracting process in Iraq during the second half of 2003, and probably still does today.''

A series of government audits of the Iraq reconstruction process has confirmed lax oversight and identified billions of unaccounted-for dollars.

In an interview, the company's attorney acknowledged Custer Battles made mistakes in paperwork but said Custer and Battles never defrauded the government. The attorney, John Boese, said the two men fulfilled all contract terms in the midst of a war zone.

First to raise concern about the minimal accountability by Custer Battles was Ballard, who found that its employees lacked training and equipment. In 20 on-site inspections, Ballard said, he watched guards wave trucks through without inspecting them.

Ballard said he also witnessed two company security guards in black fatigues conducting what he termed an unauthorized mission, firing an automatic weapon into the air, in an attempt to stop young Iraqis suspected of firing rounds near an airport checkpoint. He halted the attack.

Ballard said his attempt to investigate the company was blocked by Custer, who disputed his authority despite a written order from Lieutenant-General Ricardo Sanchez, the top military official in Iraq. Ballard recommended the coalition terminate the contract but took no formal action before leaving Iraq, saying he became distracted by the scandal at Abu Ghraib prison. ``I concluded that they were intentionally attempting to defraud the government,'' he said.

Frank Willis, a retired senior official at the US Department of Transportation who oversaw the civilian side of the Baghdad airport, clashed with Custer Battles repeatedly. Without seeking permission, the company opened a dog kennel at the airport, offering bomb-sniffing dogs to other clients, Willis said. It also began mysteriously importing Filipino workers, apparently to work on catering contracts.

On one visit to Custer Battles headquarters, Willis found 40 Filipinos living in cramped quarters.

Willis demanded that Custer justify use of the airport to expand his business. He said Custer rebuffed him. In the end, Willis left Iraq after six months of service, again without taking formal action. Custer Battles continued guarding the airport until last June. Although the government did not extend the contract, the company won high praise from Douglas Gould, the fourth coalition official in a year to oversee the airport.

A US official said Gould, who took over last spring, was aware of ``rumors'' about problems with Custer Battles. But nobody passed on word that the Pentagon had opened a criminal investigation of the money-exchange contract in October 2003. Soon after Custer Battles won the airport deal, it landed a second job: a US$9.8 million contract to build housing for workers on a project to exchange Iraq's old currency for newly minted dinars. That contract would grow to be worth as much as US$21.4 million.

The coalition team heading the project soon grew frustrated with Custer Battles. The company was missing deadlines to set up the camps. Its trucks frequently broke down. Subcontractors complained to coalition officials of not being paid, according to a memo from a government consultant.

Then the consultant found a spreadsheet that appeared to show the company was artificially boosting profits, according to a memo prepared by the consultant. The spreadsheet indicated the company had invoiced the government US$2.1 million for US$913,000 worth of work.

Despite the Pentagon investigation, coalition officials approved an additional US$5.6 million in contract changes, vowing to recoup any money paid out on fraudulent invoices later, records show. As the criminal investigation progressed, whistle-blowers came forward and described a complex scheme to defraud the government.

Two Custer Battles insiders told investigators that the company set up shell companies in the Cayman Islands to create fake invoices. Custer Battles would submit the invoices to the government to be reimbursed for work done by the shell companies without disclosing it owned the offshore firms.

The two whistle-blowers worked for Custer Battles before leaving under acrimonious circumstances. They have filed a civil lawsuit under the False Claims Act, which allows private citizens to sue on behalf of the government, and if successful, are entitled to a portion of the money returned to the government.

Pentagon auditors tried to take a look at the company's books on the money-exchange contract in February last year. But Custer Battles was able to block inquiries from the Defense Contract Audit Agency because there was no provision in the contract for an audit, according to the Pentagon.

Custer Battles lawyers said the fraud allegations were ludicrous because the firm lost money on the contract. Records submitted by the company say that the company received about US$9 million from the government, while spending more than US$14 million. The attorneys also said the Cayman Island companies were legitimate businesses.

``This is not about not delivering,'' Boese said. ``These are questions about accounts and contract interpretation.''

LOS ANGELES TIMES

magician

4 April 2005, 06:55

transcript from NPR:

from : http://66.98.181.12/newsources/Nov2304c.htm

First contractor fraud case
from Iraq to be unsealed

*

Transcript

______________________________

STEVE INSKEEP, host:

This is MORNING EDITION from NPR News. I'm Steve Inskeep.

Private military contractors have done much of the work for the United States in Iraq, and now one of those contractors is accused of overcharging the US Occupation Authority. The company is called Custer Battles, and it's based in Virginia. Two of its former associates have filed a lawsuit. They accuse the company of using a billing scheme to defraud the government. One of the issues is whether people working for the Occupation Authority in Iraq were legally working for the US government at all. NPR's Debbie Elliott reports.

DEBBIE ELLIOTT reporting: Bob Isakson's story sounds like a Tom Clancy novel. It all starts in Iraq just after the fall of Saddam Hussein. His company, Alabama-based DRC, was a subcontractor to Custer Battles in the $16.8 million contract from the Coalition Provisional Authority to provide security at the Baghdad international airport.

Mr. BOB ISAKSON (DRC): We began to mobilize it immediately. We had a very short period of time to mobilize, just several days to mobilize security guards and camps and security equipment, construction, things of this nature.

ELLIOTT: Custer Battles was a young company, founded by former Army Ranger Scott Custer and Michael Battles, who had come to Iraq on borrowed money. In an August Wall Street Journal article, Battles, a former Republican candidate for Congress, said he only had $450 cash when he convinced an official to put Custer Battles on the list of bidders for the airport security contract. They promised to get the job done fast and won the contract, which included two up- front cash advances of $2 million each. Isakson, a former FBI agent, says about two weeks into the job, something went awry.

Mr. ISAKSON: They approached me to participate in a scheme to defraud the government.

ELLIOTT: He says it involved bidding for cost-plus contracts, which guarantee payment for a contractor's actual costs plus an agreed-to profit margin.

Mr. ISAKSON: They would take and open a company in Lebanon and buy the materials through the Lebanese company which they would own, and then the Lebanese company would sell it to their American company at a highly inflated rate, and then they would charge their profit on top of the highly inflated rate. In other words, they would make a profit plus another profit.

ELLIOTT: Isakson says he refused to go along and warned company officials that such a plan could land them in jail. The next day at the airport camp, Isakson claims Custer Battles security guards cornered him in a hallway at gunpoint. His brother and 14-year-old son were there, too.

Mr. ISAKSON: They said, `You're terminated and you're under arrest, and don't move or we'll shoot you.'

ELLIOTT: Isakson says the guards took their weapons and ID badges and eventually turned them out of the airport compound where they made the dangerous journey from Baghdad to the Jordanian border. Isakson has filed a $70 million civil lawsuit against Custer Battles in Alabama over the ordeal. But he is also party to a $50 million federal lawsuit filed in Virginia under the False Claims Act, a law dating back to the Civil War which allows whistle-blowers to recover money for the US Treasury in alleged fraud cases and get a percentage of what they win.

The other whistle-blower in that suit is Pete Baldwin, a former country manager for Custer Battles in Iraq who now runs another firm there. Baldwin also describes a web of false billing practices designed to inflate costs and boost company profits. He cites a deal to provide fork-lifts on a security detail.

Mr. PETE BALDWIN (Whistle-blower): They confiscated old Iraqi Airways green and white fork-lifts and transported them out of the airport facility, which Custer Battles had control over, and painted them blue and then sold them back to the government on a lease. That's a blatant example where something was actually acquired free and sold back to the government.

ELLIOTT: Baldwin took his suspicions to government investigators and eventually quit over the company's billing practices. Now Baldwin claims his life has been threatened because of his actions. The Pentagon has suspended Custer Battles from receiving further military contracts, and sources say a federal criminal investigation of Custer Battles is ongoing. But a civil probe ended in October when the US Justice Department declined to join in the whistle-blower case. A spokesman says the agency won't discuss why, but whistle-blower attorney Alan Grayson says a US attorney explained it to him.

Mr. ALAN GRAYSON (Attorney): The reason they gave it to us is that the Bush administration has made a policy decision that cheating the Coalition Provisional Authority in Iraq -- basically the military and for the most part the US military -- is not the same as cheating the US government.

ELLIOTT: Grayson says it's hard to understand the decision, given the evidence against Custer Battles: witnesses from inside the company, actual invoices they claim are false and an internal company memo in which a manager warns he found, quote, "enormous areas of discrepancies and irregularities that lend themselves to criminal fraud." Custer Battles claims the allegations are baseless and come from disgruntled former employees and current competitors. Attorney Jack Bazey(ph) says the firm was simply trying to deliver in a war zone.

Mr. JACK BOESE (Attorney): We are confident that the facts will show that those are not criminal acts, they were not even civil fraudulent acts. They were acts of people trying to get a job done.

ELLIOTT: But the case may never get to that point, depending on how the courts interpret the False Claims Act and whether it applies to the interim agency set up to govern Iraq. Custer Battles is seeking to have the case dismissed.

Mr. BOESE: The funds came from--they were Iraqi funds. These are not United States funds. Any losses--and we vigorously dispute that there were any losses, but any losses were not to the United States government, and the contracts were not entered into with the United States. They were entered into with the Coalition Provisional Authority, which the government has made quite clear is not a federal agency.

Mr. NEIL GETNICK (Attorney): In my view, it's a hypertechnical defense that may very well be effective.

ELLIOTT: New York attorney Neil Getnick specializes in fraud cases. He says this one raises a significant question amid concerns about the often no-bid environment in which companies like Halliburton have received billions in contracts to rebuild Iraq.

Mr. GETNICK: And therefore, it's particularly problematic if it turns out that after a process was established favoring US companies and favoring a limited subset of US companies, it turns out there's some type of technical jurisdictional bar that absolves these companies of potential guilt under the US laws, that's very troubling.

ELLIOTT: The Custer Battles case has drawn the attention of several government watchdog groups. Patrick Burns is with Taxpayers Against Fraud.

Mr. PATRICK BURNS (Taxpayers Against Fraud): Essentially a war is being fought in which there's almost no accountability whatsoever in the government contractor arena, and I think the Custer Battles case is a perfect example of that.

ELLIOTT: Burns is alarmed that the Justice Department declined to participate in the whistle-blowers' lawsuit.

Mr. BURNS: This is one of the very first cases dealing with fraud in Iraq, and I think it's very bad for the US government, on this first case, to sort of suggest that it's going to take a pass when the evidence is so very clearly damning. And my fear is that they're signaling that in fact they are going to go soft on war profiteering.

ELLIOTT: Because they are automatically under seal by law, there's no way to know how many similar Iraq contractor fraud cases are pending.

Debbie Elliott, NPR News.

magician

4 April 2005, 07:07

from : http://newstandardnews.net/content/?action=show_item&itemid=1616&printmode=true#

U.S. Excuses Mercenary Firm Accused of Defrauding Taxpayers
by Chris Shumway (bio)

Assuming the Justice Dept. fails to sign on to a suit against private paramilitary firm Custer Battles filed by two former associates, the government will be officially ignoring a claim of some $50 million in scammed funds.

Apr 1 - Despite strong evidence from well-connected whistleblowers and military investigators that the American mercenary firm Custer Battles over-billed US occupation authorities in Iraq by tens of millions of dollars, the Bush administration has refused to pursue legal action,*so far declining*multiple invitations to join a*lawsuit brought against the company. The latest*invitation expires today.

"The government has not lifted a finger to get back the $50 million Custer Battles defrauded it of," said Alan Grayson, an attorney for two whistleblowers, former company employee Pete Baldwin and Robert Isakson, a Custer Battles subcontractor. Grayson, who spoke to Newsweek,*filed a "false claims" lawsuit last fall against the company on behalf of the federal government.

Although the judge hearing the fraud suit has twice invited the Justice Department to join the case, the Bush administration has thus far refused. According to multiple sources, Justice Department officials have privately argued that the Coalition Provisional Authority (CPA), which governed Iraq during the first year of occupation, was not an arm of the US government but rather a multinational institution. Following this logic, the Bush administration can claim that technically it has not been defrauded by Custer Battles, nor by any other company working under CPA contracts.

Grayson counters that position by pointing out that a 2003 law signed by George W. Bush himself -- which authorized $18.7 billion for reconstruction in Iraq -- explicitly referred to the CPA as "an entity of the United States Government." And at least one CPA contract with Custer Battles indicates it is a Department of the Army document and is signed by American contracting officer Patricia G. Logsdon of the US 336th Finance Command.

The administration's failure to join the suit effectively makes Iraq a "free fraud zone," in the words of Frank Willis, a former CPA official who testified before Congress in February that he handed $2 million in shrink-wrapped $100 bills to a representative from Custer Battles without properly accounting for the cash award. Willis, who indicated that paying corporations in cash without collecting receipts was a matter of policy, also provided a photograph showing himself and two other CPA employees smiling while holding bricks of cash he says they handed to a representative of Custer Battles minutes later.

Berlin-based Transparency International, an anti-corruption watchdog organization, recently criticized the CPA for its handling of reconstruction contracts in Iraq. A report by the group warns that unless immediate corrective measures are taken, Iraq's reconstruction could become "the biggest corruption scandal in history."

The suit filed by Baldwin and Isakson claims that Custer Battles double-billed the CPA for salaries and that they repainted forklifts they found at Baghdad airport before leasing them back to the US government at a rate of $1,000 per month per machine.

In addition to alleging fraud, the suit claims that after Isakson complained about Custer Battles' practices, company employees held him and his 14-year-old son at gunpoint. According to the suit, the employees then kicked Isakson and his son off the US base at the Baghdad airport.

Other charges of brutal treatment have come from former Custer Battles security personnel.

Four former US military veterans who worked for Custer Battles in Iraq came forward last month saying they witnessed other company employees brutalizing Iraqi civilians. According to NBC, the men, who say they quit the company after a few missions, claim that heavily armed security operators on Custer Battles' outings frequently fired at civilians indiscriminately as they ran for cover. The Army told NBC it is investigating the accusations.

Newsweek reports that in 2004 Steven Shaw, the Deputy General Counsel of the Air Force, asked that Custer Battles be banned from future business with the US. He said the company had "created sham companies, whereby [it] fraudulently increased profits by inflating its claimed costs." Shaw's recommendations came nearly a year after an Army inspector concluded that Custer Battles was incompetent and had refused to obey rules established by the CPA.

According to the LA Times, Custer Battles was a newly formed company with no experience in the security industry when in the spring of 2003 it landed one of the first contracts issued in post-invasion Iraq. The no-bid contract to maintain security at the Baghdad airport was worth $16 million, the Times reported.

The Virginia-based company is headed by Scott Custer, a former Army Ranger, and Mike Battles, a former CIA employee, who was fined by the Federal Elections Commission for misrepresenting campaign contributions during a failed race for Congress in Rhode Island in 2002. Battles has also been a commentator for the Fox News Channel.

In August 2003, according to Shaw's report, the company won a contract to provide support for a currency exchange program in which Iraqis traded in their old currency for new Iraqi dinars. The "cost plus" contract paid all the company's operational expenses, plus a 25 percent markup for overhead and profit. A few months later, Custer Battles representatives accidentally left a spreadsheet in a meeting that was later discovered by CPA employees, the LA Times reported. The spreadsheet reportedly showed that although the currency-exchange operation had cost the company $3.7 million, Custer Battles billed the CPA for $9.8 million, a markup of 162 percent.

Richard Sauber, an attorney for Custer Battles, who says his clients deny the charges against them, doesn't think the Bush administration will*accept the judge's latest invitation*to join the false claims suit. "I'll bet you $50 dollars they will not show up," he told Newsweek.

© 2005 The NewStandard. See our reprint policy.

magician

4 April 2005, 07:36

comments from the ranks: http://216.239.57.104/search?q=cache:AktsJIoZGFEJ:www.alicp.com/forums/topic.asp%3FTOPIC_ID%3D363+%22Job+seekers+beware+o f+Custer+Battles+LLC+Security%22&

magician

5 April 2005, 16:21

Holy shit.

Can it be that Scott Custer is taking what money he still has squirreled away and is waddling for the hills as fast as his fat ass will carry him?

from : http://www.washingtonpost.com/ac2/wp-dyn/A20165-2005Apr1?language=printer

washingtonpost.com

Justice Dept. Says U.S. Law Applicable in Iraq Contracts

By Griff Witte
Washington Post Staff Writer
Saturday, April 2, 2005; Page E01

The Justice Department gave critical support yesterday to whistle-blowers in a federal lawsuit against a U.S. security contractor, concluding that the company can be held liable for allegedly defrauding authorities in Iraq of tens of millions of dollars.

The opinion came in response to a request by U.S. District Judge T.S. Ellis III, who had asked for the government's help in decoding a basic question at the heart of the case against Custer Battles LLC: Does federal fraud law apply when the contract was administered by the Coalition Provisional Authority, which governed Iraq for a year after the U.S. invasion.

Custer Battles lawyers had argued that because the CPA was international, and because the money at stake was Iraqi and not American, accusations that the company defrauded the occupation authority didn't belong in U.S. courts.

Custer Battles was one of the first firms to enter Iraq after the invasion and quickly picked up a contract to secure Baghdad International Airport. Last year, the Air Force suspended the firm from receiving contracts, citing evidence of fraud.

While not taking a position on the truth of the alleged wrongdoing, the Justice brief concluded that anti-fraud law would apply because of the major role U.S. officials played in the CPA, and because U.S. authorities had seized much of the Iraqi money in question after the military victory there.

Ellis still has to rule in the matter.

Legal experts said the department's stand may open the door for other whistle-blower lawsuits against contractors operating in Iraq under the CPA. The Custer Battles case is the first of its kind to be unsealed.

"What this means is that, at least in the eyes of the Justice Department, contractors working in Iraq are not necessarily entitled to a free pass on actions that would have exposed them to liability in the U.S under the False Claims Act," said Steven L. Schooner, a professor of government contracting law at George Washington University.

The False Claims Act dates to the Civil War, allowing private citizens to sue on behalf of the government to recover money that's been fraudulently obtained. If a lawsuit succeeds, the defendants can be liable for up to three times the amount of the original fraud, and the whistle-blowers receive a percentage of the judgment.

The law was invoked last year against Custer Battles when two men who had worked for the company in Iraq claimed it had cheated the CPA out of tens of millions of dollars by funneling money through Cayman Islands subsidiaries and billing for nonexistent costs.

"As a taxpayer, I'm relieved to hear that the government is not going to simply walk away from all the fraud that was committed in Iraq," said Alan Grayson, the whistle-blowers' attorney.

Richard Sauber, an attorney for the company, said that the government brief was "disappointing."

"We don't believe the Justice Department's ruling was consistent with the language and spirit of the [False Claims Act]. And we have every hope that the court will agree with us."

Last fall, the Justice Department declined the option to join the case on behalf of the plaintiffs. Since then, political pressure has been building for the government to do something to demonstrate that contractors charged with cheating the CPA could face some form of sanction. Democrats in Congress heard witnesses on the matter in February, and Republican Sen. Charles E. Grassley (Iowa) wrote to Attorney General Alberto R. Gonzales urging him to find that the False Claims Act applied to cases involving the CPA.

Yesterday, Grassley expressed satisfaction with the department's brief. "The Justice Department's support for extending the False Claims Act in this matter is a step in the right direction," Grassley said in a written statement.

Grayson said the next step should be for the department to reconsider its decision not to intervene in the case. "What they should be doing is trying to recover the money," he said.

Custer Battles had operations in Fairfax and Rhode Island, but Sauber said the company is no longer operational because it was prohibited last year from receiving government contracts. "The Air Force suspension has effectively put them out of business," he said. "They have lost all their contracts and all their assets."

PACE

6 April 2005, 13:25

All,
I was told by a former CB employee (he left CB and Iraq in December 2004) that Mr. Custer and Battle had sold CB and it's assets to another company. My acquaintance said the company that purchased CB is called "Danubia ..." (can't remember what the exact company name was right now). My acquaintance also reported that Mr. Custer and Battle were still principals in the new company. My acquaintance believes that Danubia is a shell company set up in Romania to try and avoid the US restrictions on their ability to bid on contracts.
I saw an advertisement earlier this week on a job board from a "Danubia ..." for PSD guys.
Beware.

ktek01

6 April 2005, 13:34

magician

6 April 2005, 14:31

never fear.

they will fool no one.

they can run, but they cannot hide.

CusterBattles has sowed such discord and contempt in its wake, and alienated so many former employees, and negatively impressed so many competitors and former clients alike, that they will never escape the kharmic debt that they have created.

what is happening to the people who created this company is of their own doing. They brought this on themselves.

they will waste their money on attorneys, and accountants, and airfares, and hotels, and dinners. It will not last.

if their attorneys have not secured large retainers, they should concern themselves with their compensation.

there is little doubt in my mind that Isakson and Baldwin will prevail in their lawsuit. What I doubt is whether they will ever collect a dime from a favorable judgement. No doubt, Scott Custer is sitting with attorneys and accountants now, planning for the implosion of his company. Hiding money.

these West Pointers have shamed themselves, and sullied that institution by extension. They will find that allies are more and more rare.

if they were smart....they would just vanish. Take what money is left, and disappear.

I doubt that they will do it. Custer is too arrogant. He believes that he is the victim of a vast conspiracy.

He is a very rude man. He offends most people that he meets. He may never realize it.

It does not matter. What is happening now is preordained, and inevitable. All that remains to be done is to play out the game, and hash out the details.

Good riddance.

magician

7 April 2005, 17:19

from : http://www.csmonitor.com/2005/0407/dailyUpdate.html

World > Terrorism & Security
posted April 7, 2005, updated 12:30 p.m.

Iraq is becoming 'free fraud' zone

Corruption in Iraq under US-led CPA may dwarf UN oil-for-food scandal.

By Tom Regan | csmonitor.com

A former senior advisor to the US-led Coalition Provisional Authority (CPA), which ran Iraq until the election of an interim Iraq government last January, says that the US government's refusal to prosecute US firms accused of corruption in Iraq is turning the country into a "free fraud zone."

Newsweek reported earlier this week that Frank Willis compared Iraq to the "wild west," and that with only $4.1 billion of the $18.7 billion that the US government set aside for the reconstruction of Iraq having been spent, the lack of action on the part of the government means "the corruption will only get worse."

More than US money is at stake. The administration has harshly criticized the United Nations over hundreds of millions stolen from the Oil-for-Food Program under Saddam [Hussein]. But the successor to Oil-for-Food created under the occupation, called the Development Fund for Iraq, could involve billions of potentially misused dollars.

In late March, the New Standard reported, the annual Global Corruption Report issued by the "corruption watchdog," Transparency International (TI), heavily criticized the US for "mismanaging" Iraq's oil revenues and "for using faulty procedures for awarding reconstruction contracts."
The report also criticizes efforts to rapidly privatize Iraqi assets and industries as a means of reducing the country’s debt. TI warns that unless immediate corrective measures are taken, Iraq’s reconstruction could become 'the biggest corruption scandal in history.'

The BBC reported that a UN report that came out in January also criticized the US as being a "poor role model" in "keeping corruption at bay."

The Christian Science Monitor reported on other allegations of corrpution in Iraq leveled against companies, including a "report by special inspector Stuart Bowen [which] found that $8.8 billion dollars had been disbursed from Iraqi oil revenue by US administrators to Iraqi ministries without proper accounting."

Meanwhile the Washington Post reported recently that both the Clinton and George W. Bush administrations had long known that monies used in the in the UN oil-for-food program were lining the pockets of Saddam Hussein, and did little to stop it.

CNN reported in February that "unclassified State Department documents sent to congressional committees with oversight of US foreign policy" show that the US actually condoned Jordan and Turkey breaking the UN sanctions against Iraq.

Rep. Robert Menendez, a New Jersey Democrat on the House International Relations Committee, one of five panels probing the oil-for-food program, told CNN the United States was 'complicit in undermining' the UN sanctions on Iraq.

'How is it that you stand on a moral footing to go after the UN when they're responsible for 15 percent maybe of the ill-gotten gains, and we were part and complicit of him getting 85 percent of the money?" Menendez asked.
One of the corruption cases that has drawn the most attention has been the attempts by two former employees of Custer Battles, a "private security company that was one of the highest-profile firms operating in Iraq" to sue the company on behalf of the US government. The whistler-blowers allege that the company and founders Mike Battles and Scott Custer, set up "shell companies in the Cayman Islands to falsely bill the government on two Iraq contracts."

The Washington Post reported last Friday that the Justice Department gave "strong support" to the men suing the company, "concluding that the company can be held liable for allegedly defrauding authorities in Iraq of tens of millions of dollars." Twice before the US governmment had declined to participate in the case when asked to do so by lawyers for the plaintiffs.

The judge, however, had asked the Justice Department "Does federal fraud law apply when the contract was administered by the Coalition Provisional Authority, which governed Iraq for a year after the US invasion?"

Newsweek reported that lawyers for Custer Battles, and until last week, the Bush administration, had argued the CPA was an "international authority" and thus US laws could not be used.

It [the US government] has argued privately that the occupation government, known as the Coalition Provisional Authority, was a multinational institution, not an arm of the US government. So the US government was not technically defrauded. Lawyers for the whistle-blowers point out, however, that President George W. Bush signed a 2003 law authorizing $18.7 billion to go to US authorities in Iraq, including the CPA, 'as an entity of the United States government.' And several contracts with Custer Battles refer to the other party as 'the United States of America.'
Max Boot, senior fellow at the Council on Foreign Relations, writes in the Los Angeles Times, the heavy use of contractors by the Bush administration not only lead to corruption problems, but is impeding the US military's progress in Iraq.

Peter W. Singer, a fellow at the Brookings Institution and author of 'Corporate Warriors,' estimates that there are 20,000 to 30,000 civilians in Iraq performing traditional military functions, from maintaining weapons systems to guarding supply convoys. If you add foreigners involved in reconstruction and oil work, the total soars to 50,000 to 75,000.

To put this into perspective: All of Washington's allies combined account for 23,000 troops in Iraq. In the latest issue of Foreign Affairs, Singer quips that "President George W. Bush's 'coalition of the willing' might thus be more aptly described as the 'coalition of the billing.' "

And the corruption problems go far beyond US contractors and other international firms. Reuters reported in March that one of the biggest problems facing the establishment of a legitimate government in Iraq is the corruption rampant in many Iraq government departments.

Radhi Hamza al-Radhi, head of the Commission on Public Integrity (CPI), an agency set up by the CPA to fight fraud committed by Iraqis, said that he faces many obstacles to fighting corruption in Iraq, including pressure from government officials to not work so hard.

Our work is new in Iraq and being an observer is not welcomed by many. We were asked many times by the government via official letters or phone calls not to speak to the media or not to speak to ministers. There were too many cases of 'Don't...'.

Wench

27 April 2005, 10:02

Mobile Register (http://www.al.com/news/mobileregister/index.ssf?/base/news/111459333790440.xml)

desertdoc

27 April 2005, 10:59

Man, things were fast and loose in those days, BUT these guys took the cake too!!! :eek:

zdfg

30 April 2005, 13:10

Even though the principals and corrupt business managers deserve every ounce of derision you can heap on them, I would like to say that there were some pretty cool guys who came out to camp Bristol early on to get involved.

I don't want to name names for obvious reasons, but there was a trio of recently retired 5th group NCO's who added a real flavor to the mix (Thanks for the journey down the rabbit hole guys!).

One crazy ex-SEAL with false teeth who always seems to pop up at the shit sandwich locations.

A young former 3/75 kid who still hasn't left Iraq in 2 years.

A former 7th group dude with a broken back who hasn't been home for 2 years.

2 former Recon Marines who punked the biggest wanna-be on the camp first day in country (CHEERS!).

An abrasive 10th GRP former Ranger who was right all along (my bad bro!),

Another guy who's exploits I still hear talked about on armed forces radio and stood in front of Ronald Reagan one day in the past.

A guy who took a grazing round to the cranium, cause Scott (fatass) Custer got scared living in his palace in Mansour while the Ghurkas were stacked like cordwood in a shitty trailer.

A few females who kept everyone's morale high.

A Lebanese guy who gave up his cushy job by the pool in Kuwait to carry a gun on MSR Tampa.

The Iraqi's who actually wanted to do something besides line their pockets with American money!

And a big thumbs up to the truly quiet professionals who stood day after day in the hot sun doing the shitty jobs no one wanted. The former Ghurka rifles and wanna be Ghurka rifles.

And a few other guys who's contribution didn't involve screwing over the government or your employees.

magician

12 May 2005, 06:17

there were some good dudes there, for sure, at least for a little while.

we all would have stayed if the company had not been such a soup sandwich.

here is an excellent backgrounder on Mr. Mohammed, as we called him.

from : http://writingcompany.blogs.com/this_isnt_writing_its_typ/2005/04/mohammed_abu_da.html

In their most recent story on the Stoffel-Wemple murders, Los Angeles Times reporters Ken Silverstein and T. Christian Miller describe the role of Raymond Zayna, the Lebanese middleman through whom payments to Stoffel's company, Wye Oak Technologies, were to have been funneled. It seems likely, however, that Zayna was representing the interests of yet another Lebanese businessman—one who figures prominently in a variety of business dealings between Lebanon and Iraq:

Mohammed abu Darwish, worked with Zayna's firm, General Investment Group, on the contract and participated in meetings with task force officials, e-mails and interviews show. In an unrelated case in September, Darwish was blacklisted by the Pentagon from receiving any future American contracts for his role in what it called a scheme to defraud the U.S. government of millions of dollars on a security contract in Iraq, according to a U.S. Air Force document.

But who, exactly, is Mohammed abu Darwish?

Well, he first surfaces in a pre-invasion coup plot that was allegedly concocted by Britain's MI-6 in an effort to replace Saddam with a Baathist with whom the West could deal more rationally. Darwish's father, Issam abu Darwish and an associate, Imad el Hajj, were recruited in attempt to "turn" Tahir Jalil al Habbush, head of Iraq's Mukhabarat secret police. "They told MI-6 and the CIA they made contact with Habbush," says an anonymous source. "MI-6 thought they could penetrate Saddam Hussein's intelligence at the highest level. They were stupid on Iraq."

Days before American and British forces invaded Iraq, as Habbush remained loyal to the regime, El Hajj brokered an eleventh-hour attempt by Saddam to avert war without stepping down. Washington rejected the overture.

Habbush, a member of Saddam's Tikriti clan and sixteenth in the United States's pack of 55 most wanted Baathists, is still at large. Abu Darwish's son, Mohammed, now [02-08-04] enjoys a lucrative contract as head of security at Baghdad airport. [My italics.]

Darwish also turns up in this eve-of-the-invasion story about the effect of sanctions on Iraq, complaining about the high cost of living in Baghdad:

"It's 20 to 30 percent more expensive than in Lebanon," calculates Mohammad abu Darwish, standing before the [cash register] armed with two loaded baskets.

But things really start to get interesting when Darwish gets detained in January of 2004 at the Beirut airport with $12 million in Iraqi dinars:

Three alleged smugglers were held in custody Friday after they were unable to provide convincing answers to questioning on why they were transporting roughly $12 million in cash from Iraq.

State Prosecutor Adnan Addoum met with the Iraqi Charge d’Affaires in Beirut Tahseen Elwan Ena, and asked him how the plane landed in the Baghdad Airport in the first place without prior authorization from the Iraqi authorities. Ena told Addoum, that the Iraqi Central Bank governor, was not aware of the money transfer taking place.

Addoum asked Ena to provide an official answer from the Iraqi authorities regarding one suspect's—Mohammed Issam abu Darwish—assertion that he is undertaking business operations on behalf of U.S. authorities.

Addoum also questioned Mazen Bsat, the owner of the plane that was transporting the money, and asked him about the reasons behind his frequent visits to Baghdad. Bsat claimed he was going there frequently with abu Darwish and that the latter had received authorization to land from the Iraqis.

Bsat also said that on the last trip abu Darwish asked him to remove all the passenger seats and to replace them with 21 boxes, each containing 1 billion Iraqi dinars.

He also said that abu Darwish also asked him to place an additional seat for Richard Jreisati, who accompanied them on the trip.

Bsat said that he flew the plane himself and that Michel Mkattaf was waiting for them in Beirut Airport. He was asked to provide a schedule for the trips his plane had made to Baghdad. Bsat, along with customs agent Zouzou Zouein, were released, pending investigation.

The case raised public attention Friday because of the close ties between the three alleged smugglers and prominent political figures and political parties. Michel Mkattaf is a relative [son-in-law] of former President Amin Gemayel, Richard Jreisati was identified as a former member of the Lebanese Forces and abu Darwish a former member of the Amal Movement.

However, a short statement issued by the Amal Movement on Friday denied media reports issued Thursday regarding abu Darwish’s former membership of the movement. “The information is completely untrue,” the statement concluded.

The smuggling incident dominated the newspapers in Beirut for much of early 2004, as defense attorneys, prosecutors and politicians in both Lebanon and Iraq wrangled over the case.

From the Beirut Daily Star (January 16, 2004):

State Prosecutor for Financial Fraud Khalil Rahhal ordered the arrest of four people on charges of smuggling Iraqi money worth $12 million into the country on Thursday.

Three of the four men arrested at the airport coming from Jordan were identified as Michel Mkattaf, a relative of former President Amin Gemayel, Richard Jreisati and Mohammed Issam abu Darwish. According to a judicial source, investigations will focus on the source of the money, whether it was stolen, and who was behind the operation.

The alleged smugglers were caught with 19.5 billion Iraqi dinars in their possession. The newly printed Iraqi currency is priced at 1,300 dinars for every dollar and suffers from rapid inflation.

From the Beirut Daily Star (January 19, 2004):

The Lebanese government said Saturday that it would not return billions of Iraqi dinars seized last week at Beirut Airport pending further investigation.

Specifically, Lebanese officials demanded proof that the money was brought to cover a legal contract between Lebanese businessman Mohammed Issam abu Darwish and the Iraqi Interior Ministry.

About 19.5 billion Iraqi new dinars, roughly equal to $12 million, were intercepted at Beirut Airport Wednesday. Three people, including abu Darwish, have been held on suspicion of attempting to smuggle the money as part of a plan to undermine the country’s domestic stability.

State Prosecutor Adnan Addoum will decide Monday the fate of the three detainees. Abu Darwish, an alleged former Amal Movement official; Richard Jreisati, a former official in the Lebanese Forces; and Michel Mukattaf, owner of the Mukattaf Exchange Company and son-in-law of former President Amin Gemayel.

Contrary to earlier reports published in The Daily Star, newly released information suggests that Mukattaf is innocent and will be released on Monday.

Investigations and information provided by the Iraqi Interior Ministry showed that abu Darwish brought the cash to Lebanon and was planning to have it exchanged through Mukattaf’s company.

From the Beirut Daily Star (January 20, 2004):

State Prosecutor Adnan Addoum affirmed Monday that judicial authorities would continue investigating the alleged smuggling of Iraqi funds into the country, despite the release on Monday of three people who had been held in custody for four days for questioning.

Addoum told reporters that the authorities still had many questions about the case, which involved transporting the equivalent of roughly $12 million in new Iraqi dinars from Baghdad to Beirut by air.

He explained that the Chief Public Prosecutor for Financial Fraud, Khalil Rahhal, decided to release the detainees—Mohammed Bu Darwish, Richard Jreisati and Michel Mkattaf—pending further investigation, though they are prohibited from leaving the country and their passports have been confiscated. The money was also confiscated pending the presentation of “definite documents” supporting claims that it was being transported legitimately, he said.

Addoum said that the investigation would continue, but he had to release the three men according to Lebanese law regarding “precautionary detention.”

The state prosecutor also said that he sent the anti-laundering committee at the Central Bank a copy of his findings in the case so far. He hopes to use provisions of the anti-laundering law to exempt the funds from the protection of banking secrecy.

This measure will open the door for an investigation into money laundering, Addoum said, adding the American military attache at the US Embassy had visited him to discuss the case. However, he did not disclose any details about the talks.

The prosecutor said that he met with the Iraqi Charge d’Affaires, who advised him that the Iraqi Interior Ministry was aware of the operation and had sent a fax to its Lebanese counterpart in Beirut.

From the Beirut Daily Star (January 28, 2004):

State Prosecutor Adnan Addoum was informed on Tuesday that Iraqi authorities will send him a memo demanding the return of money that has been confiscated by Lebanese authorities, according to sources.

The sources told The Daily Star that Addoum received a call from the Iraqi Charge d’Affaires in Lebanon, Tahseen Elwan Eena, telling him that a memo will be sent through diplomatic channels.

Iraq’s Interior Ministry said on Monday that it could not be held responsible for the decision of Lebanese businessmen to fly to Beirut with billions of Iraqi dinars, which they had cashed for a procurement contract.

“Our responsibility stopped when the money was paid,” interim Interior Minister [and brother-in-law of Iraqi interim prime minister Iyad Allawi] Nuri Badran said.

He stressed that the Lebanese businessmen agreed to be paid in Iraqi dinars and cashed the money from the Rafidain Bank in Baghdad. “I don’t know why they chose a currency exchange company abroad (to convert the dinars),” he added.

Badran said that the 9.5-billion dinar contract was to supply the ministry with necessary equipment, such as protection and tools for police officers to defuse bombs and strips to protect windows from being shattered by explosions.

The amount was equivalent to $10 million when the contract was signed earlier this month, he said.

He did not explain, however, why the Interior Ministry had not sent proof of the contract, as requested by the Lebanese authorities who seized the dinars from the businessmen on their arrival in Lebanon.

“We have paid the money, we are now awaiting the equipment,” he said.

But the Lebanese authorities said on Jan. 17 they would not return the money until they had proof that the money was from a legal payment for a contract.

Four Lebanese men were detained for several days on suspicion of attempting to smuggle the money as part of a speculation scheme and their passports were confiscated by the Lebanese authorities.

Iraqi central bank officials have conceded that large quantities of the new currency, particularly the easy to carry 25,000 dinar notes, may be being smuggled to neighboring countries.

Smuggling committed by traders hoping to make hefty gains * especially when Iraq’s economy improves and its oil exports increase has caused the currency’s value to spike wildly.

From the Naharnet Newsdesk (February 3, 2004):

A member of the Iraqi Governing Council said Lebanon will return the Iraqi millions in its banks, but he gave no indication of when it will happen.

Mouwafak al-Rubaie met the speaker of Lebanon's parliament, Nabih Berri, together with fellow Governing Council member Younadem Kanna….

The two-day visit of al-Rubaie and Kanna comes two weeks after Lebanese authorities confiscated 19.5 billion Iraqi dinars (US$15.6) from a private plane that flew to Beirut from Iraq.

The Iraqi Interior Ministry said the money was to be used for government purchases. A Lebanese businessmen on the plane, Mohammed Issem abu Darwish, told investigators the money was to pay mainly for armored cars for Iraqi officials.

Al-Rubaie and Kanna did not say whether they spoke to Berri about the confiscated dinars.

From the Beirut Daily Star (April 9, 2004):

A criminal judge postponed the trial of four Lebanese until June 3 on Thursday. They are accused of violating regulations and laws by smuggling 19 billion Iraqi dinars in cash from Baghdad into Beirut without formally notifying the Lebanese security authorities and the Central Bank.

Judge Fawzi Khamis is due to question the accused at a forthcoming court session on the circumstances of the smuggling of the money, which was later recovered by the Iraqi authorities.

The five people involved in the case are: Michel Mkattaf, owner of the Mkattaf Exchange Company and a close relative of former President Amin Gemayel; Richard Jreisati, formerly in charge of foreign relations in the disbanded Lebanese Forces militia; Mazen al-Bassat, owner of Bassat Tourist Company; and Mohammed abu Darwish and Zuzu Zouein.

Lawyers acting on behalf of the defendants were in court Thursday for the trial and were notified of the postponement and the need for their clients' presence for questioning.

And, then, in a bizzare twist, the case was more or less inexplicably dismissed.

From the Beirut Daily Star (July 16, 2004):

The Lebanese judiciary ended legal proceedings against five Lebanese charged with violating banking laws by illegally transporting $13 million from Baghdad to Lebanon on Jan. 24, 2004.

The defendants were identified as Mohammed Abu Darwish, an official working for a private security company at the Baghdad airport; Zouzou Zouein, a customs agent at Beirut International Airport; Richard Jreisati, a former foreign affairs official working for the disbanded Lebanese Forces; Michel Mouktafi, the owner of the Mouktafi Company for Money Exchange and former president Amin Gemayel's brother-in-law; and Mazen Bsat, the owner of the Bsat al-Rih Airlines Company as well as the owner of the airplane that transferred the money from Iraq to Lebanon.

Presided over by Beirut's Penal Magistrate Fawzi Khamis, the court said the suspects would not be tried because "the money that left Baghdad Airport was allocated to buy equipment for Iraq's Interior Ministry with its approval."

The defendants chose Lebanon to exchange the money into a foreign currency due to the country's financial facilities, according to the court.

Khamis said similar sums of money enter and exit Lebanon on a regular basis with great freedom, due to the free-economic system in the country.

He added that the Central Bank's special investigation committee for fighting money laundering had issued a decision on the issue saying the source of the Iraqi money was legal.

Mohammed abu Darwish's name also surfaces in connection with a lawsuit against Fairfax, Virginia-based Custer Battles by a former executive of that company, William Baldwin, and one of its subcontractors, Robert Isakson—who together accuse the company of defrauding the U. S. government.

A $33,000 food order in Mosul was billed to the U.S.-led interim government of Iraq at $432,000. Electricity that cost $74,000 was invoiced at $400,000. Even $10 kettles got a 400 percent markup.

Documents unearthed as part of a whistleblower suit against Fairfax, Va.'s Custer Battles reveal for the first time the extent to which the defense contractor is accused of gouging the Coalition Provisional Authority, which governed Iraq following the U.S. invasion of the country in 2003.

Among those documents is a spreadsheet that appears to show the company billing the government nearly $10 million for dozens of items, including food, vehicles, and cooking pots. The total cost to Custer Battles, according to the spreadsheet, was less than $4 million—a profit margin of 150 percent, far higher than the 25 percent margin allowed under its contract.

For critics of the Bush administration's handling of postwar Iraq, Custer Battles has become something of a symbol of contractor excess during the 14-month period that the Coalition Provisional Authority governed Iraq. The company was able to secure tens of millions of dollars' worth of security and logistical contracts from the CPA—despite the fact that it didn't even exist until just months before the invasion of Iraq.

Last fall, Custer Battles was suspended from government contracting after Pentagon investigators documented evidence indicating that the company had defrauded the CPA by inflating its costs. The scheme, according to the investigation, involved a series of "sham" companies that were used to produce false invoices and hide the actual costs of items.

Darwish ("a citizen of Lebanon who resides in Lebanon and Iraq") is named as a defendant in the lawsuit in his capacity as founder of Custer Battles Levant, the Beirut-based arm of the company, and a company called Secure Global Distribution, headquartered in the Cayman Islands. According to the complaint, Darwish and his co-defendants "were directly involved in the scheme to use intermediary shell companies toobtain excess profit mark-ups on the cost-plus items in the ICE [Iraqi Currency Exchange] contract, and to bill for items and services that they did not provide."

There's more background on the Custer Battles lawsuit here.

It's also curious that the Fairchild SA-227 Metro owned by Flying Carpet bears the name "Custer Battles Levant" on its nose, right above the name "Flying Carpet." (The same plane was used to transport two Lebanese businessmen, Sharbel Karam al-Haj and Aram Nalbandian, who had been kidnapped by by militants from the group of al Qaeda operative Abu Musab al-Zarqawi last October. It may also be the same plane whose interior appears in the most recent Stoffel-Wemple video.)

Darwish's aims seem to be as much political as they are mercenary, however. A report in the Beirut Daily Star from last August indicates that he has founded his own political faction in Lebanon.

A new group, called the United Lebanon Gathering was created Sunday at the town of Mosseileh in the South.

The group was started by businessman Mohammed Issam abu Darwish before a large crowd featuring politicians as well as religious and political figures.

Abu Darwish, who said he was not the leader of the group but would stand for election to that post at the next general assembly, added that the group was not a party. "The United Lebanon Gathering is a humanitarian, social, cultural and health gathering."

He added that he belonged to the Musa Sadr school. But Sadr "was not so much a Shiite as a Lebanese."

Abu Darwish said that Sadr had prayed in churches and monasteries as well as mosques because he considered them as houses of God.

In answer to a question on whether the new movement supported President Emile Lahoud, Abu Darwish said: "Lahoud more than likely does not know about the new group. But perhaps he will hear about it from the media Monday."

Abu Darwish said he had expressed appreciation to "anyone who took part in the liberation of the land." But the opening statement was free of any allusion to the anti-Israeli national resistance.

This report, from Lebanonwire.com, sheds more light on the United Lebanon Gathering:

On Aug. 1, 2004, a new grouping was proclaimed in the southern Lebanese town of Musseileh, only a short distance from Berri's residence. Issam Abu Darwish, a prominent Shiite businessman who is close to Speaker Nabih Berri and also a close friend of former President Amin Gemayel, proclaimed on Sunday the birth of a new Shiite group called al-Kiyan (entity) Gathering, As Safir and daily AlMustaqbal said August 2.

"I would like to point out that our friends and contacts are numerous ... We will put up with those who fought against our group before it was even born. And regardless of the obstacles we will work because the nation requires sacrifices regardless of the price," Abu Darwish said.

"We are not a party and we will never be one. We are not against any of the forces existing on the political scene and not an alternative to anyone. We don't want to cancel the others... However, we will be in the forefront of the march to defend the nation, which is passing through very dangerous phases and circumstances," he added. "Our gathering is for a united Lebanon... It is a humanitarian, social, cultural, health and development gathering... Furthermore, in politics we will stay away from degradation and violations and pettiness at all levels," Abu Darwish said.

He pointed out that the group was inspired by the political line or trend of missing Shiite Imam Musa Sadr, the founder of the Shiite Amal movement led by Speaker Berri. "Before politics, we are interested in projects, which are many and varied, including social, educational, cultural and health projects... Nevertheless, in politics we will not be lenient or flexible with corruption and we will not be idle spectators, but, we will speak up bluntly," he added.

The new group underscored the need for excellent and distinctive relations with Syria, the main power broker in Lebanon with some 20,000 troops deployed in several Lebanese regions. "Syria saved Lebanon from being partitioned and backed the process of liberating the south…." Abu Darwish said urging an end to hostile campaigns against Damascus.

Could it be purely coincidence that Darwish's formation of the pro-Syrian political group occurred in the same month as the fateful visit of Rafik al-Hariri to Damascus, in which the former Lebanese Prime Minister was allegedly told by President Assad: "If you and Chirac want me out of Lebanon, I will break Lebanon"?

All in all, Mohammed abu Darwish is clearly a "connected guy," who could be the key to unravelling the mysterious deaths of Dale Stoffel and Joe Wemple last December. And with his close ties to both Nabih Berri and Amin Gemayel, he is without doubt a significant force in the Byzantine politics of Lebanon.

Posted by Rodger on April 13, 2005 at 09:15 AM | Permalink

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12 May 2005, 06:27

from : http://www.utexas.edu/conferences/africa/ads/379.html

BRITISH BROADCASTING CORPORATION RADIO 4
TRANSCRIPT OF “FILE ON 4” – IRAQ
CURRENT AFFAIRS GROUP
TRANSMISSION: Tuesday 1st February 2005 2000 - 2040
REPEAT: Sunday 6th February 2005 1700 - 1740
REPORTER: Gerry Northam
PRODUCER: Jenny Chryss
EDITOR: David Ross
PROGRAMME NUMBER: 05VY3005LHO
1
THE ATTACHED TRANSCRIPT WAS TYPED FROM A RECORDING AND NOT COPIED
FROM AN ORIGINAL SCRIPT. BECAUSE OF THE RISK OF MISHEARING AND THE
DIFFICULTY IN SOME CASES OF IDENTIFYING INDIVIDUAL SPEAKERS, THE BBC
CANNOT VOUCH FOR ITS COMPLETE ACCURACY.
“FILE ON 4”
Transmission: Tuesday 1st February 2005
Repeat: Sunday 6th February 2005
Producer: Jenny Chryss
Reporter: Gerry Northam
Editor: David Ross
NORTHAM: The news from Washington was deliberately held
back until after the Iraqi elections, for fear of the consequences. Auditors in the US
Government have checked the accounts of the oil fund as managed by the Coalition after
the war, and found $8.8 billion missing - more than 40% of the total. They can’t say
where it’s gone, but they certainly can’t be sure it’s been spent on reconstructing the
country for the benefit of its people, which is what the oil money was supposed to do.
At the same time, details have begun to emerge of how huge sums of Iraqi and American
money were lost under the Coalition. File On 4 has investigated allegations of negligence,
waste, dodgy contracts and outright fraud, which swept up hundreds of millions of dollars.
LEENDERS: We can only guess how much disappears in private
pockets. I really fear that Iraq reconstruction will turn into one of the biggest corruption
scandals in history.
SIGNATURE TUNE
ARCHIVE CLIP – ACTUALITY OF CROWDS
REPORTER: …five years of hatred and rage as they jump up on
the statues, chanting …
2
NORTHAM: As both the statue and the regime tumbled in
Baghdad, Iraqis saw the end of decades of tyranny. They hoped it would also bring an end
to corruption. But even some former exiles who worked with the Americans to resuscitate
government and the economy have begun to wonder what happened to the symbols of
Saddam’s opulence. The political scientist, Dr Isam al-Khafaji, was a leading member of
the post-war Iraqi Reconstruction and Development Council, until he resigned in
disillusion only months after the war.
KHAFAJI: The Ba’ath Party, the ruling party during Saddam
Hussein, had huge palaces. Who decided to give them to the new Iraqi elite? Where are
the Lamborghinis and the hundreds of cars that they used to own? Nobody is accounting
for them, nothing was presented to the Iraqis.
NORTHAM: No account?
KHAFAJI: No account.
NORTHAM: So what did happen to all the Lamborghinis and the
art treasures and so on?
KHAFAJI: They were plundered, as simple as that. You almost
cry with tears, literally speaking.
NORTHAM: One thing the Ba’ath Party did well – all too well –
was to keep order in Iraq. After defeating him, officials in the Pentagon and the victorious
Coalition found themselves presiding over near-chaos.
KROHN: It was kind of a wild west thing. The Americans
were a long way from home, we were in the Green Zone, a walled area, working in the old
palace for the most part, getting mortared virtually every night, so we felt we were at the
edge of civilisation doing the important work for the nation. There was a lot of money that
was being spent rather freely, and there wasn’t a great deal of accountability in the money
that flowed through the system.
3
NORTHAM: As a senior official in the US Army, Colonel Charles
Krohn served time as the Coalition spokesman in Baghdad after the war. Under a UN
mandate, the Coalition Provisional Authority was responsible for the country’s assets –
most importantly its oil and the revenues from it - to safeguard them for the reconstruction
of the country and the humanitarian needs of its people. Huge hoards of cash from oil
squirreled away by the old regime were seized by the Coalition. But where Saddam
Hussein had insisted that precise accounts be kept even of shady payments in commissions
and bribes, Colonel Krohn found the Coalition had a new, more casual attitude to
stewardship.
KROHN: There was $700 or $800 million in cash that was
captured by US forces early in the war, cash that belonged to Saddam and his people. I
don’t know what happened to that money and I don’t know who does know. I suspect a
lot of it was used for high-minded purposes, given to commanders to spend freely in their
areas of operation.
NORTHAM: And what kind of accounts were kept of that?
KROHN: I don’t know that any accounts were kept of that.
When I raised a question about it to one of my associates, he pointed out that, ‘Well, you
know, Krohn, that $700 million physically is a lot of money and if somebody comes in and
wants a couple of million for a particular purpose, it simply takes a long time to count that
much.’ And I said, ‘Well, as a minimum you could have waited. At least that would have
shown an intent to maintain some kind of accountability. That at such-and-such an hour of
such-and-such a day I gave such-and-such a person 50lb of hundred dollar bills.’
NORTHAM: Fifty pounds weight?
KROHN: Weight, fifty pounds weight.
NORTHAM: Was that a serious suggestion?
4
KROHN: I would have done it. I would never handle
government money without some kind of accountability. We get involved in some covert
programmes and the advice of my best mentor was, the blacker the money, the cleaner the
books.
NORTHAM: But you’re saying that the Coalition, as a matter of
fact, didn’t keep accounts of that money?
KROHN: To the best of my knowledge, they did not keep
accounts of that money.
NORTHAM: Many questions about assets and finance throughout
the year of the Coalition’s rule remain unanswered. In one office, millions of dollars were
kept in a safe, the key to which was in an open backpack. In the last days of the Coalition
last summer, a mind-boggling quantity of cash was suddenly flown up from Baghdad to
the Kurdish Regional Government in Erbil in the north of Iraq. The amount was
$1.4 billion, and its fate has become a matter of some mystery. Ginger Cruz, of the US
Government auditors specifically charged with monitoring Coalition finances, was on
hand to ensure that the cash was kept safe.
CRUZ: For us to transfer $1.4 billion to the Kurdish region
required three pallets of $100 bills, which are shrink-wrapped into bricks, to be loaded
onto helicopters and then flown up to Erbil and then driven to the Central Bank, where it
was deposited.
NORTHAM: It’s supposed to have weighed 14 tons. Is that right?
CRUZ: Yes. It’s quite a sight to physically see $1.4 billion
sitting on pallets, but it’s an incredible strain on the security crew, who understands that if
at any moment those helicopters are shot down or if something should happen along the
way, that there’s no way to recoup that money.
NORTHAM: And once it had been paid into the bank, apparently
someone forgot to ask for a deposit slip?
5
CRUZ: Yes. The group that dropped off the money thought
that that had been taken care of and so they did not actually fill out a deposit slip for the
$1.4 billion, so it took about two weeks for the controller to fix that problem with the
Central Bank in Erbil.
NORTHAM: The fate of this cash since it was deposited remains
unclear. The Kurdish Regional Government has told File On 4 that it will all go on
strategic projects to boost the economy, none of it has yet been spent and it is all still in the
Kurdish region. But it’s reported in the Financial Times that efforts have been made to
transfer it to a Swiss Bank. The Kurdish Prime Minister acknowledges that this may have
been discussed - ‘probably talks have been made’, he says, but they weren’t official talks.
When a team of accountants from KPMG were sent under the United Nations to check the
Kurdish region, they reported that they were unable to obtain information regarding the
intended use of this $1.4 billion. In fact, they were kept in the dark about almost all the
Kurds’ finances:
READER IN STUDIO: During our procedures in Erbil, we were denied
access by the Kurdish Regional Government to their accounting records.
NORTHAM: The Kurds’ response is that the accountants didn’t
approach them, though we know that KPMG were in Erbil and even met the Minister of
Finance. Breaches of the normal rules of financial accountability went remarkably far
under the Coalition. A report on Iraqi Reconstruction by an eminent NGO, the
International Crisis Group, points to a lack of control after the war that looks close to
shambolic. Dr Reinoud Leenders, the report’s author, was surprised to find that even some
basic elements of businesslike housekeeping were not observed.
LEENDERS: Unlike most, if not all oil-producing countries, Iraq
still has not any oil metering in place.
NORTHAM: They don’t meter the output of oil?
LEENDERS: That’s right.
NORTHAM: How does anyone know how much there is then?
6
LEENDERS: Well that’s exactly the problem. We don’t know
how much oil is being produced, so we don’t know what kind of revenues are going into
the development fund for Iraq.
NORTHAM: Does this open the possibility that some oil may be
smuggled and lost to revenue to the country?
LEENDERS: Yes, and given the lax border controls, given the
intransparency of Iraqi institutions, you might well assume that that is the case.
NORTHAM: Why did the Coalition not insist that there should be
proper metering and accounting for the oil?
LEENDERS: Well that’s everybody’s guess, and on top of that
they have resisted for a very long time for the auditing agency …
NORTHAM: Under the UN?
LEENDERS: Under the UN, to start monitoring and auditing the
funds. This is only very recent. And the conclusions they are coming up with are
devastatingly critical of the CPA’s behaviour in Iraq.
NORTHAM: What are they saying?
LEENDERS: Well they are saying that not only is there no oil
metering equipment in place, on top of that some oil revenues are not going into the
development fund for Iraq, in violation of the UN resolutions. I really fear that, given all
the factors in Iraq, which constitute a fertile ground for corruption, and the lax attitude by
US officials in Iraq, that corruption will be huge and Iraq reconstruction will turn into one
of the biggest corruption scandals in history.
NORTHAM: But even what the Coalition did know about Iraq’s
finances wasn’t always passed on. Among Iraqis who were supposed to be working as
partners with the Coalition in the Iraqi Governing Council, a sense of frustration grew after
7
NORTHAM cont: the war at the paucity of information, let alone
consultation, they were permitted over financial matters. Mahmoud Othman, a Kurdish
member of the Council, came to believe they were sidelined.
OTHMAN: We didn’t know exactly where the money was going.
Most of the things we are not aware of. The CPA themselves at that time, when we were
in the Governing Council, they were spending, they were making the budget, they were the
rulers of Iraq. For sure I didn’t see mass transparency and no accountability, they were
unaccountable to us. We were not partners in making the budget, in making the spending
and so on. They were the boss and they were ruling and we were consultants sometimes
and sometimes not.
NORTHAM: Did you ever say that you wanted to know more
about where the money was going?
OTHMAN: Of course. That was one of the points, we always
were discussing it with them. Sometimes we had ten sessions together, and we thought we
should know first where the money is going, second the priorities of how to spend the
money, and third there should be more information about the contractors who will take it –
whether they are Americans or Iraqis or Kuwaitis or Lebanese or whatever. In all three we
hardly were consulted.
NORTHAM: Even the United Nations monitoring body for Iraq,
which sent the KPMG accountants to examine financial controls under the Coalition, was
able to make only limited headway. The team reported some of the obstacles they faced.
READER IN STUDIO: KPMG has encountered resistance from Coalition
staff regarding the submission of information required to complete our procedures.
Particular issues noted include:
Responses to queries extremely slow, requiring frequent follow-up.
A lack of individual accountability by Coalition staff.
A lack of interest demonstrated by Coalition staff.
8
NORTHAM: One of the areas of greatest concern is the awarding
of contracts, together worth billions of dollars, supposedly for reconstruction and
humanitarian needs. If oil revenues are to be spent properly, then the business of
contracting needs to be tightly monitored. But Iraqis complain of weak controls, leaving
scope for negligence, waste and fraud. Dr Isam al Khafaji, who worked with the US State
Department before the war, has been dismayed to see millions after millions of dollars
disappear into a web of profligate, sometimes corrupt, businesses.
KHAFAJI: The contracts were given according to, first, who
knows whom; second, the Commissions. We have compiled tens of cases whereby the
contract is given to companies. But none of these companies implemented the work on the
ground. So when you investigate it, you discover that the first contractor subcontracts it to
a second, the second to a third, who happens to be a Kuwaiti or a Lebanese, so we have
not reached the Iraqi layer, to a fourth, to a fifth. Normally those who implement the
project are the sixth.
NORTHAM: And the middlemen are all taking their cut.
KHAFAJI: Imagine you are paying six times subcontracting, and
to the sixth, who implements the job, does it and feels happy because they are still making
profits out of that sixth of the amount that was taken. Now none of these cases that I have
heard of was taken through proper tenders.
ACTUALITY AT TYSONS CORNER, VIRGINIA
NORTHAM: One of the contractors under suspicion has an office
on this busy commuter street at Tysons Corner, a few miles to the west of Washington DC.
This area consists almost entirely of tall office buildings with floor after floor of
corporations, many in the defence and security fields. On the second floor of this block,
number 8201, above the Vietnamese restaurant and the hair salon, is the office suite of
Custer Battles, advertising a ‘very skilled breed of security professionals’. When they
opened an office in Baghdad just after the war, one of the founders, Mike Battles, said, “In
all my years of experience, I’ve rarely seen such opportunities.” And it appears the
company took them.
9
GRAYSON: Custer Battles is a private company. It’s owned by
Mr Custer and Mr Battles. The government somehow saw fit to give them over $100
million in security contracts in thirteen months.
NORTHAM: Alan Grayson is a lawyer representing two
whistleblowers against the company. In court documents, they allege a number of scams
which they claim Custer Battles used to milk millions from both US and Iraqi funds. One
of the most blatant frauds they allege was in the security operation to protect Iraq’s
distribution of a new currency – the dinars without Saddam Hussein’s head on them.
According to Alan Grayson, the scheme was simple: Custer Battles sub-contracted some
of the work out, and then generated false documents showing inflated costs, which they
then claimed back from the Coalition.
GRAYSON: Custer Battles established fraudulent sham
companies in the Cayman Islands. They manufactured fake invoices that were purportedly
issued by these controlled sham companies, which they then turned around and billed to
the government.
NORTHAM: And the Coalition paid these invoices that were
actually fake, did they?
GRAYSON: Yes. One example is the fact that there were forklifts
that Custer Battle found in the course of performing the Baghdad International Airport
contract. These were Iraqi Airways forklifts, and Custer Battles found them simply
because they were on site and occupying that site and there was nobody else there. What
they did was they painted them over so that no one could see anymore that these were Iraqi
Airways forklifts, and then they turned around and leased them to a shell entity of their
own making and then in turn billed that to the US Government.
NORTHAM: They charged for forklift trucks which they had
actually found at the airport?
10
GRAYSON: That’s right. They charged for equipment that they
never owned. Another example, a helicopter pad, which cost something on the order of
$50,000, the company made up fake invoices and ended up billing the government over
$130,000 for it.
NORTHAM: Altogether, how much fraud do you think Custer
Battles committed in Iraq?
GRAYSON: Our best estimate at this point is approximately
$50 million.
NORTHAM: Fifty?
GRAYSON: $50 million, that’s correct.
NORTHAM: One of the whistleblowers in this case is
Robert Isakson, Managing Director of a separate security company, which worked with
Custer Battles on its contracts in Iraq. In an affidavit, he describes a conversation with the
other founder, Scott Custer, about the idea of creating phoney, and very lucrative,
invoices.
READER IN STUDIO: Mr Custer brought up and discussed the possibility of
using shell companies to increase the profits. He advised that he had a second company
through which assets and purchases could be funnelled. I stated my view that such an
arrangement would be illegal and that we were not interested in participating in such a
scheme. I told Mr Custer that everyone would go to jail.
NORTHAM: An internal company document from one of its
managers, included in the court papers, sets out what it calls ‘enormous areas of
discrepancies and irregularities that lend themselves to elements of criminal fraud’. It’s
dated February 28th last year. The company has not yet had to file a substantive defence,
and our repeated attempts to arrange an interview have met with no response. A statement
on Custer Battles’ website dismisses the whistleblowers’ claims as ‘baseless’ and accuses
them of business rivalry. But the American-led Coalition has itself lost faith in the
11
NORTHAM cont: company’s ‘skilled breed of professionals’. This
happened, according to the lawyer Alan Grayson, after an apparent slip made by the
company.
GRAYSON: A meeting was called with Custer and with Battles,
the two principals, who were called in to explain some of the mishaps that had occurred
under this contract. At this meeting, one or the other left a spreadsheet on the table, and
the spreadsheet had several columns. The column indicating what Custer Battles had
spent totalled $3.5 million. The column indicating what Custer Battles had billed was
almost $10 million. So even at that early date in the performance of this contract, the
government knew from that spreadsheet that Custer Battles had cheated it out of at least
$6.5 million, and somehow or other they managed to leave the spreadsheet on the table
when they left the meeting.
NORTHAM: And what did the Coalition do once it had that
spreadsheet, with evidence that there may have been a fraud?
GRAYSON: Well, if you mean, were these people punished, the
answer is no. It’s more than a year later. In fact, nobody has been indicted, nobody has
gone to prison, the government has done nothing to get that money back, except to – quote
– investigate.
NORTHAM: Once the Coalition had evidence from that
spreadsheet that there may have been a fraud, did it stop the contract?
GRAYSON: No, and in fact this is one of the most disturbing
elements of this entire situation. Custer Battles received new contracts from the US
Government all the way from October 2003 until the very end of September 2004.
NORTHAM: The 30th September last year was the date the
Pentagon announced that Custer Battles was provisionally suspended as a contractor, and
banned from competing for any future US government business. The company is
appealing the decision. There’s no explanation from the Pentagon of why, having found
the spreadsheet, it took almost a year to ban Custer Battles from government contracts. No
one from the Pentagon would be interviewed for File On 4. Nor is it clear why the US
12
NORTHAM cont: Department of Justice has refused to join the
whistleblowers’ action against the company. Their lawyer, Alan Grayson, wonders if
Washington may actually be happy to see this case fail. We understand there are more
than thirty cases pending involving other companies.
GRAYSON: Behind this case are larger cases, cases that are still
under seal that people aren’t even allowed to talk about at this point, as a matter of law.
And if this case is swept under the carpet, and this case is one where people escape all
punishment, despite the serious amounts of money involved here, then the even better
connected people will benefit from this directly as well, because if Custer Battles gets
away with this, then so will they.
NORTHAM: There are two fundamental aspects of the Coalition’s
contracts which left Iraq’s oil wealth vulnerable to waste, overcharging and fraud.
The first is that two-thirds of the early contracts were awarded without competition -
they’re known as sole-source, a breach of the normal government rules defended on the
grounds of emergency. The other potential problem is that many were so-called cost-plus
contracts, in which a company is paid whatever it spends, plus a management percentage.
The defence given for this is the uncertainty of what would be required in the chaotic
aftermath of the war, but it creates the opposite of conventional market forces – the higher
the company’s costs, the more profit it makes. But these departures from normal standards
demand special care to ensure probity. In President Bush’s first term, the lawyer Angela
Styles was his Administrator for Federal Procurement Policy. She accepts both types of
contract in principle, but only on condition that they’re tightly monitored.
STYLES: I certainly think there are a lot more risks when it’s a
sole source situation. There’s a lot more risk that other people out there who could have
done it better or cheaper didn’t have the opportunity to do that, and that’s why competition
is so important.
NORTHAM: So if you’ve got a contractor who not only has a cost-
plus contract, but got it without competition, they’re in a very strong position, aren’t they?
13
STYLES: Absolutely. These contracts don’t work unless
there’s a significant amount of oversight by the government. When the government’s
pressed, when they have to do things quickly, when they can’t have all the normal
constraints that they would usually have in place, I think there are always going to be
people out there that take advantage of the system. We have to find those people and we
have to make sure that they’re held accountable if they do.
NORTHAM: Cost-plus contracts awarded without competition are
at the heart of complaints against the largest contractor in Iraq by far. It’s one of the best-
connected companies in the world, the one the US Vice-President used to run, Halliburton.
The company’s internal control of its contracts is criticised by a whistleblower.
Marie de Young was a logistics specialist working in the sub-contracts department for
Iraq, based across the border in Kuwait. By the time she began work there, early last year,
the company had had more than six months to get its financial house in order.
Marie de Young knew that that could be done, she’d seen it happen in an earlier
Halliburton operation in Kosovo. But last year, for Iraq, she saw a very different pattern.
DE YOUNG: I was shocked because I had seen Halliburton’s
system. I was very surprised that they weren’t monitoring costs as you go, because I have
managed army budgets for many years and you get a report every month saying, ‘You’ve
accomplished so much spending and you’ve accomplished so much work.’ Well, they
weren’t generating these kinds of reports.
NORTHAM: Halliburton didn’t have those kind of monthly
reports?
DE YOUNG: No, they did not. They were not controlling the
spending, and when I suggested to my first manager there that we needed to do this, that it
was a good, sound accounting practice, I was told stop, cease and desist. There was a
resistance to creating documents that would prove cost overruns were really inflated
charges. In so many other contracts, for example automobiles, we were paying but I spent
a good six or seven weeks trying to track down automobiles that we were paying for, we
didn’t even know where they were. They didn’t know who had what vehicle, because they
didn’t have a process. I mean, they’d have a manual that’s about 3” thick, but the
supervisory team weren’t following legitimate normal business practices.
14
NORTHAM: What most troubled Marie de Young was that she
thought Halliburton didn’t properly control its payments to sub-contractors, by ensuring
that work had actually been done and goods actually provided as invoiced. These, under
the contract, were costs that were passed straight on to the Coalition with a percentage
charge on top. If Halliburton wasn’t keeping an eye on them, who was?
DE YOUNG: I was horrified to discover, when I went into detail,
that they were asking us to sign off on contracts that weren’t ours.
NORTHAM: Who was asking you to sign off on contracts?
DE YOUNG: The sub-contracts department …
NORTHAM: Halliburton’s sub-contracts department …
DE YOUNG: Correct.
NORTHAM: … were telling you what?
DE YOUNG: They would lay out these contracts for the managers
to sign, and there wouldn’t be any supporting documentation showing, you know, this is
what you are paying for.
NORTHAM: So are you saying that you’ve seen cases where
contracts have been paid without Halliburton verifying that those services had actually
been delivered?
DE YOUNG: Routinely.
NORTHAM: Routinely?
DE YOUNG: Routinely. I can say that, routinely. My question is,
why would you pay on something, why would you recommend paying on something if
there are no invoices? Why are you not in contact with the vendor, with the end user?
15
DE YOUNG cont: That is not to say that the people who are trying to do
the job at the site, that they weren’t intentionally trying to rip off the government. They
were working with a procurement system that was broken. They were working with a
paper system that was just out of control.
NORTHAM: Halliburton’s response to the suggestion that it paid
invoices without verifying that services were delivered is a flat denial. Its statement to File
on 4 says, ‘This is absolutely not the case’. We’d have liked to test this confidence in an
interview, but no one was available.
EXTRACT FROM VHS
MAN: Good morning. Our Committee will come to order
and I want to welcome everybody this morning to our full Committee oversight hearing
entitled ‘Contracting and the Rebuilding of Iraq, part 4’.
NORTHAM: At the Congressional Committee on Government
Reform, Halliburton’s conduct in Iraq has come under scrutiny. The senior Democrat on
the Committee, Congressman Henry Waxman of California, commissioned a staff study of
the price Halliburton charged for the fuel imports it needed for vehicles working to restore
Iraq’s oil industry - one of the contracts it was awarded without competition. Halliburton
challenged his findings. But Congressman Waxman’s conclusion, published as a minority
report, is that the company overcharged by $167 million, a mark-up of 90%.
WAXMAN: The evidence for the overcharging was simply to
look at what the charges were from other sources of gasoline in Iraq. The defense agency
that was bringing the gasoline for our troops was paying a fraction of the amount that
Halliburton was paying. The Kuwaiti oil company that was bringing in oil was paying a
much smaller amount than Halliburton was paying. It didn’t add up, whenever we talked
to any of the energy experts, to figure out why they were spending as much as they did,
one energy expert told us it looked like highway robbery to him. My staff estimated
around $167 million was overcharged before Halliburton was relieved of the job of
bringing in gasoline and the defense department agency took over the responsibility,
paying much less than Halliburton did.
16
NORTHAM: Has any of that money been paid back?
WAXMAN: It should be paid back, in my opinion, but none of
that money has been paid back, nor has Halliburton had any withholding of money that
should be paid to them in order to make sure that the government is reimbursed.
Halliburton has not paid much of a penalty for the documented overcharging of the
taxpayers of the United States and the Iraqi oil money that was used for part payment for
their activities.
NORTHAM: Congressman’s Waxman’s suspicion of overcharging
by Halliburton is raised further by a Pentagon audit covering only part of the time the
Coalition ran Iraq, which concludes that in the early months after the war, the company
may have overcharged for fuel by a total of $61 million. The Department of Defense calls
it a ‘potential overpricing’. In the absence of an interview for this programme, a statement
from Halliburton says it undertook substantial efforts to find the lowest possible price for
fuel and claims that the Pentagon’s auditors started from an ‘erroneous premise’.
It’s a dispute between the company and the government, which has never been put to the
test. Once the Defense auditors had identified this potential overpricing, Halliburton
should have been made to produce evidence that its prices were indeed fair. But the US
Army suddenly waived this requirement, in circumstances which remain disputed, and it
was back to business as usual. The most serious charges made against Halliburton concern
bribery. A State Department document reports complaints to the US Embassy in Kuwait
from a leading oil contracting company. Their allegations could hardly be more stark:
READER IN STUDIO: It is common knowledge in Kuwait that Halliburton
officers are on the take; that they solicit bribes openly; that anyone visiting their seaside
villas at the Kuwaiti Hilton who offers to provide services will be asked for a bribe.
NORTHAM: This was reported to the Pentagon in August 2003
and released to the Congressional Committee on Government Reform late last year.
The senior Democrat on that Committee, Congressman Henry Waxman, has called for
new hearings on the allegations, which the Republican majority has not arranged.
17
WAXMAN: We don’t know whether it’s true or not, we don’t
know whether there’s an investigation going on or not, and we don’t know if anything will
come of it, but we’re going to keep on asking the questions and try to insist that action be
taken. There was one other example of corruption with Halliburton, that Halliburton
acknowledged, and that was a couple of Halliburton employees were taking kickbacks in
order to give the sub-contract. Halliburton fired those employees, they openly admitted it.
We haven’t been able to get all the information about that as well. We can’t even get the
names of the people who took the bribes. In this case, where we’re seeing US taxpayers’
money being squandered, you would think that they would want to let the American
people know that the government officials are on top of it and going to make sure this
doesn’t happen any longer. What I get from the whole picture of Halliburton’s activities
in Iraq is they’ve been gouging the American taxpayers, improperly taking Iraqi oil
money, and getting away with it because this administration so far is letting them get away
with it.
NORTHAM: Allegations of demanding bribes for contracts go
beyond Halliburton. They also point to officials of the Coalition Provisional Authority
itself. As the Coalition ran Iraq after the war, a British advisor to the Iraqi Governing
Council, Claude Hankes-Drielsma, was concerned at information he received in Baghdad.
HANKES-DRIELSMA: The perception by Iraqis, government officials, civil
servants and ordinary Iraqis was that many people within the CPA behaved in a corrupt
manner. Contracts were not necessarily awarded to the benefit of the Iraqi people, but
sometimes at the expense of the Iraqi people. It was brought to my attention by those who
I have known for many years that officials within the CPA demanded significant bribes in
order to obtain contracts. I am aware of figures up to $300,000 in cash.
NORTHAM: Just to get this quite clear, you are saying that people
working for the Coalition demanded, in plain terms, bribes in order for contracts to be
awarded?
HANKES-DRIELSMA: Correct. It was most unfortunate, given that the
Coalition forces, the liberation of Iraq, it was a great achievement, it was recognised as
such by the Iraqi people, but the subsequent handling of events was a disaster.
18
NORTHAM: Claude Hankes-Drielsma says he reported these
allegations of bribery up the Coalition hierarchy and he believes that, behind the scenes,
they are under investigation in Washington. In all, something over $20 billion of Iraq’s oil
wealth and an estimated $3 billion of US taxes were spent under the Coalition –
supposedly for the reconstruction and development of the country. But the lamentable
state of much of Iraq’s infrastructure and public services lead many to question where the
money actually went. The US government auditors, who have this week identified the
problem of the missing $8.8 billion of Iraq’s oil revenues, say there’s no assurance that
this huge sum was used for reconstruction or humanitarian needs. They blame ‘severe
inefficiencies and poor management’ under the Coalition Provisional Authority, the CPA,
and the auditors’ Chief of Staff, Ginger Cruz, politely points to less than adequate controls
of money and contracts.
CRUZ: We believe that there was insufficient internal
control to assure that the CPA could meet the mandates of the United Nations and assure
that that money was spent for the benefit of the Iraqi people, as the UN Security Council
resolution mandated. We do understand that there was a war at the time and there were
very extenuating circumstances. You’re talking about an Iraqi government that was still in
place at the time, although all of the management was gone. So when the CPA came in
and they placed advisors at the ministries, there was a combination of responsibility. The
degree to which we believe the CPA should have been responsible for the establishment
and tracking of controls is a point of disagreement with the officials from the CPA. They
feel that they provided adequate supervision and we contend that there needed to be more
supervision due to the fact that you had such a chaotic situation after the war.
NORTHAM: How high in the Coalition did this failing go? Did it
go right to the top, to Ambassador Bremer?
CRUZ: We believe that it did, and we believe that there
should have been better management controls placed over money that was turned over to
the Iraqi ministries.
NORTHAM: Ambassador Paul Bremer, the former Head of the
Coalition, wouldn’t be interviewed by File On 4. But in a scathing letter to the auditors, he
says they fail to understand the context in which the Authority was operating - you can’t
19
NORTHAM cont: apply Western accounting standards in the midst of a
war. The auditors acknowledge that, but believe he should have done a great deal better
than he did. For the Democrats in Washington, in a minority on the key investigative
Committees, it’s proving difficult to drag information and a full accounting of Coalition
spending from an apparently reluctant Administration. Congressman Henry Waxman of
California hopes that the full story will one day be known, but isn’t confident.
WAXMAN: When people have spent a lot of time trying to keep
the Congress even of the United States from knowing how the taxpayers’ money is being
spent, along with the Iraqi oil money, and when the US Government goes out of the way to
keep elected members of Congress from knowing the information, it makes us worry that
what we’ve heard about may just be the tip of an iceberg of an enormous waste and abuse
and perhaps corrupt use of money. We need to realise that we’ve done a lot of harm by
having this money used for purposes that were not as important as where it could have
been spent.
NORTHAM: What harm?
WAXMAN: If the Iraqi people don’t have electricity or running
water, infrastructure rebuilt, this money was supposed to help provide for them, we
prolong the agony of what is going on every single day in Iraq and we give ammunition
for the insurgents to recruit others, because they can say, ‘See, the Iraqis’ oil has been used
by Americans for purposes other than helping the Iraqis.’
NORTHAM: The United Nations is under scrutiny because of a
report it’s commissioned on its oil revenues scandal - the mishandling of billions of dollars
of Iraqi funds before the war. Supporters of the Bush administration are already having a
field day with the evidence. There’s hostile lobbying for the removal of Kofi Annan, daily
denunciations on talk radio, and full-scale investigations on Capitol Hill. In marked
contrast, there’s almost complete silence over the evidence emerging of America’s own
financial scandal in Iraq – the mysterious disappearance of a huge amount of the country’s
own money, under the stewardship of the American-led Coalition.
SIGNATURE TUNE

magician

12 May 2005, 06:31

from : http://www.thepilot.com/news/050605Training.html

Company Drops Training Facility Plan
BY JOHN CHAPPELL: Staff Writer

The sun shines bright on hills just outside Carthage, but no dust rises from backhoes or bulldozers. Custer Battles has struck out.

The company’s plans for a state-of-the-art security training center there have gone awry. Custer Battles is caught in a swarming cloud of suspicion, lawsuits and accusations alleging fraud, kidnapping and more.

The storm might have killed the land deal an elderly local property owner was counting on.

Army veterans Scott Custer and Michael Battles started operations in Afghanistan following the 2001 fall of Kabul. They won a $16.5 million contract from occupation authorities to provide security for the Baghdad airport in June 2003, and business really took off.

They made a deal with DRC, an Alabama-based disaster services firm headed by a former FBI agent Robert “Bob” Isakson. That’s when things started to go wrong, and the two former partners are headed for court.

A lawsuit filed by Isakson and William Baldwin, a former employee of the company who managed one of its Iraq security contracts, accuses Custer Battles of cheating the government out of tens of millions of dollars. As “whistle-blowers,” Baldwin and Isakson stand to get a percentage of any recovered moneys and fines.

DRC has accused Custer Battles officials of kidnapping Isakson and his 14-year- old son at gunpoint and of cheating the Coalition Provisional Authority out of millions of dollars using offshore shell companies.

Last month, Custer Battles fired back with a countersuit against Isakson, making similar claims of fraud and double-dealing against DRC.

According to court documents filed April 1, “DRC, Inc., and its managing director, Robert J. Isakson, defrauded Custer Battles by intentionally misrepresenting their business record in order to gain a business foothold in postwar Iraq, when in fact, DRC and Isakson had previously committed fraud on the United States Government. This misrepresentation caused Custer Battles to subcontract DRC to provide important services which DRC was unable to satisfactorily supply.”

Lurid accounts in press stories worldwide described company agents pointing submachine guns at Isakson and his son Bobby.

“Custer Battles terminated DRC and Isakson for their incompetence and poor judgment, including Isakson’s reckless decision to bring his 14-year-old minor son to postwar Iraq without informing Custer Battles,” the company said in a press release.

Those suits are now to go before a federal judge in a Virginia court.

Last November, the Moore County planning board approved Custer Battles’ preliminary plan, granting a conditional-use permit for a proposed Tarheel Security Training Center about six miles north of Carthage. It would have had firing ranges, driving tracks and other facilities on 222.43 acres off Cool Springs Road.

That site is in Deep River township in the Carthage Fire District.

The company’s legal troubles would not affect Custer Battles’ Moore County plans, said Jack Donovan, who was director of training at the time. But by the first of this year he was calling everything off.

One of the landowners involved in the land deal is John Burns of Sanford. He’d hoped to sell that property, was counting on Custer Battles.

“I am 75 years old, and got lymphoma,” Burns said. “I am fighting to stay alive right now. This land is some stuff I am trying to get rid of.”

The deal fell through in January. Donovan called Burns with bad news.

“They decided that they were not going to take that property right now,” Burns said. “He said if I had a chance to sell it to somebody else, go ahead. That’s all I’ve heard from Donovan. I guess he was working with Custer Battles at the time. It has been a couple of months ago.”

Then Custer Battles simply vanished from Carthage.

Donovan himself stayed on, now part of an entirely new company called Tarheel Training. His Custer Battles office in the old town hall became his Tarheel Training office.

Nobody at the Carthage municipal building realized Tarheel Training was a different company when Donovan called town treasurer Linda Phillips to change billing.

“He just telephoned and said to send bills to Tarheel Training instead of Custer Battles,” Phillips said.

Donovan followed that call up with a letter and a check for $1,740.52 covering rent and the cost to refill the heating fuel tank.

“We understand we will only be charged for the heating fuel that we consume as tenants,” he wrote.

The town later found a permanent tenant for the building, which is now the home of Moore Buddies. Tarheel Training moved to offices farther south on U.S. 15-501. Donovan is out of town on vacation and could not be reached for comment.

“We are not affiliated with Custer Battles in any way,” said Thomas Carlin, chief of operations and chief security officer of the new company.

Nobody bothered to say anything to Kathy Liles at the Moore County planning office, either. She had worked with Donovan on the conditional-use permit. A textual change in the code was needed and passed, to make the training center conditional use permissible.

“I didn’t think anything of it,” she said. “Sometimes it takes time to take care of issues like getting a federal firearms license, or permits from the Fire Department for storage of munitions. If the area of disturbance is over an acre, they would need a sedimentation and erosion control plan.”

That conditional-use permit is still valid, even if Custer Battles has no plans to buy the property or build anything there.

“Conditional use goes with the property, not the owner,” Liles said.

The conditional-use permit applies no matter who owns the property. It might make the property more valuable, in case Burns can find another buyer with similar plans.

Tarheel Training is probably not that buyer, according to Carlin. It is a certified law-enforcement training company and has no plans at present to build a center like the one Custer Battles wanted.

The new company donated its services to Moore County Sheriff Lane Carter for help in a recent exercise.

“We didn’t charge a cent,” Carlin said. “Would it have been nice to be paid? Yes, of course; but we gave it to them.”

As for the approved site, he doesn’t know whether Tarheel Training would ever be interested in using it.

“Moore County is a great place for training,” he said. “Considering the number of experienced military people who live here, its background in training special forces, and its proximity to Fort Bragg — which is a national first responder — it would be a logical place to do it.”

With more than 200 acres in the middle of the county already zoned for security training, Burns could yet find his buyer.

magician

12 May 2005, 06:33

from : http://www.washingtonpost.com/wp-dyn/content/article/2005/05/10/AR2005051001680_pf.html

Invoices Detail Fairfax Firm's Billing for Iraq Work
By Griff Witte
Washington Post Staff Writer
Wednesday, May 11, 2005; E01

The invoice lists $12,000-a-month trucks, $5,000-a-month buses and $2,000-a-month forklifts -- all of which a Cayman Islands-based company said Custer Battles LLC leased from it for contract work in Iraq. The total due: $1,394,000.

Fairfax-based Custer Battles submitted a bill to the U.S.-led Coalition Provisional Authority in October 2003, seeking reimbursement for Secure Global Distribution Inc.'s charges and more. Custer Battles also billed for millions in charges from other offshore companies with names like Mid East Leasing, of the Caymans, and CBL, of Lebanon, plus a 25 percent fee for overhead and profit.

Pentagon investigators would later conclude that the three companies were all Custer Battles subsidiaries. And according to a whistle-blower suit moving through federal court in Alexandria, they acted as little more than shells designed to bilk the CPA of money through phony invoices that made it look like Custer Battles was spending more than it did to fulfill a contract in Iraq. By inflating its bills, the whistle-blowers claim, Custer Battles was also able to inflate its profit.

The company denied the charges in court papers. Its lawyer said that the contract was based on fixed fees and that the invoices didn't affect Custer Battles's profit.

Hundreds of pages of documents provided to The Washington Post by the whistle-blowers' lawyers provide a fuller picture of the allegations at the heart of the lawsuit, which is the first involving allegations of fraud by contractors in Iraq to become public. They cover a period in the first months after the U.S. invasion when the fledgling security firm became a key contractor in the government's attempt to restore order in Iraq.

Scott K. Custer, a former Army Ranger, and Michael J. Battles, a former CIA agent and unsuccessful Republican candidate for Congress, founded the firm in 2002. Their break came a year later when the company won a $16.8 million contract to provide security at Baghdad International Airport after Saddam Hussein's fall. Later that year, the company won a $9.8 million contract to provide logistics support as the CPA switched Iraq to a new currency. That contract eventually was worth $21 million.

The Air Force banned Custer Battles from new federal contracts last year, citing evidence of fraud. A lawsuit by two men who worked for Custer Battles in Iraq also was unsealed last year; the Justice Department has declined to join that case.

If the lawsuit succeeds, the government will get back up to three times the initial fraud amount and the whistle-blowers will get a share of the award.

Among the documents provided by the whistle-blowers' attorneys are two invoices for the same item. A helipad cost the company $96,000 when it was purchased through a non-Custer Battles subsidiary. A second invoice shows the company buying a helipad from Laru Ltd., which one of the whistle-blowers said was partly owned by Custer Battles, for $157,000. Custer Battles billed the government for the $157,000, though Laru didn't do the work, Pentagon investigators found.

In addition, a spreadsheet that Custer and Battles allegedly left at a meeting with government investigators shows two columns, "actual cost" and "invoiced" cost. In almost every case, the invoiced costs are substantially higher. For example, generators that cost $74,000 were invoiced for $400,000, and $240,000 for trucks became $600,000 in bills, according to the spreadsheet.

"This is a company that set out right from the beginning to cheat the government. They did it in a way that was recognizable almost immediately. Yet the government paid the invoices," said Alan Grayson, a lawyer for the whistle-blowers.

Custer Battles attorney Richard Sauber denied that the spreadsheet was a company document. He also said that the offshore invoices don't show evidence of fraud because Custer Battles was operating under a contract that provided a set fee, no matter what the costs.

"If they went out there and bought paper clips for a dollar, and ran it through a subsidiary for $100, at the end of the day it wouldn't matter in terms of what Custer Battles was able to charge the CPA," Sauber said.

In the memo awarding the currency-conversion contract to Custer Battles, however, Air Force Maj. Darwin Kirby writes, "The contract type that is most appropriate is time and materials," a reference to a type of contract under which firms are reimbursed for their expenses and given a percentage fee on top of that.

A CPA contracting officer wrote an expert reviewing the case for the government that she had erred by indicating in contract modifications that the costs were fixed. The expert responded that Custer Battles's invoices were submitted under a time-and-materials contract.

Sauber said there was confusion over the type of contract because of disorganization at the CPA, which ran Iraq for a year after the U.S. invasion.

While maintaining the company's innocence on the allegations of fraud, Sauber acknowledged that in its attempts to respond to shifting demands from the CPA, the company may have created documents after the fact. "Did these guys do things based on their inexperience that were stupid? No question," he said.

A Defense Criminal Investigative Service memo reports that an address given for Custer Battles subsidiary Mid East Leasing Inc. turned out to be an abandoned building in Baghdad. Articles of incorporation for a third company that shows up frequently on Custer Battles invoices to the government, CBL, show that the acronym stood for Custer Battles Levant and that Battles was the chairman of the board.

Custer Battles lawyers have argued that the case does not belong in federal court because the firm is alleged to have defrauded the CPA, not the U.S. government, and because Iraqi, not U.S., money was at stake. The Justice Department said in two briefs this spring that U.S. anti-fraud law applies nonetheless.

U.S. District Judge Thomas Selby Ellis III has set a hearing on the matter for tomorrow.

magician

12 May 2005, 16:02

from : http://blogs.salon.com/0003364/2005/03/15.html

Tuesday, March 15, 2005

So who is Mohammed abu Darwish? Well, for one thing, he seems to have an affinity for armored vehicles. More than a year before he shows up in the murky background of the story of Iyad Allawi's show-pony tank division (see the post below for background), he was involved in an odd little smuggling episode: Darwish was arrested in January 2003 at the Baghdad airport, where he was a security official, for attempting to transport (presumably for laundering purposes) almost $13 million in new Iraqi dinars with him to Lebanon. (Darwish and his co-defendants were all let off the hook, by the way, when a Lebanese court dismissed charges against them last year.)
Darwish told the Times and others that he had been authorized by the American-led authority to take the money to Lebanon, where he intended to purchase armored cars to be delivered to Baghdad.

That story was subsequently backed up by Paul Bremer, the top American official in Iraq at the time, who said that the funds were for an urgent purchase of armored vehicles and security equipment.
Eddie Curran, Mobile Register,"Kidnapped in Iraq?"
Darwish has pull with more than just Paul Bremer. The smuggling incident reveals the further extent of his patronage:

The impounded plane was piloted by Mazen Bsat, a prominent Beirut businessman who owns a chain of pharmacies and a company that leases planes for charter flights. With him was Mr. Darwish and Richard Jreissati, who held the portfolio for foreign affairs of the Christian right-wing Lebanese Forces Militia during the country's civil war. Waiting to meet the plane was Michel Mkattaf, who owns a foreign exchange business and is married to the only daughter of a former Lebanese president, Amin Geymael.
And on the subject of security at the Baghdad airport, who do we find Darwish associated with in his capacity as an official there? Again, from the Mobile Register:

Abu Darwish, according to [a lawsuit filed by an Alabama-based disaster recovery firm], formed the Lebanese company called Custer Battles Levant that is co-owned by Custer and Battles.
That would be well-known wired-in GOP fraudsters Scott Custer, a former Army ranger, and Mike Battles, a former CIA officer, whose McLean, VA-based Custer Battles won the contract to provide security at Baghdad airport without ever having previously won a government contract and without any prior experience providing site security. [Interestingly enough, in context with the smuggling incident, Custer Battles also holds a contract (estimated allowable profit of $20 million) to support Iraqi currency distribution!] Among the litany of complaints about how Custer Battles does business in Iraq, it's worth noting here that the firm stands accused of creating a variety of sham companies that would allow CB to inflate expenses on its airport security contract.

In other words, Mr. Darwish is one connected guy. He seems to be a node that links together, on the one hand, a bunch of shady American "businessmen" with ample CIA and military-intelligence ties (and some schooling in creative ways to make money disappear), and on the other a set of wealthy, politically significant right-wing Lebanese Christians. I think you can see where I'm going with this.

Are we looking at a simple corruption story here? Or are we seeing the trace of a program in which American intelligence services are siphoning money from the Iraq occupation to favored elements in the Lebanese anti-Syria coalition? The skim off a $300 million tank-division project can fund an awful lot of political agitation. The assembled facts don't demonstrate it, certainly: but, especially in light of our history in the region, they make it awfully difficult not to want to ask the question.

Update:A somewhat head-spinning addition to the Darwish dossier is posted above.

posted by michael 11:35:20 AM
tell me about it [1]

The LA Times has lifted the corner of a veil covering some very skanky doings in Iraq, but they're not giving you a very clear picture yet of what's underneath.
Today's LAT offers another installment in the story of the death of Dale Stoffel, an American weapons dealer contracted last summer to provide hardware for an Iraqi Army tank division, an expensive and militarily useless toy that PM Iyad Allawi wanted to give himself as a display of his political pull. Stoffel and a partner were killed early last December, apparently an assassination (his vehicle rammed by another, then fired upon), just days after Stoffel insisted, in a letter to a senior Pentagon official and in a meeting with aides to Rick Santorum (Stoffel was a constituent), that Iraqi Defense Ministry officials were raking off kickbacks from the nearly $300 million project. (The LAT's initial reporting on the story is here.) It's a nasty episode in the history of business under the U.S. occupation; here are the key facts:

Stoffel, an ex-Special Forces arms broker with a network of contacts in former Soviet Bloc countries, was awarded a no-bid contract by Army Lt. Gen. David Petraeus, who was tasked with getting the armored division outfitted before the Jan. 30 elections.
Stoffel, who had "a long history" of acting "on behalf of U.S. intelligence agencies to covertly buy foreign military equipment for research and testing by the U.S. military," according to today's LAT, was doing business under at least two different company identities unrelated to weapons brokering or military technology, Wye Oak Technology, a web development consultancy, and CLI Corporation, a coal and mineral processing company. (There's more about this, and a good compendium of information in the case as of late January, here.) The "broker's agreement" for outfitting the armored division was awarded to Wye Oak—which, as a Web developer myself, I can tell you is an unusual contract for a Web agency to win.
Stoffel was required by Iraqi Deputy Defense Minister Mashal Sarraf to conduct all financial transactions through a third party, Raymond Zayna. Stoffel alleged to the U.S. military that Zeyna was charging a 3% fee on all transactions passing through his hands (which he thought was being kicked back to the Defense Ministry), and also trying to force him to use subcontractors who Stoffel thought were under the control of Zayna and Iraqi officials. At the time of his death, Stoffel was awaiting payment, through Zayna, of nearly $25 million issued to him by the Iraqi Defense Ministry; the money has disappeared.
Petraeus's office has been lying to the press, as the LAT report makes clear today, about the extent of its involvement in setting up the Iraqi tank division. In spite of Stoffel's warnings, and his subsequent murder, the U.S. military is continuing to work with Zayna, who is now doing "construction work on a U.S.-controlled military base outside Baghdad related to the project."
The Times report strongly implies that the U.S. military may have unwittingly signed Stoffel's death warrant, which is perhaps why it's tried to maintain the appearance of distance from the whole affair:

"When told that there was a holdup regarding refurbishment of the armored vehicles, Lt. Gen. Petraeus did ask the ministry to get on with whatever they were going to do with the contract so that the stand-up of the mechanized brigade would not be delayed," Alvarez said.

By late November, Stoffel had returned to the United States to seek help in getting his payment. He asked Pentagon officials and Santorum's office to pressure the Iraqis to release the $24.7 million to him. ...

U.S. military officials informed Zayna about the allegations of corruption, according to several people familiar with the matter. British Brig. Gen. David Clements summoned the parties to a Dec. 5 meeting in Iraq. Afterward, Clements ordered Zayna to release the money to Stoffel, sources said.
Ugly, yes? Arms dealing, graft, assassination and military coverup? But while the Times primarily sees this as part of the larger story of business corruption and lax financial oversight within the American occupation, it's uncovered a nugget of information that suggests the real story lies elsewhere:

In September, Stoffel signed a limited power of attorney allowing Zayna to "arrange financing and request banking guarantees" for the contract, records show. Zayna was to act as a broker between Stoffel and the Defense Ministry, reconciling invoices and disbursing payments.

Another Lebanese businessman, Mohammed abu Darwish, worked with Zayna's firm, General Investment Group, on the contract and participated in meetings with task force officials, e-mails and interviews show. In an unrelated case in September, the Pentagon barred Darwish from receiving future American contracts because of his alleged role in a scheme to defraud the U.S. of millions of dollars on a security contract in Iraq, according to a U.S. Air Force document.
That name, Mohammed abu Darwish, is an extremely interesting find. Darwish, not Zayna, who seems to be serving as Darwish's cutout in this business, is where the story acquires another dimension. And since this is getting long, having provided you the background, I'll tease out that extra dimension in the next post.

Wench

12 June 2005, 21:03

Banned Contractors Still Soliciting Iraq Deals (http://news.yahoo.com/s/ap/20050612/ap_on_re_mi_ea/iraq_contractors)

SOTB

12 June 2005, 22:43

Executive John DeBlasio said Morris worked as a contracts consultant "off and on," for the past six months. "We employed him for that, for his expertise," DeBlasio said. "He's got a lot of knowledge about Iraq."

He didn't know Morris had been suspended, DeBlasio said.Liar, liar, pants on fire....DeBlasio is a former adviser to the Coalition Provisional Authority, which ran Iraq and awarded reconstruction contracts for 13 months following the country's invasion. Custer Battles was one of the first CPA contractors.

magician

13 June 2005, 03:05

doubletap.

magician

13 June 2005, 03:21

I will do the deed.

By DEBORAH HASTINGS, AP National Writer Sun Jun 12, 3:57 PM ET
Former executives of Custer Battles — an American firm accused of stealing millions from Iraq reconstruction projects and banned from further government contracts — have continued doing contracting work and have formed new companies to bid on such projects, The Associated Press has learned.

This may or may not be illegal, military officials say; Custer Battles officials deny any wrongdoing.

The new companies (there are at least three) are all headed by Rob Roy Trumble, who previously was operations chief for Custer Battles, according to state records.

Rob Trumble was a platoon leader in 3d Ranger Battalion, and legitimately so. Unless I am mistaken...he is also a veteran of the Panamá invasion.

Like Custer, and Battles, and Kurt Gutierrez...and Joe Morris...Trumble is a graduate of West Point. All these guys were West Point classmates.

The fledgling firms have different names but all are housed in the same office as Custer Battles — Suite 100 on Hammerlund Way in Middletown, R.I., 3,000 square feet on the ground floor of a squat building in an industrial park.

Coincidence? I do not think so.

This practice jives with the Custer Battles modus operandi: find a legal loophole, and exploit it, but do it the cheapest way possible. Believe me, if they thought that they needed to actually use some of the tradecraft that Battles learned, they would.

Meanwhile, Custer Battles' former chief financial officer Joseph Morris, accused of submitting fake invoices to the government, has been working for another American contractor in Iraq, according to interviews.

The military was not aware of either the new companies or Morris' new employment, a Pentagon official said, speaking only on condition of anonymity. Military investigators would have to decide whether these actions violate the suspension order.

Morris did not return phone messages or e-mail sent to his company and private addresses.

By itself, Custer Battles is already in a great deal of trouble. It is under investigation by the Pentagon for allegedly cheating the U.S. government out of tens of millions during the chaotic months following the Iraq invasion. In September 2004, the military banned Custer Battles and 15 of its subsidiaries and officials, including Morris, from obtaining government contracts while the criminal probe proceeds.

Custer Battles employees have also been accused of firing on unarmed Iraqi civilians, of using fake offshore companies to pad invoices by as much as 400 percent, and of using forgery and fraud to bilk the American government. Two former associates have filed a federal whistle-blower suit, accusing top managers of swindling at least $50 million.

Former Army Rangers Mike Battles and Scott Custer formed a limited liability corporation before the Iraq invasion to seek rebuilding contracts. Battles, a GOP campaign contributor and a former CIA case worker, ran unsuccessfully for Congress in 2002 as a Rhode Island Republican.

These men are both tab-wearers. Neither of them were Army Rangers. Neither of them spent a day in the Regiment. Custer has lied about serving in the 3d Ranger Battalion, in my presence. Rob Trumble was present at the Custer Battles mansion in the Mansour district at the time, as was Joe Morris. Rob Trumble even quizzed Custer about this claim, which I found interesting, as they certainly worked in close proximity in Rhode Island. If Custer truly had been an alumnus of 3d Bat, as was Trumble...Trumble would have known it before then. Custer's explanations followed a classic posers trajectory. I was not convinced, and neither, I suspect, was Trumble. I have yet to find anyone who knew Custer in the 3d Ranger Battalion, or anyone from the Regiment who remembers him. Going to Ranger School after IOBC can get you a Ranger tab. There is only one way to earn the title "US Army Ranger." Custer is not a Ranger, and neither is Battles. They are Ranger-qualified. They have tabs, just like thousands of other officers in the US Army.

The actions of Morris, their chief financial officer, were among the worst, according to the military's suspension order and the federal lawsuit. The order cites "serious improper conduct" by Morris which required immediate suspension, so he could not be "awarded new public contracts in Iraq and elsewhere."

I was present in Iraq at the time of Joe Morris's tenure there. He was in constant, close, daily contact with Custer. Morris did not make a move without Custer's approval, regardless of Custer's physical location. I do not believe for one instant that Joe Morris acted on his own volition.

But Morris has worked on subsequent reconstruction contracts, for an American firm called Sallyport Global Holdings. Executive John DeBlasio said Morris worked as a contracts consultant "off and on," for the past six months. "We employed him for that, for his expertise," DeBlasio said. "He's got a lot of knowledge about Iraq."

He didn't know Morris had been suspended, DeBlasio said.

Bullshit. Total bullshit. Anyone who knows Joe Morris knows all about his tribulations. This guy DeBlasio quite possibly just lied in a demonstrable fashion. There are employees at Sallyport who will attest to it.

DeBlasio is a former adviser to the Coalition Provisional Authority, which ran Iraq and awarded reconstruction contracts for 13 months following the country's invasion. Custer Battles was one of the first CPA contractors.

DeBlasio expects those of us familiar with the CPA and its workings to believe that he is ignorant of Custer Battles' reputation? And that he "did not know" that Morris had been a Director of Custer Battles? Please.

The suspension order, and the ongoing criminal investigation, have been reported for months in the national and international media. The government maintains a Web site that lists all parties banned from contracting work.

After DeBlasio talked with the AP, a lawyer representing Sallyport e-mailed the AP saying Morris had signed a one-year contract with Sallyport in April 2004, before the suspension order was issued, and that work already underway was exempt.

"All government contracts that Mr. Morris had any involvement in while under contract with Sallyport were in effect prior to Mr. Morris being placed on the (suspension) list," wrote Washington, D.C. attorney David Cohen. Sallyport will not renew Morris' contract, Cohen said.

Typical behavior for guys like this. DeBlasio lies, and is quoted in national media, and they instantly have a meeting with their attorneys to figure out how to practice damage control. I would be interested to learn more about attorney David Cohen. If I had to bet, it would not surprise me if his firm does business with Custer Battles.

But a subcontractor now working in Iraq said Morris was a project manager for Sallyport from May until October, when word got out about his military suspension, and that Morris was involved with new contracts after his suspension.

"I asked him about it because I saw his name on the (government) Web site," said Nate Hill, a former Custer Battles midlevel manager who says he quit more than a year ago after becoming exasperated with management practices. "He told me he was a federal witness and had been exonerated."

Interesting. Nate Hill....was a longtime alumnus of the Ranger Regiment...if I am not mistaken, he served in all three Battalions. I knew Nate Hill in Iraq....he was a loyal soldier for Custer Battles. If he is granting interviews to the media....then Custer Battles needs to be running scared. Nate Hill was certainly in a position to be cognizant of much questionable activity. He was present when much of it was going down. I do not believe for an instant that Nate himself engaged in any wrong-doing....but for this loyal guy to leave Custer Battles....he had to be exasperated beyond belief. Someone needs to ask him about this.

According to federal regulations, individuals suspended by the military are banned from acting as principals on subsequent government contracts. Principals are defined as "officers, directors, owners, partners, and persons having primary management or supervisory responsibilities." Whether Morris' position was equivalent to those descriptions would have to be determined by military investigators.

Rob Roy Trumble, the former Custer Battles executive who heads the new companies, is not on the suspension list.

It is not a simple thing to track the ownership of two of his businesses, Emergent Business Services and Tarheel Training LLC.

They are affiliated with a Romanian company called Danubia Global Inc. Danubia, in turn, is owned by Security Ventures International Ltd., a British Virgin Islands firm, according to Bucharest incorporation records. Trumble cut short an interview with the AP, after saying he had "no idea" who owned Danubia. The web sites of his new companies are linked to Danubia's. Emergent's site says it is Danubia's employment recruiter and lists several contracting jobs open in Iraq.

Rob Trumble knows exactly who owns Danubia. Any competent investigator can prove it.

Battles and Custer, through a spokesman, said they sold the remaining Iraqi assets of Custer Battles — including vehicles, computers and intellectual properties — to Danubia early this year. Several former Custer Battles employees have joined the Romanian firm. But the contractors refused to name the employees, or to identify Danubia's owners.

These will be the long-time Custer Battles guys who could not jump ship to other, more reputable firms. Their credentials were never vetted by Custer Battles when they were hired, and would never survive scrutiny by anyone else. Of course they are going to keep their mouths shut. Their paychecks depend on it. I never saw a larger collection of posers and ass hats and outright liars in my entire life. If you accepted their statements, every single "secret sniper assassin" who ever worked in Latin America ended up working for Custer Battles. A couple of jarheads that I know...legit guys with verifiable credentials and experience....lasted about two weeks with Custer Battles. They jumped ship as quickly as they could. They could not stand the lying and posing going on in the ranks.

Trumble said his new companies "have nothing to do with Custer Battles" — though they share the same office. A Custer Battles e-mail, obtained by the AP, shows the recipient was instructed in January to send future Internet correspondence to Emergent, though the phone number and street address remained the same.

Yeah, I am sure that it is just a coincidence, Rob.

Emergent has bid on at least one government contract, according to federal records.

Tarheel Training was the name of North Carolina business development proposed by Custer Battles. In January, the deal to build a security training facility fell through amid growing controversy surrounding the contractor. That same month, Tarheel Training LLC was incorporated in Delaware and North Carolina with Trumble listed as manager.

uh, huh.

Trumble denied he was the manager of Tarheel and said the 5-month-old company was going out of business because "they haven't been able to sign any contracts."

But the company's web site says the firm is more than a year old and has attracted more than 100 customers.

Typical hyperbole.

"We've been working with the specialists in Emergent Business Services for well over a year and they have provided comprehensive, professional services," says the web site, quoting Tarheel Chief Executive Officer Jack Donovan.

Donovan is a retired military colonel who told a North Carolina newspaper in November that Scott Custer "was one of my best soldiers. I got him a commission." He also is a former Custer Battles official.

"They're like mushrooms, they just keep sprouting up," said Franklin Willis, a former CPA official and Reagan administration member who testified in Washington that Custer Battles had defied government control and did what it wanted in Iraq.

"They are extremely clever. They are extremely brazen. They've never let truth get in the way of their economic ambitions."

___

Associated Press writers Michelle R. Smith in Rhode Island, Alexandru Alexe and Alison Mutler in Romania, contributed to this report.

It is ok.

The legal bills that Custer Battles is paying will bankrupt them. If their attorneys are smart, they will ensure that their retainers are securely in their own bank accounts, and they will watch carefully for any evidence of cashflow problems. There will come a day when someone in the US government says "enough is enough" and padlocks the Custer Battles offices.

There are enough former Custer Battles employees running around that anyone, whether media or government investigator, who truly sets out to begin documenting wrongdoing, will be stunned. There are a lot of people who jumped ship from Custer Battles. A lot of those people were sued by Custer Battles for breach of contract after they left, or to enforce clauses in the non-compete contracts that they signed when they first hired on with the company. All that I have spoken to settled out of court. I imagine that the majority of them would be more than willing to talk to government investigators, or to the media, without attribution, regardless of the fact that a prohibition against doing so is part of their settlement with Custer Battles.

The question is whether the government really cares?

magician

13 June 2005, 03:29

from:

http://bellaciao.org/en/article.php3?id_article=6147

Monday 23rd May 2005 (09h42) :
Custer Battles Whistle-Blower Suit May Set Course on Iraq Fraud Cases

To its accusers, the security company Custer Battles exemplifies corporate profiteering in postinvasion Iraq, when officials were pumping out hastily written contracts for everything from air conditioners to armed guards.
In a lawsuit now in federal court, two former associates of the company say it bilked the American-led coalition out of millions, turning in hugely inflated invoices from phantom supplier companies among other misdeeds. If successful, the suit, brought under the False Claims Act, could recover triple damages for the government and handsome rewards for the whistle-blowers.

Custer Battles has denied wrongdoing and the accusation remains to be proved. But before a trial can proceed at all - before any company can be sued for fraud in the chaos of occupied Iraq - a federal judge in Virginia must issue another, more basic ruling that is now anxiously awaited by the company, its accusers and the Justice Department.

Lawyers for Custer Battles argue that the False Claims Act - the prime legal tool against contractor fraud - does not apply because the company signed contracts with the Coalition Provisional Authority, not the American government, and was mainly paid with Iraqi money seized or managed by the United States, rather than with money appropriated by Congress.

Lawyers for the whistle-blowers and the Justice Department argue that the law does apply. All sides agree that the case will set a precedent and that the stakes are high, and not only for Custer Battles.

"This is an important case because there are a lot of companies over there with poorly constructed contracts and little oversight," said Steven L. Schooner, an expert on procurement at the George Washington University Law School. "The potential for chicanery is great and the potential universe of whistle-blowers is mind-boggling."

In a court hearing on the issue on May 12, a senior Justice Department official warned that if companies could not be held accountable under the False Claims Act, they might not be accountable to anyone.

The Coalition Provisional Authority disappeared in mid-2004, after decreeing that contractors could not be held liable by Iraqi courts. So if the United States cannot bring suit against fraudulent contractors, "who could do that?" asked the official, Michael F. Hertz of the Justice Department’s Civil Division.

Judge T. S. Ellis III of the Federal District Court in Alexandria, Va., said at the May 12 hearing that he would rule soon on the prior issue.

In September 2004 the Pentagon, citing evidence of fraud and a continuing criminal investigation of Custer Battles, barred the company from receiving more federal contracts, halting what had been the company’s explosive growth. The company was founded in 2001 by two veterans with more ambition than assets, and by mid-2004 it had $100 million in Iraq contracts.

The company’s critics say its owners, Scott Custer and Mike Battles, benefited from the frantic awarding of contracts in 2003 and the constant turnover of monitors.

The whistle-blower suit accuses the company of defrauding the government through actions as large as the creation of shell companies to pose as suppliers and increase billable costs and as small as the repainting of Iraqi Airways forklifts, then claiming to have leased the machines for thousands of dollars per month.

The company says it performed admirably and honestly in Iraq, starting with its initial contract, which was for $16.8 million to provide security at the Baghdad airport.

In June 2003, seeking to open the airport quickly, coalition authority officials put out a request for immediate proposals to provide security, including control of vehicles and enforcement of weapons-free zones.

Several established companies called the proposed timetable unrealistic, but Mr. Custer and Mr. Battles promised to have a security team in place within two weeks and they won the bidding. To make the proposal credible, Mr. Custer and Mr. Battles had hastily lined up subcontractors with relevant experience. But at least two crucial partners left the project within months, citing disputes over company practices.

That autumn, an inspector from the United States Army lambasted the company’s airport security procedures.

"What we saw horrified us," Col. Richard Ballard wrote in a memo on Nov. 28, 2003. Beyond undisciplined and poorly trained guards, he wrote, cargo trucks were often waved through without a search, and Custer Battles refused to cooperate with his review.

In a memo dated Nov. 21, 2003, a senior American adviser in the Iraqi Transportation Ministry, Charles E. McVaney, described Custer Battles as "incompetent" and "deceitful."

A coalition contract officer sent the company a warning letter detailing 13 areas of concern. In a long reply, the company said any disputes reflected the lack of clarity in their assignment. Custer Battles finished out the initial year of the airport contract but it was not renewed.

In the meantime, from its base in the airport, Custer Battles swiftly won several other security and logistical contracts worth $100 million. At the center of many fraud charges is a 2003 contract to provide logistical support for the urgent program to replace Iraq’s currency.

To increase billing and profits, former associates have said in court documents, Mr. Custer, Mr. Battles and their partners formed several shell companies, some registered in the Cayman Islands. These were listed as suppliers of millions of dollars worth of equipment, at inflated prices and using false invoices, witnesses allege.

One of the most striking pieces of evidence, critics say, is a company spreadsheet that Mr. Battles accidentally left on the table after a meeting in Baghdad. The spreadsheet was retrieved by coalition authority officials and is part of the lawsuit record.

Item by item, it lists the company’s actual expenditures and the far higher costs reported to the coalition authority for reimbursement, claims far exceeding the 25 percent markup allowed. The spreadsheet shows that the company spent $240,000 for 12 trucks, to give one of dozens of examples, but told the authority it spent $600,000, for a gain on this item of $360,000, or 150 percent.

Judge Ellis’s decision on the prior question, the applicability of the False Claims Act, is likely to be appealed by the losing party. Still, a decision that the act applies, together with the Justice Department’s supporting stance, will be widely seen as a green light to whistle-blowers, said Mr. Schooner, the legal expert.

"There is every reason to believe that a significant number of attorneys around the country are preparing False Claims Act cases," he said.

http://www.nytimes.com/2005/05/22/i...

by : Erik Eckholm
Monday 23rd May 2005

magician

13 June 2005, 03:35

excerpt from http://www.crosswindsweekly.com/reliable_sources.htm

....So the criminal odyssey of Arthur Anderson may be over. But one odyssey that’s not, is the case pending against something called Custer Battles, a now notorious post–invasion contractor in Iraq. The creation of a couple of 30–year– old vets named Custer and Battles, the company is now charged with defrauding the federal government of several hundred million dollars. The facts in this case are beautiful.

Early on, Custer and Battles realized what only became apparent to the rest of us after several months of U.S. incompetence in Iraq: the Bush administration did no post–invasion planning and was clueless about how to provide material and services to a country still in the process of being destroyed.

The administration needed airport security quickly, for example; so quickly that companies with experience in the field declined to bid on the contract. That didn’t faze Custer Battles, which was paid $16.8 million for services that were called “incompetent” and “deceitful” by American inspectors. Guards were poorly trained, inspections of cargo were nonexistent, security was a joke.

This performance did not keep the administration from shoveling another $100 million worth of contracts to Custer Battles to provide equipment to occupation forces. The extent of their fraud is detailed in a spreadsheet, part of the court record, that Battles somehow managed to leave on a table after a Baghdad meeting. The spreadsheet showed, for instance, that Custer Battles spent $240,000 for 12 trucks, but charged U.S. forces $600,000 for them. A payroll of $200,000 was billed to the government as $564,000. And on and on.

The case, prosecuted by the U.S. under the False Claims Act, is before Judge T.S. Ellis III in Federal District Court in Alexandria, Va. Both parties are now waiting a ruling from Judge Ellis on what has become the key issue in the case and which has nothing to do with the company’s guilt or innocence on the facts.

Custer Battles is claiming that the U.S. government has no right to sue because the contracts were not signed by the American government, but by the Coalition Provisional Authority. The company says the money it collected was seized in Iraq and not appropriated by Congress. More, the Coalition Provisional Authority no longer exists, so, according to the company, there is no one left to complain about its massive theft.

This would be hilarious if it were not so serious. Several companies, including Vice President Cheney’s old stomping grounds, Halliburton, are accused of bilking the U.S. with inflated contracts in Iraq. They could walk away whistling, with our money, if this case goes the wrong way.

After all, despite George W’s burbling, the Coalition Provisional Authority, like “coalition” forces, was primarily American. Money seized by our soldiers becomes the property of our government — meaning the property of U.S. taxpayers. Could a federal court actually rule that there is no proper court to prosecute companies and individuals that have ripped off the government and its citizens?

Sure it could. In the halls of justice … CW

Doogie320

13 June 2005, 14:04

If this doesn't spawn several books I will be amazed. Wow.

Thank you for the info, magician.

magician

11 July 2005, 20:20

from: http://news.yahoo.com/news?tmpl=story&u=/nm/20050711/us_nm/iraq_contract_dc_3

Judge rules in whistle-blower Iraq case

By Sue Pleming Mon Jul 11, 5:52 PM ET
WASHINGTON (Reuters) - A U.S. judge ruled on Monday that a whistle-blower case alleging fraud against a U.S. security contractor employed in Iraq could go ahead, but excluded any work paid for with Iraqi oil money.

In what is seen as a test case for U.S. companies working in Iraq, the judge left open a key question over the legal status of the U.S.-led occupation authority that paid the contractor and whether it was subject to U.S. law.

The case involves Custer Battles, an upstart security firm based in Rhode Island that had a contract with the U.S.-led Coalition Provisional Authority in 2003 to guard Baghdad Airport and a later logistical deal.

Former associates of the company sued under the False Claims Act that it defrauded the U.S. government of millions, a claim Custer Battles strongly denies.

In issuing his opinion, Judge T.S. Ellis from U.S. District Court in Alexandria, Virginia, denied a motion by Custer Battles to dismiss the case on the grounds that the money involved was not drawn from U.S. funds.

The case could set an important precedent as it may mean companies doing business in Iraq can be charged with contracting fraud under U.S. law -- even though it was during the occupation. If successful, the suit could recover triple damages for the government and rewards for whistle-blowers.

A spokesman for Custer Battles said the company disagreed with the ruling but looked forward to clearing up the issue.

"The company enthusiastically welcomes the opportunity to finally have a forum to prove the company did nothing wrong and show that the relators, disgruntled former employees, conspired against Custer Battles," spokesman Jake Dye said.

The company, named after its founders, military veterans Scott Custer and Michael Battles, was barred by the Pentagon from future contracts last year because of evidence of fraud.

Alan Grayson, a lawyer for the whistle-blowers, said he was confident their case would succeed.

"For us, this ruling is good news. It is clear that we will be able to establish these claims were fraudulent and these people will be held accountable," he added.

IRAQI OIL MONEY

Judge Ellis said it appeared Custer Battles liability would be limited to work paid for from "seized and vested Iraqi funds" and would not be extended to money paid out of the Development Fund for Iraq.

The Development Fund for Iraq, or DFI, succeeded the U.N.'s oil-for-food program and is made up of Iraqi oil sales, frozen assets from foreign governments and surplus from the U.N. oil-for-food plan.

More than $1.7 billion in these Iraqi funds were, for example, paid to U.S. company Halliburton to bring fuel to Iraq. An unclear number of other U.S. companies were also paid from these funds.

The CPA also disbursed more than a billion dollars in funds seized by the U.S. military, as well as "vested" funds, drawn, for example, from bank accounts held by Iraqis abroad.

Procurement expert Prof. Steven Schooner said any U.S. company paid solely with DFI funds should feel confident they would be excluded from future False Claims Act cases, but those paid for by appropriated U.S. funds were not.

"The only group of firms who can breathe a sigh of relief based on this opinion are those who are confident that their work has been funded through the DFI," he said, adding that he was surprised the judge left open the CPA's legal status.

Discerning the status of the CPA was not an easy task, the judge said, even though it was "tempting to conclude that the CPA was merely an alter-ego, a tool, or an instrumentality of the United States."

The Justice Department has not joined the Custer Battles suit and the judge said it was reluctant to respond to requests over whether the CPA was a U.S. instrument.

"The government's reluctance in this regard is reminiscent of the guest invited to dinner who gladly accepts the invitation, but once she arrives and sits down to eat, proceeds to complain about the menu," a footnote in the ruling said.

The Justice Department declined comment on the ruling until it had time to review it.

magician

11 July 2005, 20:24

http://www.dailypress.com/news/local/virginia/dp-va--iraq-contractor0711jul11,0,5720301.story?coll=dp-headlines-virginia

Whistleblower suit against Custer Battles can proceed: judge

By MATTHEW BARAKAT
Associated Press Writer

Published July 11, 2005

McLEAN, Va. -- Two whistleblowers who allege that a Fairfax-based contractor cheated taxpayers out of tens of millions of dollars on reconstruction projects in Iraq can proceed with their lawsuit, a judge has ruled.

But parts of the ruling could have negative consequences for those who file similar claims against other contractors, according to a lawyer for the whistleblowers.

Two former employees of the security firm Custer Battles, Robert Isakson and William Baldwin, filed suit in federal court against their former employer under a law that allows whistleblowers to collect a portion of the proceeds when they help uncover a fraud against the government.

The two allege massive fraud by Custer Battles on $30 million in contracts the company received to provide security at Baghdad Airport and to provide security and support on a project to replace the old Iraqi currency in the months following the ouster of Saddam Hussein's regime.

Custer Battles, which was formed by former Army Rangers Scott Custer and Mike Battles, sought dismissal of the lawsuit. While the firm denies any wrongdoing, it had argued that even if the whistleblowers' charges were true, it was not the U.S. government that was defrauded but the Coalition Provisional Authority, which governed the occupied Iraq until sovereignty was transferred to an interim government.

A key question in the case had been whether the CPA was a part of the U.S. government or an independent entity.

Judge T.S. Ellis III, who issued his ruling late Friday in U.S. District Court in Alexandria, wrote that the CPA's origins in 2003 were murky. He also chided the Justice Department for its reluctance to weigh in on the issue.

Government lawyers, after repeated prodding from Ellis, eventually argued that the CPA should be considered a U.S. entity only for the purposes of the whistleblower law.

Ellis wrote that the government's stance is "reminiscent of the guest invited to dinner ... who proceeds to complain about the menu."

As it turns out, Ellis based his ruling less on the status of the CPA and more on the status of the money used to pay Custer Battles.

When the CPA used money that was seized from the old Iraqi regime, those payments are eligible for a whistleblower claim because international law generally recognizes that an occupying force claims title to seized funds.

Payments made from a pot of money called the Development Fund for Iraq, however, are not subject to the whistleblower law because the DFI fund was established by a United Nations resolution and the funds there never vested in the U.S. Treasury.

Alan Grayson, a lawyer for the whistleblowers, said the ruling is a good one for his clients because most of the money paid to Custer Battles--including an initial $2 million payment in shrink-wrapped blocks of $100 bills--came from seized funds and is therefore subject to recovery.

"The ruling is good for us because it means we can use this law to attack this war profiteering and remedy some of the mistakes made by the Bush administration" early in the occupation, Grayson said.

For others who have similar claims against other contractors, though, the ruling could establish a bad precedent because the DFI fund was the larger pot of money. Ellis, in his ruling, says that the DFI fund totaled about $10 billion, compared to $3 billion in seized and vested assets.

"For other cases (of alleged war profiteering), I think this causes some concern," Grayson said.

The Justice Department could appeal Ellis' ruling if it formally intervened in the case. Department spokesman Charles Miller said Monday that the ruling is being reviewed and declined further comment.

Numerous instances of contract fraud have been alleged in postwar Iraq, but Grayson said the Custer Battles case is the only whistleblower case filed in federal court, excepting those that may remain under seal.

Jake Dye, a spokesman for Custer Battles, said that "even though we don't agree with all of the judge's findings, we're excited about having a venue to get all these allegations cleared up."

Ellis also in his ruling dismissed the whistleblowers' claims on two subcontracts worth about $20 million, citing a lack of specific charges. Grayson said those claims can be refiled with more specific allegations.

ODA 564

12 July 2005, 07:26

And NEK, a firm thought of very highly by some because of its principal, uses Tarheel Training's Moore County NC office to manage the SWC ATD course.

magician

31 July 2005, 08:13

http://www.washingtonpost.com/wp-dyn/content/article/2005/07/11/AR2005071101639.html

Judge Allows Suit Alleging Fraud in Iraq
By Charles R. Babcock
Washington Post Staff Writer
Tuesday, July 12, 2005; Page D01

A whistle-blower's lawsuit against alleged contract fraud in Iraq can continue, but the U.S. government lacks the authority to police the spending of billions of dollars of Iraqi oil money, a federal judge in Alexandria has ruled.

The decision in the case involving Fairfax security firm Custer Battles LLC was issued yesterday by U.S. District Judge T.S. Ellis III. The rulingwas the first to decide how far the federal False Claims Act can be stretched to cover alleged theft in contracts on the battlefield.

Two former employees had sued Custer Battles over the company's work on two contracts in Iraq. One contract was to provide security to Baghdad International Airport and another was for helping move new currency around the country. The workers claimed the company used shell companies in the Cayman Islands and elsewhere to submit phony bills to the U.S.-led Coalition Provisional Authority, which ran Iraq for the first year after the war.

If the authority were an American agency, there would be little question that the whistle-blowers could pursue their suit under the Fair Claims Act, Ellis said. But because "the essential nature" of the CPA is "shrouded with ambiguity," he ruled, the case depends on the origins of the money at the heart of the allegations.

The judge noted that aid used in rebuilding Iraq came from four sources: U.S. funds appropriated by Congress, "vested" Iraqi funds seized by the United States, "seized" Iraqi funds -- mostly cash -- uncovered by coalition forces occupying the country, and funds from the Development Fund for Iraq.

It was the last pot of money that Ellis said could not be reached by the federal fraud law. DFI funds included those from the sale of Iraqi oil after the war, transfers from the United Nations oil-for-food program and international donations. But Ellis said the whistle-blowers can continue their suit because they contend that not all of the money in question came from the DFI.

Steven L. Schooner, a contract law expert at George Washington University law school, said the message is that the courts will oversee fraud claims if U.S. tax funds are involved, but "if it's someone else's money, too bad."

He added: "On one level it is an incredibly ugly result, but probably legally proper. If I were a donor country I wouldn't be amused by this."

Alan Grayson, attorney for the former Custer Battles employees, said Ellis's ruling was a positive one for his clients because they can pursue their claims. "But it's a pretty bad day for the American taxpayer, and a pretty good day for war profiteers," he said, because the decision means the spending of billions in Iraqi funds will not be covered by the False Claims Act.

Richard Sauber, the lawyer for the company, did not return a call seeking comment. Custer Battles spokesman Jake Dye was quoted by the Associated Press as saying the company welcomed the chance to have a forum to prove it did nothing wrong and that the former employees conspired against it.

The Justice Department filed a brief in the case, at the judge's urging, in which it argued that the CPA was a government entity and that Ellis should take a more expansive view of the law. DFI funds should be included within the reach of the fraud law because the U.S. government was responsible for the Iraqi funds, government attorneys said.

magician

31 July 2005, 08:20

http://www.iht.com/articles/2005/07/12/news/fraud.php

U.S. judge limits use of fraud law against Iraq contractors

By Erik Eckholm The New York Times

WEDNESDAY, JULY 13, 2005

A federal judge has issued a ruling that will limit the applicability of a critical antifraud statute against corporate contractors in Iraq.

Judge T.S. Ellis 3rd of U.S. District Court in Alexandria, Virginia, held on Monday that the False Claims Act did not apply to the many contractors who were paid by the American occupation authority using Iraqi oil money.

The False Claims Act offers large rewards to corporate insiders who reveal misdeeds, and huge financial penalties can be imposed on errant companies. It is widely regarded as the government's most potent weapon against contractor fraud.

The district court decision, which is the first to provide guidelines in what has been a legal void, could derail some whistle-blower lawsuits that are in their early stages and still under seal, experts in the field of procurement law declared.

In the chaotic year after the 2003 invasion, the coalition authority used billions of dollars in Iraqi funds, along with money appropriated by Congress, to pay for reconstruction projects and vital imports.

Ellis said the civil suit before him, involving allegations of sham billing by the security company Custer Battles, could go to trial under the False Claims Act because the company was mainly paid with confiscated Iraqi money that had become legal U.S. property.

"We're pleased that our own case can proceed," Alan Grayson, a lawyer representing two former associates of Custer Battles who brought the lawsuit, said by telephone. "But this ruling will significantly limit the ability of the government and whistle-blowers to act against frauds involving Iraqi oil funds. If that's going to be the law, it's a terrible shame."

Legal experts said there appeared to be little doubt that fraud involving appropriated U.S. funds - Congress has directed more than $20 billion to Iraqi reconstruction - would be subject to the False Claims Act. But many of the contracts signed in 2003 and 2004 were partly or wholly paid using Iraqi money.

Custer Battles won more than $100 million in security and logistical contracts in Iraq. The former associates say the company cheated the coalition authority of tens of millions of dollars, using shell companies to file phony, overpriced invoices.

Lawyers for Custer Battles argued that the lawsuit should be dismissed because the contracts came from the Coalition Provisional Authority, not the U.S. government, and that they were Iraqi funds.

In his decision, Ellis said he did not need to decide what many legal experts had regarded as a central question: whether the Coalition Provisional Authority, which ruled Iraq for 13 months after the invasion, could be considered an agent of the United States, with its contracting subject to the False Claims Act.

Instead, his decision focused more narrowly on whether the funds in question were the property of the U.S. Treasury.

Ellis rejected the argument, which was made by the whistle-blowers and by the Justice Department in a brief filed in April, that fraud damages could be pursued when bills were paid using Iraqi oil money.

The Justice Department said in its argument that because the Iraqi oil funds were controlled and spent by American officials, the False Claims Act should apply.

"The reasoning the judge used was perfectly logical," Steven Schooner, who is a procurement expert at George Washington University, said in an interview. "But I'm disappointed by the message this decision sends - that our legal system is interested in how the U.S. takes care of its own money but is not willing to take responsibility for American stewardship of other people's money."

Under authority granted by the United Nations, the Coalition Provisional Authority spent $17 billion in Iraqi oil funds.

Much of that money went to finance the operations of the Iraqi government, but billions of dollars were spent on reconstruction.

Doogie320

31 July 2005, 08:23

Steven L. Schooner, a contract law expert at George Washington University law school, said the message is that the courts will oversee fraud claims if U.S. tax funds are involved, but "if it's someone else's money, too bad."

He added: "On one level it is an incredibly ugly result, but probably legally proper. If I were a donor country I wouldn't be amused by this."

Okay, I'm very uninformed about law but could CB be sued by countries that did lose money as a result of their (alleged) behavior? Regardless of how the US lawsuit turns out?

magician

31 July 2005, 09:50

It should be noted that Nate Hill, cited as a source in one of the articles above, is no longer available to be interviewed. He was killed in Southern Iraq on July 1, 2005, in a "vehicle accident."

Nate Hill was a longtime CusterBattles employee. He was a fixture at meetings and parties at CB's mansion in the Mansour district, and there is little doubt that he was cognizant of much of CB's internal deliberations and business practices. Nate was not a Director of the company, so he would not have been in a position to be a party to many of the more controversial decisions. There is no doubt that he was in a position to corroborate much, however, and fill in many gaps.

Rest in peace, Ranger.

http://www.socnetcentral.com/vb/showthread.php?t=50509

Spinner

31 July 2005, 13:51

The Justice Department said in its argument that because the Iraqi oil funds were controlled and spent by American officials, the False Claims Act should apply.

"The reasoning the judge used was perfectly logical," Steven Schooner, who is a procurement expert at George Washington University, said in an interview. "But I'm disappointed by the message this decision sends - that our legal system is interested in how the U.S. takes care of its own money but is not willing to take responsibility for American stewardship of other people's money."

One can only wonder how much money was lost to outright theft. There may never be a definitive accounting, but it certainly has left a stain that won't wash away that quickly.

Alan Grayson

25 August 2005, 20:02

I am the attorney for the whistleblowers who are suing Custer Battles to recover the money that they claim Custer Battles stole from the Government under the Iraqi Currency Exchange (ICE) and Baghdad International Airport (BIAP) contracts. We are putting the case against Custer Battles together now. If you want to help, now is the time to do it. (This means you, Magician.) We want witnesses, documents, and anything else that helps to prove the case. You can send this to grayson@graysonlaw.net.

If anyone knows of any other cases of fraud by US contractors in Iraq, then tell me. Anything that you say to me about a new case is attorney-client privileged. Whistleblowers get 15%-30% of whatever the Government recovers, plus attorneys fees and costs. In an average year, total awards to whistleblowers are about $200 million. The Custer Battles case is the only case of fraud in Iraq that the Government has unsealed, so we are the only ones with experience litigating a case like this. We already have five clients who have come to us with Iraq fraud cases.

magician

25 August 2005, 20:16

Welcome, counselor.

:)

magician

30 August 2005, 01:54

This article explains the core ruling which has permitted the Custer Battles case to proceed.

I am not an attorney, but the court apparently determined that fraud which results in a loss to agencies, or a country, on whose behalf the US government administers funds can in fact be stolen without recourse to US legal remedies.

Or, as long as your corporate thieving did not result in a loss to funds appropriated by Congress, or to funds seized by the US government, it is apparently ok.

Specifically, in this case, as long as the money that you stole came from the Development Fund for Iraq, you cannot be prosecuted under the False Claims Act.

Sorry, but the way that I was brought up taught me that theft is theft, regardless of where the money comes from. This is a contemptuous ruling, and it gives thieves a green light to steal, as long as the money comes from a certain piggy bank. I think that this is a bad law. It does not withstand the simplest moral scrutiny.

If the US government is taking care of your money for you, for whatever reason, and if it is truly your money--Uncle Sugar did not give it to you, or take it from you, but is merely paying your bills using your checkbook--then Uncle Sugar is apparently under no compulsion to ensure that your money is not stolen. Your money can be stolen while Uncle Sugar is giving it away, and apparently no US law has been broken.

Whatever. In this case, much of the money paid to Custer Battles is said to have come from seized Iraqi funds, or from money appropriated to the war effort by Congress.

Because Custer Battles allegedly stole money from those two piggy banks, this case can go forward.

Hmmph. It looks to me as though the ruling merely laid grounds for an endless round of appeals stretching into the far future. The attorneys will get rich, as long as someone can continue to pay their bills.

What kind of justice is this?

Enough of the preamble.

from: http://www.washingtontechnology.com/news/20_17/federal/26868-1.html

Washington Technology home > 08/29/05 issue

08/29/05; Vol. 20 No. 17

Infotech and the law: False Claims Act covers Iraq work

By Eliza Nagle

The U.S. District Court for the Eastern District of Virginia issued a significant decision in the Custer Battles qui tam False Claims Act case.

Often associated with whistleblower laws, a qui tam lawsuit is initiated by a citizen on behalf of the government and alleges that a citizen or contractor performing a government contract has violated a law or regulation.

Custer Battles addressed a novel question: Does the act applies to Coalition Provisional Authority contracts?

The court concluded that the False Claims Act may apply, depending on the source of the funds used.

Custer Battles is accused by former associates of defrauding CPA of tens of millions of dollars received under two contracts in Iraq. Among other offenses, Custer Battles allegedly inflated invoices and created shell companies to pose as suppliers to increase contract costs.

The court engaged in an intricate analysis to conclude that the False Claims Act could apply to CPA contracts. The court focused on the source of funds used to pay the allegedly false claims. Ultimately, who owned the funds was the deciding factor as to whether the act applied.

The court found that if the funds used to pay Custer Battles came from the U.S. government, False Claims Act liability could apply. It is not enough for the United States to administer the funds. Instead, demand for payment from the United States must result in an economic loss.

The funds used to pay Custer Battles came from three sources: vested funds, seized funds and the Development Fund for Iraq. Vested funds were confiscated Iraqi government property that became U.S. property. Seized funds were money that American and coalition forces in Iraq seized that could be used for U.S. interests. DFI was Iraqi money that CPA administered on behalf of the Iraqi people and that never became U.S. property.

The court concluded that Custer Battles' claims for payment from vested funds or seized funds could invoke the False Claims Act because the money was U.S. property. Custer Battles' claims for payment from DFI would not invoke the act, because the money was not U.S. property and would not result in economic loss to the government.

What does this mean to contractors? For companies that hold CPA contracts, depending on the source of the funding, the False Claims Act could be applicable. This finding could have a ripple effect, resulting in initiation of more qui tam actions.

The court's ruling may come as a surprise to many contractors that, like Custer Battles, entered into CPA contracts unaware of the laws and regulations that might apply. The Custer Battles decision likely will be the first in a long line of such actions that will determine the liabilities of contractors engaged in Iraq.

The Custer Battles ruling also is another example of the increased scrutiny that contracts are receiving. Paul McNulty, U.S. attorney for the Eastern District of Virginia, recently created a procurement-fraud task force comprising investigators from the Pentagon and federal law enforcement. Its goal is to deter procurement fraud by tackling cases early on.

McNulty has said he has seen no evidence of an increased rate of procurement fraud, but government contracts generally are under increased scrutiny because of the swell in contracting since Sept. 11.

As a result, companies working at home and abroad may find themselves subject to more audits and investigations. While always vigilant, contractors should focus greater attention on compliance with the statutes, regulations and policies governing their contracts with Uncle Sam.

Eliza Nagle is an associate in the Government Contracts practice of DLA Piper Rudnick Gray Cary LLP in Washington. Her e-mail address is eliza.nagle@dlapiper.com.

magician

12 September 2005, 01:19

Iraqis To Bush - Where Did All Our Money Go?

http://www.opednews.com/articles/opedne_evelyn_p_050911_iraqis_to_bush___whe.htm

by Evelyn Pringle

http://www.opednews.com

I have come to the conclusion that even if I live to be 100, I will never be able to track down every Bush-connected profiteer involved in this phony war on terror scheme. According to a report released in March 2005, by Transparency International (TI), an international organization that focuses on matters of corruption, Iraq could become "the biggest corruption scandal in history."

"I can see all sorts of levels of corruption in Iraq," report contributor Reinoud Leenders told the Christian Science Monitor, "starting from petty officials asking for bribes to process a passport, way up to contractors delivering shoddy work and the kind of high-level corruption involving ministers and high officials handing out contracts to their friends and clients."

One of the top ten crooks, has got to be Ahmed Chalabi. A former banker in Jordon, Chalabi was forced to flee the country in 1989 before he could be arrested for his involvement in a $200 million financial scam. He was later tried and found guilty in his absence, and sentenced to 22 years in prison for more than 30 charges of theft, embezzlement, misuse of depositor funds, and currency speculation.

However, a little criminal history obviously didn't bother the Bush gang, because Chalabi was one of the first Iraqis flown into Iraq by the Pentagon during the 2003 invasion, supposedly so he could solidify his political base, which pretty much has proved to be non-existent.

By now, I cannot believe that anyone could possibly doubt Chalabi's role in the plot to take over Iraq. He was very much in the loop from day one, according to a March 17, 2005, report by BBC's Newsnight which said, "the Bush administration made plans for war and for Iraq's oil before the 9/11 attacks sparking a policy battle between neo-cons and Big Oil." Insiders told Newsnight that the planning began "within weeks" of Bush taking office.

An Iraqi-born oil industry consultant, Falah Aljibury, told Newsnight that he took part in secret meetings in California, Washington and the Middle East. He described a State Department plan for a forced coup d'etat. Aljibury said that he had even interviewed potential successors for Saddam on behalf of the Bush administration.

However, "The industry-favored plan was pushed aside by yet another secret plan," wrote Newnight, "drafted just before the invasion in 2003, which called for the sell-off of all of Iraq's oil fields."

The sell-off plan was given the OK at a secret meeting headed by none other that Ahmed Chalabi, shortly after the invasion of Baghdad, according to Robert Ebel, a former Energy and CIA oil analyst. He attended the London meeting at the request of the State Department, Ebel told Newsnight.

Falah Aljibury contends that it was the plan to sell off Iraq's oil, which ultimately led to the insurgency and attacks on US occupying forces. "We saw an increase in the bombing of oil facilities, pipelines, built on the premise that privatization is coming," he reported.

Of course it probably didn't help matters when the Iraqis were forced to watch as Halliburton's fortunes increased with money from the Development Fund for Iraq, through the award of 5 no-bid contracts, by the Coalition Provisional Authority, to the tune of $222 million, $325 million, $180 million, and a total of $194 million for the last two, which I just happened to find listed back in the Appendix to a July 28, 2004, report by the CPA Inspector General, titled "Comptroller Cash Management Controls over the Development Fund for Iraq."

The CPA Office of the Inspector General (CPA-IG) was established by Congress on November 6, 2003, to serve as “as an independent, objective evaluator of the operations and activities of the CPA,” according to the official web site. The CPA-IG reported directly to Administrator Paul Bremer, although it had independent authority to conduct audits and investigations without the Administrator’s approval.

A report in January 2005, by CPA Inspector General, Stuart Bowen, concluded that occupation authorities accounted poorly for $8.8 billion in Iraqi funds. "The CPA did not implement adequate financial controls," Bowen said.

That was definitely an understatement. A former CPA senior adviser, Franklin Willis, compared Iraq to the "Wild West," saying he delivered one $2 million payment to one company, Custer Battles, in bricks of cash.

"We called Mike Battles in and said, 'Bring a bag'," Willis said in testimony before Congress in February 2005.

Custer was another piece of work. Two former employees turned whistleblowers filed a law suit against the company with a complaint that said among other things, that Custer Battles double-billed for salaries and repainted the Iraqi Airways forklifts they found at the Baghdad airport, which Custer was hired to secure, and then leased them back to the US government. The two former employees, Pete Baldwin and Robert Isakson, claim Custer swindled the CPA out of about $50 million.

Bush was quick to criticize the UN over millions of dollars stolen from the Oil-for-Food Program under Saddam. But the CPA, as the successor to Oil-for-Food Program, aka Development Fund for Iraq, involves the swindling of billions of dollars.

And Custer represents only one crooked contractor. The investigation by the CPA-IG which resulted in the Comptroller Cash Management Report, determined that when it came to Iraqi cash, proper accountability was not maintained, physical security was inadequate, records were incomplete, and fund managers’ responsibilities were not assigned properly.

The auditors who participated in the investigation were unable to reconcile financial statements for the DFI, in large part due to the CPA’s decision to use cash basis accounting, which is more difficult to track than accrual accounting.

The investigators also found poor oversight of the fund managers who were responsible for transferring payments. While examining 15 disbursement locations, the auditors found that officials routinely failed to properly document advances to paying agents and receipts. For example, officials at 14 of the sites did not even maintain a register of cleared receipts. In examining 26 paid receipts, they found 25 had no supporting invoices, and all 26 were missing one or more of the required signatures.

They determined that of $400 million available for disbursement, as much as $50 million was handed out without proper receipts. “During the review, we found that there were no supporting receipts for some invoices; receipts were cleared with limited explanations of services or materiel received; and funds were disbursed for services that were contradictory to the allowable expenses,” the Inspector General said in the report.

Similarly, a United Nations sanctioned audit concluded that about half of the $5 billion in Iraq reconstruction funds could not be accounted for because of poor financial controls, according to the “Development Fund of Iraq-Report of Factual Findings in connection with Disbursements from January 1, 2004 to 28 June 2004, by the International Advisory and Monitoring Board, in September 2004

Until the summer of 2004, the CPA refused to release the names of companies that were awarded contracts paid for with Iraqi funds. Although information was available about US funded contracts, there was no public information available about companies paid with Iraqi money. In August 2004, information was finally made available for contracts valued at more than $5 million. But to this day, no details have been released about contracts worth less than $5 million.

An analysis of the data released in August 2004, showed that the CPA had awarded 85% of the contracts to US and UK firms. By contrast, Iraqi companies received a mere 2% of the contracts paid for with Iraqi funds.

A March 18, 2004 audit report by the Department of Defense Office of the Inspector General, titled, “Acquisition: Contracts Awarded by the Coalition Provisional Authority by the Defense Contracting Command-Washington," determined that the CPA and its predecessor, the Office for Reconstruction and Humanitarian Assistance (ORHA), had circumvented federal contracting procedures since the early days of the occupation.

The audit found that federal procurement rules were not followed in 22 of 24 contracts awarded by the Defense Contracting Command and that defense department personnel conducted “inadequate surveillance” on more than half of the contracts; did not “perform or support price reasonableness determinations;” and allowed activity that was “out-of-scope” of the original contracts.

The audit said that the DoD cannot be assured that it either “provided the best contracting solution or paid fair and reasonable prices for the goods and services purchased” during the reconstruction process.

However, not only did the CPA fail to follow DoD reporting rules, it failed to follow its own rules. CPA regulation Number 2 required the CPA to retain an independent certified public accounting firm to ensure that the Development Fund of Iraq was being used transparently and for the benefit of the Iraqi people.

But instead of hiring a certified public accounting firm, the CPA awarded a $1.4 million contract to North Star Consultants, a financial services firm, to review its internal controls for the DFI. In the end, neither North Star, nor any other firm, ever performed a review, because the Comptroller “verbally modified the contract and employed the contractor to primarily perform accounting tasks in the Comptroller’s office,” the report said.

In response to the report, the CPA claimed the reason that North Star did not perform a review was because the contract was not signed until shortly before the CPA was dissolved. Although it acknowledged that the contract “should have been modified to reflect the change,” the CPA did not bother to explain why it would award a contract to review its control of the DFI if the organization was about to be dissolved.

The truth is, that the CPA' shabby accounting procedures left all doors open to fraud, waste, bribery, and the misappropriation of funds, and nobody will ever be able to figure out what exactly happened to the Iraqi money.

But the fact remains that Halliburton received 60% of all contracts paid for with Iraqi money, even after it was proven time and time again that its projects involved fraud on every front, from paying over $6 million in kickbacks to a Kuwaiti contractor; to charging for three times as many meals as the company actually served to soldiers; to spending millions on laundry and monogrammed towels; to running up costs by driving empty trucks back and forth across Iraq; to leasing overpriced vehicles from Kuwaiti purchasing offices.

In 2003, Halliburton was delivering gasoline, through the Kuwait subcontractor, Altanmia Commercial Marketing Company, for an average price of $2.65 per gallon. In the spring of 2004, the contract was canceled and the new Iraqi Interim government gave an identical contract to Lloyd Owens International, a British company that manages 700 trucks from 7 separate subcontractors, which left Halliburton resentful toward the new company because of losing the contract.

LOI and its partners, Geotech Environmental Services of Kuwait, only charged 18 cents a gallon to haul the gasoline to the same sites.

An oversight hearing on "Waste, Fraud, and Abuse in U.S. Government Contracting in Iraq" was held on June 27, 2005, conducted by Senator Byron Dorgan of North Dakota, chairman of the Democratic Policy Committee.

Alan Waller, CEO of Lloyd Owens International, and his business partner, Gary Butters, flew to the US to testify at the hearing.

Waller said that over the past year while working in southern Iraq, he had encountered only one Halliburton worker and that every fuel station set up to provide gasoline to the Iraqis was in bad shape, including those that Halliburton was supposed to have repaired.

"As Lloyd-Owen delivers fuel to nearly every refinery or depot in southern Iraq, we find ourselves frequently encountering examples of poor equipment, no equipment or complaints from Iraqi staff," Waller said.

Waller and Butters told lawmakers at the hearing that every morning the drivers of 120 trucks who line up at the Kuwait-Iraq border to deliver gasoline have to cross the border at dawn because if they wait too long, KBR employees who patrol the border during the day, will subject them to far-reaching inspections and effectively shut down the operation.

The LOI also reported that on June 9th, 2005, a convoy of LOI trucks that was on its way to deliver construction materials for a Halliburton dining facility at an army base near Fallujah, came under attack and 3 drivers were presumed dead and six trucks had to be abandoned.

The surviving drivers limped to a military base, expecting to get help from the Halliburton staff running the facility, but instead got the cold shoulder. When the drivers tried to leave Iraq, they hit a roadside bomb and another man was killed.

Waller said Halliburton employees were instructed not to help the drivers and that the company had failed to warn LOI that two other convoy had been attacked in the same area the previous week.

At the start of the hearing, Congressman, Henry Waxman, (D-CA), introduced a new study based mostly on confidential reports originating from the Defense Contract Audit Agency (DCAA).

The study revealed that overall, Halliburton had received roughly 52% of the $25.4 billion that has been paid out to private contractors in Iraq. The 52% was divided between two different contracts. The first, known as LOGCAP, was to provide logistical support like cooking and cleaning for the troops, and was outsourced to civilian workers, for which Halliburton had been paid $8.6 billion.

On the LOGCAP contract, the company was paid for its actual costs, plus an additional commission of between 1 to 3 percent, depending on its performance.

The "Restoring Iraq Oil" contract covered the repair of Iraqi oil fields in the immediate aftermath of the 2003 invasion and imports of consumer fuel. The RIO contract is now complete and ended up costing $2.5 billion. A second RIO contract is now underway.

New evidence of fraud and contract abuse, was released right before the hearing and showed that KGB:

1) Had overcharged or presented questionable bills for close to $1.5 billion, almost four times the previous amount disclosed.

2) Had lost 12 pre-fabricated bases worth over $75 million which could have housed as many as 6,600 soldiers.

3) Had billed $152,000 to provide a movie library for 2,500 soldiers

4) Had billed inconsistently across the board. Eg, Video cassette players cost $300 in some instances, and $1000 in others; the company charged $2.31 for towels on one day and $5 for the same towels on another.

Rory Maryberry, a former Halliburton contractor, who worked at the dining facilities at the largest military base in Iraq, also testified at the hearing. Mayberry said the company charged the government for serving 20,000 meals a day when it was only serving 10,000 and that he was sent to a more dangerous post as punishment for speaking to auditors.

In a video-taped deposition testimony played at the hearing, Mayberry told how Halliburton would sometimes supply food that was more than a year past the expiration date or that had spoiled due to poor refrigeration. The few times the military refused to accept the spoiled food, Maryberry said truckers were told to deliver it to the next base in the hope that they would escape scrutiny.

He said that Halliburton was also supposed to serve 600 meals to Turkish and Filipino workers in Iraq, and "although KBR charged for this service, it didn't prepare the meals. Instead, these workers were given leftover food in boxes and garbage bags after the troops ate. Sometimes there were not leftovers to give them," he said.

According to Mayberry, "Iraqi drivers of food convoys that arrived on the base were not fed. They were given Meals Ready to Eat, with pork, which they couldn't eat for religious reasons."

"As a result, the drivers would raid the trucks for food," he said.

The star witness at the hearing was Bunnatine Greenhouse, a former math teacher, who moved up the latter to become the highest ranked civilian employee in the Army Corps of Engineers, responsible for signing off on Iraq contracts. She testified that her superiors forced her to sign no-bid contracts for Halliburton on the eve of the invasion of Iraq.

She filed a complaint against her superiors for harassment but the harassment has not ceased. She said Pentagon attorneys had to tried to talk her out of testifying at the hearing three days before the hearing date.

"I have agreed to voluntarily appear at this hearing in my personal capacity because I have exhausted all internal avenues to correct contracting abuse I observed while serving this great nation as the United States Army Corps of Engineers senior procurement executive," Greenhouse said. "In order to remain true to my oath of office, I must disclose to appropriate members of Congress serious and ongoing contract abuse I cannot address internally," she said.

"I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my professional career," she said in her testimony.

Members of Congress at the hearing reacted strongly to Greenhouse's revelations. "This testimony doesn't just call for Congressional oversight -- it screams for it," Senator Dorgan said.

Hover, I have not heard of any oversight hearings in response to Greenhouse's testimony. Instead, about a short time after the hearing I read the August 29, 2005 New York Times which said: "A top Army contracting official who criticized a large, noncompetitive contract with the Halliburton Company for work in Iraq was demoted Saturday for what the Army called poor job performance."

"The official, Bunnatine H. Greenhouse," the Times wrote, "has worked in military procurement for 20 years and for the past several years had been the chief overseer of contracts at the Army Corps of Engineers, the agency that has managed much of the reconstruction work in Iraq."

In fact, none of testimony by any witness phased the top brass at the Pentagon one bit. On May 1, 2005, the Army quietly awarded the company a new contract worth nearly $5 billion to continue on with its wonderful logistical support of the soldiers in Iraq, and last I knew, the contract is as good as money in the bank for KBR.

But then what the hell. People have been nagging Halliburton of war profiteering for over 40 years. In 1966, a Republican member of the House of Representatives from Illinois, demanded to know about the 30-year association between Halliburton Chairman George R. Brown and Lyndon B. Johnson. Brown had contributed $23,000 to the President’s Club while the Congress was considering whether to continue another multimillion-dollar Brown & Root Services project, according a report by the Center for Public Integrity, on August 2, 2001.

“Why this huge contract has not been and is not now being adequately audited is beyond me. The potential for waste and profiteering under such a contract is substantial,” the indignant Republican Congressman, Donald Rumsfeld said.

In 1982, the GAO reported that the company lost accounting control of $120 million and that its security was so poor that millions of dollars worth of equipment had been stolen.

For those readers who may hoping that the millions of tax dollar spent on all the investigations and hearings discussed in this report might result in a turn-around by contractors in Iraq, here is a discomforting tidbit. According to the July 15, 2005 Boston Globe, "The federal government's chief investigator yesterday blasted the Pentagon for its ''atrocious financial management," saying the Defense Department was not able to give federal oversight officials a full accounting of the $1 billion being spent each week on the war in Iraq."

I'm not sure whether the Americans or the Iraqis are picking up the tab for the billion a week, but I think it must the Iraqis in light of the latest announcement by officials in Iraq. On September 9, 2005, the Guardian reported that, "Key rebuilding projects in Iraq are grinding to a halt because American money is running out and security has diverted funds intended for electricity, water and sanitation, according to US officials."

There are an estimated 20,000 foreign security contractors currently in Iraq, with some being paid more than $1,000 a day. According to IG, Stuart Bowen, $5 billion of the $18.4 billion appropriated by Congress for reconstruction, has been diverted to security.

A GAO report said that "attacks, threats and intimidation against project contractors and subcontractors" were to blame.

For those wondering what kind of bang the Iraqis got for their big bucks, some areas of Iraq still only get less than four hours of electricity a day. The estimated cost of providing enough electricity for the country by 2010 is $20 billion, according to the Guardian.

Water and sanitation projects have been hit hard. According to a report published early this month by the GAO, so far, $2.6 billion has been spent on water projects, but that amount equals only half the sum allocated for the work, because the remainder was spent for security and other uses.

A quarter of the $200 million worth of completed water projects handed over to the Iraqi authorities no longer work properly because of "looting, unreliable electricity or inadequate Iraqi staff and supplies," the GAO report said. There has be a surge in cases of dehydration and diarrhea among children and the elderly.

Shortages of fuel have produced lines a mile long at gas stations. Crude oil production is averaging around 2.2 million barrels a day, still below its pre-war peaks, according to the Brookings Institution in Washington.

As for Halliburton, it is currently facing a number of investigations for overcharging in Iraq, according to a report released in March 2005, by Rep Henry Waxman (D-CA).

But hey, what better choice could Bush have made than for Halliburton to get the $700 million reconstruction contract to repair the damage caused by Katrina? I mean, look what the firm has done for the Iraqis.

And just think how thankful the Iraqis must feel toward Bush, especially the ones who have managed to stay alive.

Evelyn Pringle
epringle05@yahoo.com

(Evelyn Pringle is a columnist for Independent Media TV and an investigative journalist focused on exposing corruption)

SabreActual

5 November 2005, 08:09

Recent report that jury found in favor of DRC with CusterBattles to ante up to the tune of $1MIL+ - Next trial to commence on or about FEB 2006 according to sources close to litigation action - seems the chickens are coming home to roost...

Alan Grayson

5 November 2005, 11:27

DRC, a CB subcontractor, got a $1.4 million jury verdict against CB for its work under CB's Baghdad Airport and Money Exchange contracts. The claim that CB (and Custer, Battles and Morris personally) defrauded the CPA is set for trial in February 2006. But "summary judgment briefs" (to allow the judge to decide the case without a jury trial) are due early next month. If any of you CB fans wants to help to see CB found gulity of fraud, and you have evidence (things that you saw, things that you heard about, e-mails, documents, etc.), now is the time to step forward. I am the attorney for the whistleblowers. Just e-mail me at grayson@graysonlaw.net, send me a private message, or answer on this board.

VZMWKL

6 November 2005, 00:37

Glad to hear that CB may soon be receiving the justice that they have coming. The company ( DSS K-9 Great Lakes - ran by Jerry Johnson who now by the way is running Canine Associates International ) that was providing the K-9s for them wasn't much better. They were losing handlers faster than they could get them hired. The Kennel master even had the balls to hire his wife who had never handled a Military or Police dog and had only been a civilian SAR dog handler. The Army requested that DSS/CB provide 4 Patrol capable dogs for a mission to SADR city to support the QRF for the riots that were going on at the time (Oct. 17 2003) and 3 of the dogs that were sent were straight Explosives dogs. When the handlers complained they were told "well you just need a dog that will bark at the end of the leash" . This was typical of the BS that was continually going on. One dog ( Ricky ) had obviously been previously trained for an aggressive indication on narcotics as he would bite and retrieve the explosives training aids... not a really healthy thing for an explosives dog ...or its handler....

So if anyone is considering working for CAI....you might want to know their history .

SabreActual

21 November 2005, 14:36

There is little doubt Mssrs. Custer and Battles will fare badly in any courtroom, whether civil or criminal.

And well they should.

As for the "whistleblowers"...

Once they profit to the enormous degree projected are they, as the "men of honor" they promote themselves as being, going to divert notable sums of their windfall to the survivors/families of those injured, wounded, or killed while working for Custer Battles? Iraqi and U.S. and "coalition" alike and equally?

Those of us that were there, particularly the Original 99, recall all too well the empty and broken promises, too many that resulted in good operators there in good faith being busted up, wounded badly, or killed.

They are the ultimate victims, the real flesh and blood victims, in all of this.

And somehow I just don't believe the "good and honorable" parties who may indeed profit from all this nonsense will remember their names, faces, and individual tragedies once judgement is made and checks are cut.

However, we who were there will not forget our teammates.

And all the money in the world cannot buy such respect and honor.

Alan Grayson

21 November 2005, 15:25

Dear SabreActual:

I think you're putting the cart before the horse. Custer and Battles have walked off with millions of dollars. The Government has done nothing to get the money back, much less punish them. The whistleblowers and their attorneys have faced death threats and economic sacrifice. Isn't it premature to worrying about what the whistleblowers might do with their "windfall"? If you think that whistleblowers "profit" to an "enormous degree," then why don't you become one? Being a "man of honor," I'm sure that you won't forget your teammates, when your "windfall" arrives. Seriously, let's keep our fire trained on the enemy, not each other.

Xdeth

21 November 2005, 15:29

In a somewhat related note that could be it's own thread, a recent round of allegations of fraud, bribery, and misappropriations came out regarding the CPA, several large firms, important business types, and contracting officers. Yet nary a sound bite from the media or any real coverage, guess it's too early to tell whats what.

RAT

21 November 2005, 16:56

Those of us that were there, particularly the Original 99, recall all too well the empty and broken promises, too many that resulted in good operators there in good faith being busted up, wounded badly, or killed.

Sorry to hear about anyone getting busted up but out of the 1st 99 or so I only knew about 9 who did not lie about their back ground or took jobs well above their skill levels.

It goes both ways.

RAT OUT!!!

Doogie320

21 November 2005, 22:54

Spinner

22 November 2005, 12:31

They mentioned on Saturday that this was the first corruption indictment stemming from Iraq.

What I would like to know is how a convicted felon obtained a job with the CPA? Just the kind of guy you want as your comptroller and funding officer.

Robert J. Stein Jr., 50, of Fayetteville, North Carolina, and his wife, even used the money to pay federal taxes and restitution for Stein's earlier federal fraud conviction, according to an affidavit made public Thursday.

This kind of stuff makes my blood boil.

Typhoon

22 November 2005, 15:32

What I would like to know is how a convicted felon obtained a job with the CPA? Just the kind of guy you want as your comptroller and funding officer...This kind of stuff makes my blood boil.
Ditto. I just hope that the folks involved in this investigation kick dirt and take names...

SabreActual

23 November 2005, 14:55

Dear Alan,

As for becoming a whistleblower...

Now a retired Special Forces operator and once again a law enforcement officer my only response to your good-natured challenge is that I long ago did what is expected of both professions, particularly the latter, in this matter and with the appropriate Authorities.

So I trust you'll allow me to remain both sympathetic and empathetic with those and their families who are fallen comrades. My background is in military and public service, specifically law enforcement.

Financial gain to me is either a TDY trip or OT in court:)

As for the comment regarding the Original 99 -

Although I worked for these people for a fairly short period of time it was my privilege to meet a fair number of qualified, experienced former soldiers, sailors, Marines, Airmen, and special operations professionals. They, and other like-minded, hard-working employees endured all manner of obstacles, challenges, and sheer nonsense to "make things happen" during a period in Iraq, and in Baghdad specifically, where chaos was the order of the day and the opportunity to get either maimed or killed while operating without any realistic form of safety net was a moment to moment reality.

Certainly there were and are today sad little men claiming backgrounds they do not possess working for all of those security firms doing business in Iraq. During my tenure I believe I culled several of these out of my operation, and at least two former SOF operators who failed to make the cut due to attitude and less than prudent judgement.

Selection, as it is said, is a never-ending process.

De Oppresso Liber -

Greg Walker (ret.)
United States Army Special Forces

VZMWKL

23 November 2005, 23:24

Maybe if successful some of the $$ could be used to compensate those families that lost members. I would think that CB could also be held legally/financially liable for the deaths or injuries to any employee if it could be proved that they were negligent in their actions. Just like some of the other current suits against other PMC's. Maybe the families of those killed or injured could also file a class action suit against CB to help compensate them. I think that sometimes the $$ isn't the issue, but merely holding those responsible accountable.

Alan Grayson

24 November 2005, 19:59

SabreActual, you have mail.

SabreActual

25 November 2005, 09:14

Dear Alan -

You might try resending as nothing as of this AM.

Pete has my alternate email address if you are having trouble -

GW

SabreActual

25 November 2005, 12:21

CB was such a miserable entity in every respect that those with valid claims and interests would certainly enjoy a more than fair advantage - IMHO.

I mean, when you allow/promote your shooters to tape soft body armor to the outside of their otherwise soft skin vehicles and then roll the streets and highways of Iraq (IED country) as if they were in an "armored vehicle"...

With the predicted and expected results...

"The horror...the horror...the horror."

It would be nice to see the victims properly acknowledged and compensated, in some tangible manner.

And it will be interesting to see, as this all plays out, what indeed will occur on all fronts.

SabreActual

16 December 2005, 16:44

CBS "60 Minutes" is presently filming a segment on Custer Battles. Host is Steve Kroft. Due to air in late January or February 2006, according to its producer.

Silverbullet

15 February 2006, 11:59

Contractor Fraud Trial To Begin Tomorrow
Case Tests Reach Of False Claims Act

By Charles R. Babcock
Washington Post Staff Writer
Monday, February 13, 2006; D01

The first civil fraud case against a U.S. contractor accused of war
profiteering in Iraq goes to trial tomorrow in federal court in Alexandria.
It pits two whistle-blowers against two former Army officers whose company,
Custer Battles LLC, won multimillion-dollar contracts in the aftermath of
the fall of Saddam Hussein in 2003.

Robert J. Isakson and William D. "Pete" Baldwin, who worked for the company
in Iraq, accuse its founders, Scott Custer and Michael Battles, of
overcharging the government millions of dollars by running inflated expense
billings through a series of shell companies they created.

Custer, who served as an Army Ranger, and Battles, a West Point graduate who
also served in the CIA and ran unsuccessfully for Congress in 2002, have
denied the charges and counter that their accusers are disgruntled
competitors.

The case has generated media coverage, including a piece on CBS's "60
Minutes" last night, because of the explosiveness of the fraud charges and
because it has become the first test of whether the federal False Claims Act
reaches the conduct of contractors working in Iraq.

Custer Battles, which has had offices in Northern Virginia and Rhode Island,
won contracts in 2003 to provide security for the Baghdad airport and to
help guard and distribute a new money supply for the country.

U.S. District Court Judge T.S. Ellis III ruled last summer that because "the
essential nature" of the U.S.-led Coalition Provisional Authority was
"shrouded in ambiguity," the reach of the fraud law turned on the source of
the allegedly stolen funds. Since much of what the CPA spent was Iraqi money
from oil sales, the trial is limited to $3 million Custer Battles received
in funds controlled by the agency.

Under the Civil War-era False Claims Act, individuals can file suit secretly
on behalf of the government. The case becomes public after the Justice
Department has had a chance to decide whether to join the case. In this case
the department declined but did not say why. The complainants, pursuing the
case with their own attorney, can collect 12 percent to 15 percent of any
damages.

This week's trial focuses on the contract to help distribute a new Iraqi
currency in the first months after the collapse of Hussein's government. A
separate trial will be held later on similar charges involving the contract
to provide security for the Baghdad International Airport.

A subplot in the trial is likely to be the performance of the CPA, which has
been criticized for failing to properly oversee the spending of more than
$20 billion in U.S. reconstruction funds. The special inspector general
examining that spending said financial systems were so shoddy that billions
of dollars couldn't be accounted for.

One former CPA employee pleaded guilty recently to several felony counts for
stealing cash in an unrelated case during the rebuilding effort. Several
others, including a contractor, are under investigation.

Court filings in the Custer Battles case detail how CPA officials in Baghdad
were ill-equipped to write, much less oversee, the processing of millions of
dollars in contracts. For example, the agency couldn't wire money to Custer
Battles and its other contractors, so it sometimes advanced them millions of
dollars in cash, according to the records.

Custer and Battles, who are in their mid-thirties, met while in the Army and
co-founded the company in the fall of 2002. By June of 2003, Battles was in
Baghdad bidding on and winning a first contract, a $16.8 million deal to
provide security at the airport.

The Iraqi currency exchange, or ICE, contract was awarded in August. Custer
Battles was supposed to build three camps as distribution points for new
Iraqi currency that didn't have Saddam's picture on the bills. The contract
was originally for $9.8 million. It was later expanded to more than $20
million.

One document in the case is a spreadsheet showing the company's actual
expenses and much higher figures for what it was charging the government. It
was among documents provided to The Washington Post last spring by attorneys
for the whistleblowers.

It showed for example, that $74,000 generators were billed at $400,000 and
$240,000 trucks at $600,000. The items were listed as coming from other
companies Custer and Battles set up in the Cayman Islands.

When Baldwin complained about the alleged overcharging, the company
appointed an investigator, Peter Miskovich, to probe the matter. He sent
Custer Battles a memo outlining what he considered "elements of criminal
fraud" in the documentation. Miskovich said in another statement several
months later that he didn't believe Custer or Battles was involved in the
questionable conduct.

Isakson, an owner of an Alabama construction company called DRC Inc., is in
a separate financial dispute with the government over federally financed
work his firm did in Honduras several years ago following Hurricane Mitch.

His company has sued the government over that contract. In late 2004, the
Justice Department sued DRC, claiming the company made false statements on
the $12.7 million deal. DRC denies the charges.

The Custer Battles trial is expected to last about two weeks.

C 2006 The Washington Post Company

Silverbullet

16 February 2006, 20:47

Washington Post
February 16, 2006

Contractor Accused Of Profiteering

Witness Says Custer Battles Sent Trucks That Didn't Work to Iraq

By Charles R. Babcock, Washington Post Staff Writer

The work of a contractor accused of defrauding the U.S. government in Iraq
in 2003 "was probably the worst I've ever seen in my 30 years in the Army,"
a retired brigadier general told a federal jury yesterday.

Hugh Tant III, who went to Iraq as a civilian to oversee a project to give
the country a new currency, testified on the first day of testimony in the
first civil fraud trial arising out of the rebuilding effort there. He said
Custer Battles LLC, which has had offices in Northern Virginia and Rhode
Island, provided trucks that did not work and failed to perform adequately
in supplying cabins, mattresses, generators and Internet service to troops
who were distributing the new dinar in the fall of 2003.

When he confronted the principals, Scott Custer and Michael Battles, that
October about 34 of 36 trucks not working, Tant testified, Battles
responded: "You asked for trucks and we complied with our contract and it is
immaterial whether the trucks were operational."

During his afternoon testimony, Tant also said he complained about the
company's failure to furnish leases and invoices from subcontractors. The
subcontractors turned out to be subsidiaries of Custer Battles, a fact the
owners didn't tell him, Tant said. The initial contract was for $9.8 million
and was later increased to more than $20 million.

The role of those subsidiaries is at the heart of the allegations against
the company and its owners. In court papers, the pair have denied they used
these offshore companies to overbill the government.

Alan M. Grayson, lead attorney for two men who filed the case on behalf of
the federal government, told the jury earlier in the day that evidence would
show Custer and Battles set up the subsidiaries to file fake invoices to the
U.S.-led Coalition Provisional Authority, which was running the
reconstruction effort.

One document will show the company spent $3 million on supplies while
billing the U.S. government $10 million, Grayson said. He said Custer and
Battles both took $3 million out of the company less than six months after
it started work in Iraq. He called the men "war profiteers" and told the
jury that "you and I as taxpayers need to be compensated for the $3 million
they took from us."

U.S. District Judge T.S. Ellis III had ruled earlier that the case, a test
of the reach of the federal False Claims Act, would be limited to the first
$3 million paid under the contract. That's because the CPA was using a mix
of U.S. and Iraqi funds to finance the rebuilding effort.

Grayson also created a stir by telling Ellis late Tuesday that Custer had
offered a witness in the case $50,000, which Grayson had reported to the
U.S. attorney's office. David L. Douglass, Custer's attorney, complained
about what he termed a "baseless, harmful allegation." Neither side would
discuss the claim further.

In his opening statement to the jury, Douglass said that the evidence would
show that there was no intent to defraud and that his clients were "victims
of confusion, misunderstanding and resentment" by their two accusers. He
said there were "good and valid reasons" for the company to set up the
offshore subsidiaries, including limiting liability, protecting the Custer
Battles brand name, and preparing to sell off the spinoffs.

The company simply passed on its bills, without marking them up, Douglass
told the jury. He said there was "tons of confusion" over what was required
when payments on the contract were requested.

Barbara Van Gelder, attorney for Joseph Morris, a Custer Battles official
who oversaw the currency exchange contract, also denied the fraud
allegations. She said, "This is a simple case of payback and self
protection" by the accusers, Robert Isakson and William Baldwin.

The trial, which started Tuesday, is expected to last about two weeks. Tant
is scheduled to return to the witness stand today to complete his testimony
and face cross examination.

A separate trial will be held later on charges involving a $16.8 million
contract Custer Battles received to provide security at Baghdad
International Airport.

Frog

16 February 2006, 21:25

After all that, only a one year suspension from getting another Gub-ment contract.

WTF???

Wench

19 February 2006, 13:37

The latest from my hometown...

http://www.al.com/news/mobileregister/index.ssf?/base/news/1140257939229440.xml&coll=3

Alan Grayson

19 February 2006, 14:42

I'm the attorney against Custer Battles in the fraud trial in Virginia right now. I'm going to be questioning Custer and Battles on the witness stand soon. If you want to make any suggestions, you can post them on the board, send me a private message, or e-mail me at grayson@graysonlaw.net .

RAT

9 March 2006, 18:20

Alan, Pete, and Group...

Congat's... Just heard 10 million...

RAT OUT!!!

Alan Grayson

9 March 2006, 21:29

It's true. Over $10 million judgment for fraud, against CB and Custer, Battles and Morris, personally.

Typhoon

10 March 2006, 01:28

Does the decision mean that CB will be precluded from bidding on future Government contracts? It would really suck if the defendants were able to resurface under another corporate banner and simply continue their ways in the future.

Glad to hear as a "grunt taxpayer" that the good guys won. Thank you for your work in behalf of those defrauded, Mr. Grayson.

Alan Grayson

10 March 2006, 08:30

PACE

10 March 2006, 09:22

Glad to hear as a "grunt taxpayer" that the good guys won.

I don't know if Baldwin and Isakkson were the good guys, maybe just "gooder" than Custer, Battles and Morris.

Silverbullet

10 March 2006, 09:32

GTG.

Maybe we can read the same thing about DEMC in a yr.

Silverbullet

10 March 2006, 11:24

When a government contractor is found guilty of fraud, that contractor is almost always barred from contracting for three years. In this case, that would include Custer, Battles and Morris, and any companies that they control.

And thank you (and everyone else on this board) for your encouragement.

Go to this link and check out Danubia Global.

http://pscai.org/fulllist2.html

CB reflagged? Someone may want to look into that.

PACE

11 March 2006, 11:02

Silverbullet

11 March 2006, 12:28

Prior Post

Considering I'm the mod, I'm well aware of every single post made in this forum.

I was giving the full name of the company and a link to a site that showed it had business in Iraq. Neither of which your post contained.

Alan Grayson

17 March 2006, 13:39

I just received this:

"A film company is in production on a documentary on waste, fraud, corruption, and malfeasance in Iraq.
One of the stories we are covering is Custer Battles. We are reaching
out to former employees of Custer Battles for stories about the
corrupt practices of Custer Battles in Iraq. In addition, we
understand that Custer Battles operations on the ground in Iraq often
put people in danger, whether by skimping on adequate arms and
protection, or not providing Custer Battles employees with the proper
instructions and training to carry out their assigned jobs. For those
who would like to participate in the film, anonymity would be assured
if requested."

The contact person is Kerry Candaele, kcandaele@gmail.com. This is a reputable organization that has produced several popular documentaries, seen by up to a million people each.

Spinner

12 May 2006, 16:20

Fern Holland was the first civilian CPA employee killed in Iraq, along with Robert Zangas, a former Marine Lt. Col., and an Iraqi interpreter.

If this story has any meat to it, the only words I can think of are dishonorable and despicable.

Aid worker's death in Iraq possible cover for lost cash

By James Glanz
New York Times News Service
Published May 10, 2006

BAGHDAD -- The killing of Fern Holland, a young human-rights worker from Oklahoma, remains unsolved and as mysterious as it was when her body was found riddled with bullets on a desolate stretch of road near one of Iraq's southern holy cities in March 2004.

Now, federal investigators are grappling with a second mystery: What happened to hundreds of thousands of dollars in cash issued by American authorities to Holland and Robert Zangas, a press officer who died in the same attack near Karbala, in the days before their deaths?

Financial records from the American-run compound in Hilla, the south-central Iraqi city where Holland and Zangas were based, have revealed that much or all of that money--issued for things like programs to train Iraqis in democratic governance and the building of women's rights centers that Holland was establishing--was either missing or improperly accounted for after their deaths.

American investigators are trying to determine whether that money was stolen as part of the web of bribery, kickbacks, theft and conspiracy that they have laid out in a series of indictments and court papers describing corruption by American officials in Hilla in 2003 and 2004, according to officials involved in the inquiry. That corruption case, centered on reconstruction efforts, has led to four arrests, and more are expected.

The murders of Holland, a 33-year-old lawyer and advocate of women's rights, and Zangas, 44, a former Marine lieutenant colonel from Pittsburgh, received wide attention at the time in part because they had been the first civilians of the American occupation government, called the Coalition Provisional Authority, to die in Iraq.

An Iraqi interpreter, Salwa Oumashi, also died in the attack. Their killings occurred before the major outbreak of an insurgency made such events seem tragically commonplace. A group of Iraqis wearing police uniforms are believed to have been the triggermen in the killings, but no suspects have been publicly charged.

Twisted trail

None of the charges in the corruption case mentioned Holland or Zangas, and there was no indication that any of those arrested in that case were suspects in the murder investigation. But as investigators follow a tortuous trail of receipts, vouchers, invoices and purchase orders indicating that Holland and Zangas received more than $320,000 in cash for their government work in the last two weeks of their lives, they have found that each of the four people arrested in the corruption case had some role in handling the money or were involved in some way with Holland's projects.

One of those, Robert Stein, a former American occupation official in Hilla, pleaded guilty in February to five counts of bribery, conspiracy and other charges, and could serve up to 30 years in prison. Stein disbursed the cash to Holland and Zangas and was involved in accounting for it after their deaths.

Another American arrested in the corruption case, a businessman named Philip Bloom who was working in Iraq, appeared in contracting documents involving changes in Holland's projects after her death. Bloom pleaded guilty to three counts of conspiracy, bribery and money laundering last month. Two Army Reserve officers, Lt. Col. Debra Harrison and Lt. Col. Michael Wheeler, who oversaw projects in Hilla, have been arrested and charged with accepting bribes.

A lawyer for Bloom, John Nassikas, declined to comment. Lawyers for Stein, Harrison and Wheeler did not return telephone calls requesting comment.

At the core of the corruption case, prosecutors say, was a scheme in which Stein and other officials had steered at least $8.6 million in reconstruction contracts to companies controlled by Bloom, in exchange for millions of dollars in bribes. Stein also pleaded guilty to federal weapons charges for having used the money to buy submachine guns, grenade launchers and other arms in the United States.

Investigators tracing the cash to Holland and Zangas are looking at the possibility that Stein and others took advantage of the deaths to steal additional money, according to the officials familiar with the investigation.

The Special Inspector General for Iraq Reconstruction, which is investigating corruption in Hilla, provided copies of some of the documents tracing the cash, and described others, after a reporter for The New York Times asked about a paragraph in one of the office's reports about the mishandling of cash recovered "from the office of a paying agent who was killed in the field."

That agent was Holland, and the documents indicate Stein and Harrison were in charge of recovering the cash. One of those documents is a "memorandum for record" signed by Stein and Harrison saying that $71,099 was missing from Holland's office after her death. But that is only part of the hundreds of thousands of dollars that cannot be accounted for.

`Nothing adds up'

"There's nothing that adds up completely or remotely close to completely," said a member of the inspector general's office.

Through press officers in the U.S. and Iraq, the FBI declined to comment on the case.

No suspicion for the missing money has fallen on Holland or Zangas. And those who knew and worked with Holland, whose efforts on behalf of women had won her recognition, said it defied belief that she could have lost track of so much money. Adly Hassanein, an Egyptian-American official for the Coalition Provisional Authority who routinely worked with Holland in Hilla, said that it was also unthinkable that she would have been carrying that amount of money with her.

"She would never do that, because there was no need," said Hassanein, who recalled that Stein had directed the recovery of money from Holland's room and office after she died.

As for Stein's memorandum asserting that money was gone, Hassanein said: "He's trying to say, `I'm a victim.' Some people took some money and couldn't account for it, but that's too easy. It's very easy to put it on somebody who's dead."

magician

22 July 2006, 00:29

Had to include this.

:)

CORPORATE CRIME REPORTER

Machine Gun Fire on the Answering Machine: Battle Over Custer Battles Heats Up (http://www.corporatecrimereporter.com/rhoad041206.htm)
20 Corporate Crime Reporter 16(3), April 12, 2006

One thing is clear.

They don’t like each other.

On one side – Robert Isakson and William “Pete” Baldwin – who sued Custer Battles under the False Claims Act.

On the other, Scott Custer, Mike Battles, and the defense contracting firm they set up to make millions in Iraq.

Last month, a federal jury in Alexandria found that Custer Battles defrauded the U.S. government on one contract with the Coalition Provisional Authority.

That jury verdict opened the way to a $10 million payout to the government and the two relators – Isakson and Baldwin – who brought the case under the False Claims Act.

The federal government refused to join the case.

Isakson and Baldwin have another False Claims Act case pending against Custer Battles.

That case will go to trial sometime later this year.

A federal criminal investigation into Custer Battles is ongoing.

In an interview with Corporate Crime Reporter, the lawyer for Custer Battles, Robert Rhoad, a partner at Porter, Wright in Washington, D.C., alleged that DRC, Inc. a company headed by Isakson – is being investigated by the federal government for fraud on a contract in Central America.

The lawyer for Isakson – Alan Grayson – confirmed that there is a dispute between DRC and the federal government over a contract in Latin America.

“Bob was doing a contract in Latin America for disaster relief,” said Grayson. “A guy working for the local government asked for a bribe. Bob said no and reported it to the authorities. After Bob reported it to the authorities, relations on the contract went downhill. The guy who asked for the bribe said – you did this wrong, you did that wrong. He reported these shortcomings six years ago. There was back and forth between DRC and the federal government for four years. And then Bob sued Custer Battles. At that point, the U.S. government got more interested in the case against DRC case and pushed it further along. Nobody has been found guilty of anything. There has been no judgment of any kind entered. If you have lived through the past few years of this process, you know that if you make an allegation of any kind against Custer Battles, they will do anything to vilify you.”

Like what?

Grayson is a partner at Grayson & Kubli in McLean, Virginia. His partner is Victor Kubli.

Grayson said that last year, on the night before he was scheduled to take the deposition of Scott Custer in the False Claims Act case, “somebody left a recording of machine gun fire on Victor Kubli’s home answering machine and office answering machine.”

“When the next day Victor Kubli asked Scott Custer if he knew who did it, Scott Custer laughed out loud,” Grayson said. “We called the FBI and they came and took a recording of the message.”

Well, who left the recording of machine gun fire on Victor Kubli’s answering machines?

“Who knew that there was going to be a deposition the next day?" Grayson asks. "The lawyers and the participants knew. That narrows it down.”

In the False Claims Act jury trial that resulted in a verdict against Custer Battles last month, two pieces of evidence hurt the company.

First was testimony of Brigadier General Hugh Tant, who was in charge of the Iraqi Currency Exchange contract – or ICE contract – which was the subject of the lawsuit.

Grayson says that under that contract, Custer Battles was to provide trucks and living quarters for people doing that work.

Grayson said that Tant testified that Custer Battles delivered 36 trucks to transport currency – 34 of which did not work.

Tant testified that when confronted with this evidence, Mike Battles is said to have responded: "You asked for trucks and we complied with our contract, and it is immaterial whether the trucks were operational."

(For complete transcript of the interview with Alan Grayson, see 20 Corporate Crime Reporter 13(10-16), March 27, 2006, print edition only.)

Rhoad, Battles’ lawyer, told Corporate Crime Reporter that Tant’s testimony to this effect “probably” tilted the jury against his clients.

Also damning was a memo (http://www.corporatecrimereporter.com/documents/custer.pdf) written by Custer Battles corporate integrity office Peter Miskovich who concluded that Custer Battles own documents were “prima facie evidence of a course of conduct consistent with criminal activity and intent."

Rhoad says that at trial, Miskovich said that he regrets having written those words.

In an affidavit (http://www.corporatecrimereporter.com/documents/miskovich.pdf) dated October 13, 2004, Miskovich says that the questionable conduct occurred “without the knowledge, control, and consent” of Custer or Battles.

For a complete transcript of the interview with Rhoad, see 20 Corporate Crime Reporter 16(11-16), April 17, 2006, print edition only.)

Home

Corporate Crime Reporter
1209 National Press Bldg.
Washington, D.C. 20045
202.737.1680

PACE

22 July 2006, 13:17

Had to include this.

:)

There you go stirring the shit pot again!:D

magician

22 July 2006, 14:31

I know.

I suck.

:)

Argyll 50

24 July 2006, 05:44

Fern Holland worked for USAID I believe, and her and her colleagues were warned repeatedly by their PSD detail not to keep going outside of the CPA on "jollies"...

Silverbullet

4 August 2006, 19:33

Prosecutor Alleges Money Laundering

By DEBORAH HASTINGS
The Associated Press
Friday, August 4, 2006; 3:58 PM

-- The wife of a disgraced American contractor moved at least $2 million into overseas bank accounts to hide her husband's money, according to a letter from a German prosecutor, which was provided to the Associated Press.

In March, a U.S. jury ordered contractors Mike Battles and Scott Custer to pay $10 million for swindling the U.S. government in Iraqi rebuilding projects. Their company is also the subject of ongoing criminal investigations in the United States.

Battles' wife, Jacqueline, who lives outside Darmstadt, Germany, became the focus of the German money laundering investigation after she opened several bank accounts under her maiden name of Vihernik, according to the letter written by Darmstadt public prosecutor David Kirkpatrick.

"Mrs. Battles received a minimum of ($2 million) from her husband," Kirkpatrick said in the letter written July 27. "The way the money was transferred shows that she is informed about the suspicious background of those transactions ... obviously, she is trying to channel the money."

The letter was sent to American attorney Alan Grayson, who represented two whistleblowers who sued Battles, Custer and their firm Custer Battles LLC.

A federal jury in Virginia ordered the contractors to pay $10 million to the government and the whistleblowers in what was the first civil fraud verdict arising from the Iraq war. Jurors upheld the lawsuit's accusations that Custer Battles LLC overcharged the Coalition Provisional Authority, which ran Iraq after the 2003 invasion, by as much as $50 million.

A federal criminal investigation into the contracts is ongoing, and Custer Battles is also being investigated for two shooting incidents in which Iraqi civilians and soldiers were injured.

Custer and Battles have appealed the judgment, and claimed they don't have enough assets to pay it. Jacqueline Battles was not part of her husband's firm.

Grayson said Friday that he has provided German prosecutors with documents describing how Battles and Custer cheated millions from Iraqi rebuilding projects.

"They are ill-gotten gains because Battles stole the money from the government and tried to hide it by sending it to Germany with his wife," Grayson said.

According to Kirkpatrick's letter, German authorities have seized nearly $1 million from the bank accounts Jacqueline Battles opened.

Kirkpatrick declined to comment when contacted by the AP in Germany. There was no phone listing for Jacqueline Battles. The current whereabouts of Mike Battles and Custer aren't known, according to Grayson. The Custer Battles office phone has been disconnected.

One of the two whistleblowers who won the March verdict, Robert Isakson, is a plaintiff in a second lawsuit that accuses two former Pentagon officials of scheming with Custer and Battles to form sham companies that sold illegal weapons on Iraq's black market where they could be bought by insurgents, the AP reported last month.

The two defendants, former acting Navy Secretary Hansford T. Johnson and top aide Douglas Combs, now run global contractor Windmill International Ltd., based in Amissville, Va.

That company was also named in the lawsuit. A company spokesman denied it was involved in any wrongdoing.

___

Associated Press writer Melissa Eddy contributed to this story from Berlin.

magician

15 August 2006, 02:52

From: Battles-hardened greed (http://www.projo.com/opinion/editorials/content/projo_20060815_edbattl.1f851a9.html)

01:00 AM EDT on Tuesday, August 15, 2006

Mike Battles is, sad to say, one of Rhode Island's own. Some may remember the Barrington native as among the Republican candidates who sought to replace Democratic Rep. Patrick Kennedy in 2002.
But Mr. Battles is now at the center of an investigation into the monumental fraud committed by some U.S. contractors in Iraq. The company he co-founded, Custer Battles, is the first U.S. contractor to have been found liable for defrauding the U.S. government in that country. And the company's troubles may be just beginning.

After losing the 2002 Republican primary (to Dave Rogers), Mr. Battles decamped for Washington. A sometime Fox News "analyst" (everyone gets that cable-news gig at least once!), "explaining" the war on terrorism, Mr. Battles soon teamed up with a fellow ex-Army officer, Scott Custer, to make a fortune with taxpayers' money.

Former Custer Battles employees accuse the company of having stolen $50 million in Iraq. In a suit filed under the False Claims Act, a jury found that Custer Battles, in its assignment to help introduce a new Iraqi currency, had defrauded the U.S. government of $3 million.

Still unresolved are charges related to the company's security work at the Baghdad airport. Custer Battles was supposed to screen civilian passengers and air freight there, but the ongoing violence halted all commercial traffic. The company then allegedly sent its idle screeners to do other jobs, but continued to charge the Coalition Provisional Authority for services not rendered. And, alleged the civil suit, it did such seedy things as painting over the name "Iraqi Airways" on forklifts and leasing them to the Americans.

Custer Battles was paid to supply trucks to the military, but the vehicles didn't run and had to be towed, says the suit. Retired Brig. Gen. Hugh Tant III has testified that when he complained about the trucks, Battles replied, "You asked for trucks . . . it is immaterial whether the trucks were operational."

In 2004, the Air Force suspended Custer Battles from contracting work in Iraq, but the company apparently ignored the ban, setting up ventures under different names. It transferred assets and most of its workers to a newly formed company, Danubia Global, based in Romania. Danubia then won U.S. government contracts worth $1.28 million a month. And its workers became embroiled in violent confrontations with Iraqi civilians and soldiers. The federal government has begun criminal investigations of these operations.

The principals at Custer Battles formed other companies to get around the military's ban on Custer Battles work in Iraq. Two of them were based in Mr. Battles's Rhode Island office, in Middletown.
Now there are shocking charges by employees that two former Navy officers helped set up some of these other companies. One firm allegedly sold weapons on the Iraqi black market that could have ended up in the hands of insurgents.

According to a sealed federal lawsuit obtained by the Associated Press, former acting Navy Secretary Hansford Johnson and his former special assistant, Douglas Combs, created "sham companies" to hide Custer Battles's ownership.

Our question is: How on earth did a seamy organization like Custer Battles manage to obtain $100 million in U.S. contracts in the first place? And it is a sobering thought that Custer Battles is but one of a number of contractors in Iraq that have picked U.S. taxpayers' pockets. U.S. audits have found evidence that the contractors stole hundreds of millions of dollars.

The saddest thing is how much the growing greed in American society spread so enthusiastically to a place where U.S. military people and others are risking their lives to try to make life better for the residents.

ROMAD

20 August 2006, 19:31

I found this today. Thought I'd add to the ever growing CB thread.

http://www.msnbc.msn.com/id/14414775/
$10 million verdict overturned in fraud case
Judge rules contractor cheated Iraq’s provisional government, not the U.S.
NBC NEWS EXCLUSIVE

Updated: 3:36 p.m. ET Aug 19, 2006
ALEXANDRIA, Va. - A federal judge has overturned on a technicality a $10 million jury verdict against a military contractor accused of defrauding the U.S. government in the first months of the Iraq war.

The award, levied in March against Fairfax-based Custer Battles LLC, had been the first civil fraud verdict arising from the Iraq war.

A former Custer Battles employee had sued under a whistle-blower statute, alleging that the company used shell companies and false invoices to vastly overstate its expenses on a $3 million contract to assist in establishing a currency to replace the Iraqi dinar used during Saddam Hussein's regime.
The verdict reached $10 million because the law calls for triple damages, plus penalties, fines and legal costs.

But U.S. District Judge T.S. Ellis III, in a ruling made public Friday, ruled that Custer Battles' accusers failed to prove that the U.S. government was ever defrauded. Any fraud that occurred was perpetrated instead against the Coalition Provisional Authority, formed to run Iraq until a government was established.

Ellis ruled that the trial evidence failed to show that the U.S. government was the victim, even though U.S. taxpayers ultimately footed the bill.

Alan Grayson, lawyer for whistle-blowers Robert Isakson and William Baldwin, said he would appeal. He faulted the Bush administration for creating the CPA in a manner that essentially allowed it to act as a money launderer for unscrupulous military contractors.

"The Bush administration incompetently created this Frankenstein monster called Coalition Provisional Authority. They did it without thinking about it. They blundered into it," Grayson said.

In pretrial motions, Custer Battles' lawyers had advanced a similar argument about CPA's status. Ellis allowed the trial to go forward and said a case could be made to show that defrauding the CPA was tantamount to defrauding the United States.

Ellis had prodded the Justice Department to weigh in on the CPA's status. Government lawyers argued that the CPA should be considered a U.S. entity, but only for the purpose of the whistle-blower law.

The judge said in his ruling that the plaintiffs failed to establish the CPA as a U.S. entity during the three-week trial this year.

Custer Battles' attorneys portrayed Ellis' ruling as a broad vindication of their clients' actions.

"The fact of the matter is that (Custer Battles founders) Scott Custer and Mike Battles did what they were contracted to do under unimaginably difficult circumstances," defense lawyer Robert Rhoad said in a statement.

Ellis left intact the jury's $165,000 wrongful termination verdict in favor of Baldwin, one of the whistle-blowers.

A lawsuit involving an even larger Custer Battles contract to provide security at the Baghdad airport has not yet gone to trial. That lawsuit will face similar obstacles, Grayson said.

Spinner

21 August 2006, 14:17

Fern Holland worked for USAID I believe, and her and her colleagues were warned repeatedly by their PSD detail not to keep going outside of the CPA on "jollies"...

I wouldn't be surprised, especially if her protection was tuned into the vibe outside. It's probably like being caught in a riot just as it starts to really pick up steam, ala Reginald Denny in L.A. in 1992. You probably never even see it coming, especially if you're used to travelling in that area and you feel like you're in a comfort zone.

Still, for anybody to pawn off the disappearance of money on dead people is just sickening. Bad enough to die violently, only to have your reputation besmirched to boot.

And there's that word "jollies" again...I originally thought it meant leave or vacation, somebody pointed out that it meant something along the line of TDY.

SOTB

21 August 2006, 14:34

And there's that word "jollies" again...I originally thought it meant leave or vacation, somebody pointed out that it meant something along the line of TDY.The people that I have worked with who use that word, use it to refer to non-work related stuff. In this case, that she traveled outside of the GZ for non-work related reasons....

magician

21 August 2006, 20:12

August 21, 2006

Judge Saves Corrupt Govt. Contractor (http://www.corruptionchronicles.com/2006/08/judge_saves_corrupt_govt_contr.html)

A federal judge's decision to overturn a jury verdict against a military contractor that defrauded the U.S. Government out of millions of dollars is enraging, especially since the judge acknowledged ample evidence that the contractor submitted false and fraudulently inflated invoices.

The Fairfax Virginia-based military contractor, Custer Battles, had been ordered by a jury to pay $10 million for defrauding the U.S. Government during the course of a multi million-dollar Iraq contract, marking the first civil-fraud verdict arising from the war.

Using federal whistleblower laws, a former Custer Battles employee provided evidence that the company used false invoices to vastly overstate its expenses and the company was found guilty of violating the False Claim Act, the single most important tool U.S. taxpayers have to recover the billions of dollars stolen through fraud by government contractors each year.

But U.S. District Judge T.S. Ellis overturned the verdict, claiming in a 23-page decision (http://www.corporatecrimereporter.com/documents/ellis.pdf) that the government entity--Coalition Provisional Authority--that contracted Custer Battles does not qualify as the U.S. Government and therefore the False Claim Act does not apply.

The now defunct Coalition Provisional Authority (CPA) was formed by the U.S. Government after the 2003 invasion to run Iraq until a government was established. Although it was controlled and funded by the U.S., the judge said it did not qualify as an "instrumentality" of the U.S. Government.

Evidently, a lawsuit under the False Claims Act requires proof that the defendant presented false claims against the U.S. Treasury. In this case, U.S. Government officials as well as military officials controlled and distributed CPA funds and therefore fraud against the CPA is tantamount to fraud against the U.S. Government.

This case is one of many to emerge from the $21 billion Iraq reconstruction effort as complaints of fraud and corruption continue to emerge. The office of the special inspector general for Iraq Reconstruction has referred more than 20 criminal cases to the Department of Justice for prosecution.

magician

21 August 2006, 20:18

Press Release Source: Windmill International, Ltd.

Windmill Reacts to Judgment Reversal (http://biz.yahoo.com/prnews/060821/phm030.html?.v=57)
Monday August 21, 4:50 pm ET

WARRENTON, Va., Aug. 21 /PRNewswire/ -- Windmill International commented today on the recent ruling by U.S. District Judge T.S. Ellis III, who overturned a multi-million dollar judgment against Custer Battles, the same company some reporters have tried to link to Windmill.
Windmill Founder Doug Combs said, "Most telling is the quote in the Washington Post story by Renae Merle, made by attorney Alan Grayson who filed the suit and who is also running for Congress from Florida. His comment 'If you want to make a list of all the things the Bush administration has screwed up, they created this Frankenstein entity called the Coalition Provisional Authority,' underscores our assertion that these whistleblower cases were more about a platform for his campaign than an honest assessment of the contracting situation in Iraq."

Windmill's attorney Christopher Johnson added, "We're pleased that some light has finally been shed on this issue. We will continue to cooperate with investigators in order to ensure our good name is cleared and the suit against our company dropped. Mr. Grayson obviously included us in his suit to capitalize on the high profile of our officers. We're confident others will see through his motivation."

Windmill International, Ltd. is an offshoot of Windmill International Singapore, established in 1972, conducting business globally, where Doug Combs was partner for more than nine years. As founder of Windmill International, Ltd. in the US, Mr. Combs has led the company in providing high-quality financial and government services focused in Central and Eastern Europe.

Contact:

Sarah Blansett
703-310-6894
pr@windmill-international.com

magician

21 August 2006, 20:20

Saturday, August 19th, 2006 at 4:00 pm
$10 Million Verdict Against Custer Battles Overturned (http://www.firedoglake.com/2006/08/19/10-million-verdict-against-custer-battles-overturned/)
By Matt O.

In June, I profiled the ill-fated and poorly named Custer Battles, LLC. While the company was not awarded Halliburton-sized contracts to operate in Iraq, Custer Battles engaged in some of the most deplorable and atrocious acts of fraud and profiteering.

Back in March, a federal jury found Custer Battles guilty of defrauding the government. Retired Brigadier General Hugh Tant, who testified, said the fraud "was probably the worst I’ve ever seen in my 30 years in the Army." Custer Battles was ordered to pay almost $10 million in damages and thousands of dollars to Robert Baldwin for wrongful termination.

It was the first civil fraud verdict brought against a defense contractor. Blackwater USA faces lawsuits from the families of the four slain in Fallujah in March 2004.

Yesterday, the Boston Globe reported that a federal judge overturned the verdict "on a technicality," issuing a 23-page ruling (available here [PDF] via the Corporate Crime Reporter).

[ed. note: Blogger Ethics 101 — I wanted to make a distinction between myself and the behavior of our frothing-friends on the right following the ruling that the NSA domestic surveillance program is unconstitutional. For instance, I disagree with the outcome in the Custer Battles appeal as they did with Judge Anna Taylor Diggs’ ruling. However, you won’t find me hoping for the next bomb to land on Judge Ellis’ head or accuse him of hating America. That would be fever swamp-ish of me.]

But U.S. District Judge T.S. Ellis III, in a ruling made public Friday, ruled that Custer Battles’ accusers failed to prove that the U.S. government was ever defrauded. Any fraud that occurred was perpetrated instead against the Coalition Provisional Authority, formed shortly after the war to run Iraq during the occupation until an Iraqi government was established.
Ellis ruled that the trial evidence failed to show that the U.S. government was the actual victim, even though U.S. taxpayers ultimately footed the bill.

It is quite apparent that Judge Ellis sees the blatant wrongdoing by Custer Battles but because the CPA, in his opinion, was not shown to be a U.S.-entity, he overturned the decision. The New York Times noted today that the Justice Department "said that some of the Custer Battles invoices were indeed claims against the American treasury and that the False Claims Act applied." That was from Bush’s Justice Department in a flash of honesty.

From the Boston Globe:

In his ruling, though, Ellis makes clear that he is overturning the verdict only on the technical question of whether the CPA is a U.S. entity.
"If the CPA was a U.S. entity, the result differs dramatically," Ellis wrote. [emphasis added]

However, don’t ask the defendants’ attorneys, they’re drinking the same kool-aid the "everything in Iraq is fine" crowd are chugging.

Custer Battles’ attorneys portrayed Ellis’ ruling as a broad vindication of their clients’ actions. "The fact of the matter is that (Custer Battles founders) Scott Custer and Mike Battles did what they were contracted to do under unimaginably difficult circumstances," defense lawyer Robert Rhoad said in a statement.
[…]

"We believe there was no evidence of fraud," [another defense attorney, David] Douglass said.

No evidence? NO EVIDENCE? You’re kidding, right? This is all for show, am I correct? Go out there, proclaim your clients’ innocence and then laugh about it later over a bottle of Brandy.

-Custer Battles employees had a reputation as "gunslingers."

-They stood accused of driving over a car, with children in it, to get out of a traffic jam and, along with Kurdish associates, fired randomly on Iraqi civilians, including teenagers. (The accusers, working for Custer Battles, quit immediately after.)

-Painted over Iraqi Airways forklifts to charge "thousands of dollars in fake invoices" to "lease" the equipment.

-Former Custer Battles executives, banned from winning any other contracts, created companies to solicit more work — all with the same office address.

-Bedding for U.S. forces arrived late and delivered trucks that did not work.

More from the today’s Washington Post buried on page D01:

Although a jury found the company guilty, U.S. District Judge T.S. Ellis III ruled on review that the firm could not be sued under the federal False Claims Act because of the ambiguous structure of the authority, which issued the contract. The judge also concluded that the way in which the company had been paid distanced it from the U.S. government. He said there was ample evidence that the company had submitted "false and fraudulently inflated invoices" but found that the nature of the Coalition Provisional Authority precluded a fraud claim. Ellis signed his ruling Wednesday; it was made public yesterday. [emphasis added]
As you may recall, Custer Battles was paid in crisp $100 bills — stuffed in duffle bags.

However, as the CPA left, the money was shifted to the State Department’s responsibility. From the June 29, 2004 article in the Washington Post:

The $18.6 billion allotted by the U.S. government for the reconstruction of Iraq, money that was previously administered by the occupation authority, will come under control of the State Department. Payments on those contracts are expected to continue without interruption. [emphasis added]

While the claims against Custer Battles were probably made before the shift, wouldn’t this show a linkage of responsibility between the CPA and the U.S. government?

For now, here’s the rundown as I understand it: Custer Battles bilked the Coalition Provisional Authority, funded by U.S. taxpayers through our government, for millions. (Ellis writes, "The contract at issue is between the CPA and Custer Battles…") It is quite clear that fraud did occur. Judge Ellis did not rule on that specifically, but it appears as though he is convinced Custer Battles committed acts of fraud.

In this ruling, the CPA is considered a transitional government independent from the U.S., though undoubtedly financed by American taxpayers. However, Custer Battles cannot be sued for defrauding the U.S. government because it was the now-defunct CPA that Custer Battles worked for and not the U.S. government itself. The U.S. money used by the CPA, it seems, is categorized as some kind of foreign aid to another country. Specifically in this instance, to the transitional government of Iraq, the CPA. Therefore, Custer Battles cannot be sued for defrauding the U.S. government because it was the CPA they bilked, which Ellis ruled there was insufficient evidence to suggest that that the CPA was a U.S.-entity.

Under what jurisdiction could such a claim be filed then? I am not sure there is one. The current Iraqi "government" is the successor to the CPA and last time I checked, war profiteers are exempt from Iraqi law.

Did I get that right? (I don’t have any legal training so this is a novice attempt at imitating Glenn Greenwald.) I fear what this means for future fraud cases brought against war profiteers if this decision is not overturned on appeal.

Updated: Readers Hugh and Peterr noted L. Paul Bremer’s title and role as the U.S. administrator of the CPA and question how the CPA is not a U.S.-entity.

magician

18 September 2006, 08:27

Wife of disgraced U.S. contractor arrested in Germany (http://www.iht.com/articles/ap/2006/09/18/europe/EU_GEN_Germany_US_Contractor_Probe.php)

The Associated Press

Published: September 18, 2006

BERLIN The wife of an American contractor accused of cheating the U.S. government in Iraq has been arrested in Germany on suspicion of money laundering, a prosecutor said Monday.

Jacqueline Battles was detained after a German bank informed authorities about "suspicious transactions" on her accounts two months ago, prosecutor David Kirkpatrick told The Associated Press.

German investigators seized about US$1 million (€800,000) in suspect funds from the accounts, said Kirkpatrick, a prosecutor in the west German city of Darmstadt.

"She is in investigative custody," Kirkpatrick said in a telephone interview. The woman, who lives near Darmstadt, has not been formally charged.

In March, a U.S. jury ordered contractors Mike Battles and Scott Custer to pay US$10 million (€8 million) for swindling the U.S. government over Iraqi rebuilding projects.

However, a federal judge overturned the verdict in July, saying any fraud was against the Coalition Provisional Authority in Iraq rather than the U.S. government, even though American taxpayers ultimately footed the bill.

According to a letter provided recently to AP, Jacqueline Battles is suspected of moving at least US$2 million (€1.6 million) into overseas accounts to hide her husband's money.

Kirkpatrick didn't comment directly on the letter, which carried his name as the sender and was addressed to an American attorney representing two whistleblowers who sued Battles, Custer and their firm Custer Battles LLC.

The July letter said Jacqueline Battles had opened several bank accounts under her maiden name Vihernik.
Kirkpatrick said the suspicion of money laundering stemmed from the initial March ruling by a federal jury in Virginia ordering the contractors to pay US$10 million to the government and the whistleblowers in what was the first civil fraud verdict arising from the Iraq war.

The lawsuit accused Custer Battles LLC of overcharging the Coalition Provisional Authority, which ran Iraq after the 2003 invasion, by as much as US$50 million (€63 million).

Custer and Battles appealed and claimed that they didn't have enough assets to pay the money back. Jacqueline Battles was not part of her husband's firm.

A U.S. federal criminal investigation into the contracts is ongoing, and Custer Battles is also being investigated for two shooting incidents in which Iraqi civilians and soldiers were injured.

Kirkpatrick declined to comment on any direct cooperation between U.S. and German authorities in the case of Jacqueline Battles.

One of the two whistleblowers who won the March verdict, Robert Isakson, is a plaintiff in a second lawsuit that accuses two former Pentagon officials of scheming with Custer and Battles to form sham companies that sold illegal weapons on Iraq's black market where they could be bought by insurgents, the AP reported in July.

Sharky

18 September 2006, 13:04

Doh!

PACE

18 September 2006, 15:55

Battles is a pretty bright guy.
I have to wonder how he thought bank transfers from the US to Germany wasn't going to come to the attention of someone. After the conviction the Feds must have been watching his bank accounts.
This was just plain stupid.

BTW,
Magician, how was your trip?
Did the info I provided help you out?
PACE

RAT

18 September 2006, 17:00

Battles is a pretty bright guy.:rolleyes:

You are kidding right? :cool:

RAT OUT!!!

18 September 2006, 18:00

If he was smart, he would have opened the accounts in Switzerland. :cool:

PACE

18 September 2006, 18:57

:rolleyes:

You are kidding right? :cool:

RAT OUT!!!:o

I guess you didn't know him too well.
No one on SOCNET ever said Battles, or Custer for that matter, were dumbasses.
And don't get me wrong, I have as much a reason to applaud their failure as anyone on here, if not more so.
But, in the end, you have to give the devil his due.
Neither of them were dumb; greedy, yep; dishonest, yep; "ethically challenged", yep; stupid, nope.
Just my .02 worth.

SOTB

18 September 2006, 19:40

....stupid, nope.While I agree with this, I think as with many simple crooks -- and in the end, fraud is really just another crime -- they let their greed overwhelm any common sense or cautious thinking that might have allowed them to not lose it all.

Oh well.

No tears for those dudes....

magician

18 September 2006, 22:26

Actually, I think that PACE is making a valid point.

Mike Battles has a background that would suggest that he knows, perhaps better than most, how to move money around the international banking system with some sophistication.

What is happening in Germany raises several interesting hypothetical scenarios.

RAT

19 September 2006, 01:48

:o

I guess you didn't know him too well.

No, and I don't care to. I know his Prof's a whole lot better and I will go off of what they said about him.

No one on SOCNET ever said Battles, or Custer for that matter, were dumbasses.

I have called the dumbasses for a very long time. Since SOTB and I showed up there almost 3yrs to the day.

:And don't get me wrong, I have as much a reason to applaud their failure as anyone on here, if not more so. But, in the end, you have to give the devil his due. Neither of them were dumb; greedy, yep; dishonest, yep; "ethically challenged", yep; stupid, nope.
Just my .02 worth.

Again, just my .02 as well. As in ENRON if you are saying smart people do stupid things then this is where I disagree with everyone (Won't be the 1st time, but I don't think of myself as smart). Smart people know their limits: Right from wrong. How hard would it have been to do the "RIGHT THING" they would have made 10x's the money and kept it all. They think they have done nothing wrong. Hence all the shucking and jiving of the money. It is not hard to hide money (even today). CB was a lot like Enron on a small scale. The highers hung out with the right people and they thought they were smart. They put smart people in place. When the smart people smelt how bad the place was and what was going down they left. Then the place when to shit.

Smart people don't let a good thing go. IMHO.

RAT OUT!!!

mdb23

19 September 2006, 03:29

What is happening in Germany raises several interesting hypothetical scenarios.

Such as? I don't know jack about this industry, but this has been an interesting thread.

What do you think might be going on?

PACE

19 September 2006, 07:43

.

Again, just my .02 as well. As in ENRON if you are saying smart people do stupid things then this is where I disagree with everyone (Won't be the 1st time, but I don't think of myself as smart). Smart people know their limits: Right from wrong. How hard would it have been to do the "RIGHT THING" they would have made 10x's the money and kept it all. They think they have done nothing wrong. Hence all the shucking and jiving of the money. It is not hard to hide money (even today). CB was a lot like Enron on a small scale. The highers hung out with the right people and they thought they were smart. They put smart people in place. When the smart people smelt how bad the place was and what was going down they left. Then the place when to shit.

Smart people don't let a good thing go. IMHO.

RAT OUT!!!
I don't consider myself smart either. Just ask anyone, they'll be more than willing to agree!:p
Hell, I'll bet you've even called me a dumbass, at least once.
We'll have to agree to disagree in regard to smart people knowing their limits.
In Battles case, as Magician says, he was a bright guy, with a background that indicates he has brains. Custer on the other hand was a prick to everyone he came in contact with on the job. Being around him was like cleaning the latrine. All that disinfectant, soap and hot water and you still take a shower and wash yourself afterwards.
Magician has a good point, there may be something more to this than readily meets the eye.
Yeah, they could have been big players if they had just done the right thing, and I agree, that would have been the easier choice for them. But they got greedy, happens to many people.
Does not indicate, however, that they were stupid.

Silverbullet

19 September 2006, 08:23

Mike Battles has a background that would suggest that he knows, perhaps better than most, how to move money around the international banking system with some sophistication.

Brother, I wouldn't give him tha much credit considering he was terminated before his first assignment.

Ironic how his wife was involved then and now this.

magician

19 September 2006, 08:36

No offense, but I will not speculate.

I agree with PACE. Custer was astonishingly foul. Battles...was always a gentleman.

Knowing these two men....and seeing what happened to them, reinforced for me the dictum that it is always better to be polite, no matter what the situation.

I feel a certain sympathy for Battles, for example, that is utterly absent for Custer. Yes, they will reap what they sowed. The Great Wheel of Kharma will churn. But I remember that Battles is human, and that his wife is now snarled in this thing, and that she, at least, is now experiencing financial difficulties.

For Custer...well, never mind. Speaking only for myself, I think that it is better not to say anything if one cannot say something nice, or at least something neutral. This one time, at least, I will try to follow my own advice.

But this thing with Battles....it does not make sense to me. Google his name. Look at the associations that pop up. I met the man on numerous occasions, corresponded with him frequently, interacted with him regularly. I accompanied him on business meetings. He was indeed what it is said that he was. SB, your point is valid, but the man had associations with colleagues from multiple cultures and multiple walks of life....I think that if Battles wanted to move money below the radar, he could do it. His Lebanese colleagues alone....would know what to do.

This thing in Germany does not make sense. At least, not on the surface, and not to me.

I could just be making things overly complex, of course.

magician

19 September 2006, 08:47

Not sure if this has already been posted.

Employees of contractor barred from Iraq resurrect business (http://www.post-gazette.com/pg/06171/699706-28.stm)

Tuesday, June 20, 2006

By Yochi J. Dreazen, The Wall Street Journal

On Jan. 3, 2005, Jerry Cullen signed an unusual document at the Baghdad headquarters of his employer, Custer Battles LLC, which the U.S. military had accused of fraud and barred from receiving any new Iraq contracts.

The document was a single-page "bill of sale." Attached were several pages detailing assets such as cars, trucks, prefabricated housing and communications gear that Custer Battles was selling. The buyer was a little-known company in Bucharest, Romania, called Danubia Global Inc. The document said Danubia would pay Custer Battles "U.S. One Dollar" upfront, and an unspecified amount of money in the future. The company never gave Custer Battles any additional money, Danubia executives say.

While the U.S. sanctions technically put Custer Battles out of business, it never actually shut down. After paying its dollar, Danubia took on most of Custer Battles's employees, who continued to work out of Custer Battles trailers on the grounds of Baghdad's airport. They were paid, for a time, from Custer Battles bank accounts. Danubia's owner, Richard Levinson, was a former Custer Battles senior executive. After signing the sale document, Mr. Cullen left Custer Battles to work for Danubia as a consultant.

Now, the Custer Battles-Danubia link is the focus of a federal criminal investigation. Law-enforcement authorities are exploring whether Danubia was an artificial entity created to evade the government ban on Custer Battles, according to investigators involved in the probe. They're examining whether Danubia executives defrauded the federal government by obtaining millions of dollars of contracts they weren't entitled to receive.

Mr. Levinson says in a phone interview that Danubia has no continuing ties to Custer Battles or that company's two founders. He stresses that neither he nor any of the employees who went with him were linked to the wrongdoing at their former firm. "I can say simply, honestly, and without reservation that Danubia is not a shell company," he says.

Meanwhile Danubia is wrestling with another controversy. This one stems from an April clash near the Baghdad airport, in which Iraqi police personnel said Danubia security guards fired on them without provocation, killing several officers including a colonel. Danubia denies wrongdoing and says its guards were fired on first. The U.S. military is pursuing a formal investigation -- separate from the one about ties to Custer Battles -- and has barred Danubia from operating in the area.

The Bush administration's effort to rebuild Iraq has been marred by mismanagement and instances of corruption. U.S. audits have found evidence that hundreds of millions of dollars was spent without proper authorization, given to contractors who performed shoddy work, or paid to firms charging unreasonably high prices. The audits have also found cases where corrupt contractors and U.S. and Iraqi government officials stole money.

The U.S. has budgeted $20.9 billion specifically for Iraq reconstruction, not counting money for smaller projects that comes from the military's budget. Mindful of the problems, the White House didn't include any further money for the reconstruction program in its latest budget request, meaning the program is likely to end later this year when its funds run out.

Custer Battles was one of the first American contractors suspended by the government, and it is often held up as a leading example of wrongdoing. In a civil trial earlier this year, a federal jury in Alexandria, Va., found that Custer Battles defrauded the government of $3 million by filing faked invoices. The company has asked U.S. District Judge T.S. Ellis III, who presided over the trial, to set aside the verdict.

Custer Battles was founded in late 2002 by two former Army Rangers, Scott Custer and Michael Battles. After the U.S.-led invasion ousted Saddam Hussein, the two men won contracts to guard Baghdad's airport and provide logistical support for the introduction of Iraq's new currency. Soon Custer Battles had hundreds of employees in Iraq.

The American-run Coalition Provisional Authority grew suspicious of bills the firm was submitting and summoned Messrs. Custer and Battles to an October 2003 meeting. The session deteriorated into a shouting match, according to participants. After the meeting, CPA officials discovered the Custer Battles executives had left behind a spreadsheet. It showed the company had spent $4 million fulfilling the currency contract but charged the CPA $10 million.

The government opened a formal probe the following day. It concluded the company had reaped outsized profits by exaggerating costs. In September 2004, the Air Force, which signed contracts on behalf of the CPA, suspended the firm from bidding for new contracts or renewing existing ones. The move effectively put Custer Battles out of business.

Danubia came into existence a short time later.

Financial registration documents from the British Virgin Islands show that the company was incorporated in the city of Tortola on Dec. 7, 2004, with $50,000 in authorized capital. Danubia said it operated out of Bucharest, which lies on a tributary of the Danube River. It listed its corporate parent as a second British Virgin Islands firm called Security Ventures International Ltd. Mr. Levinson, the Danubia owner, says he also owns Security Ventures International. He explains that he created the companies to avoid paying U.S. taxes in the event the firms were later sold and to minimize his liability in American courts if employees were killed or wounded in Iraq.

Mr. Levinson, a 53-year-old lawyer, joined Custer Battles as a contract manager in December 2003 after a series of personal and professional setbacks.

He had worked for a time in the State Department, where he served as a political officer at the American Embassy in Rome. He was also an aide to senior officials including then-Assistant Secretary of State Richard Holbrooke. He left the State Department in 1998 for the private sector.

Mr. Levinson says his marriage ended in the early 1990s in a divorce that took more than 12 years and $1 million in legal fees to resolve. Toward the end of the battle with his ex-wife, Mr. Levinson was laid off and spent 18 months looking for work. In July 2003, Mr. Levinson and his second wife filed for Chapter 7 bankruptcy protection, citing liabilities of nearly $400,000.

After the demise of Custer Battles, Mr. Levinson says he saw Danubia as a way to ensure a steady income for himself and former colleagues. He says Messrs. Custer and Battles agreed to effectively give him the company's Iraq assets as a reward for past work. "It was a kind of severance package," he says.

The new company quickly got off the ground. Custer Battles's remaining security contractors and support staff were summoned to the small office housing the firm's Baghdad operations center. They were told their positions were being eliminated but they could apply for identical positions with Danubia, Mr. Levinson says. Virtually all of them went to work for the new company, he says.

Several Danubia employees had their salaries paid from Custer Battles bank accounts until at least the end of May, according to bank-account statements.

Mr. Levinson says Danubia was actually paying the salaries but the money was funneled through Custer Battles's accounts to take advantage of the established firm's payroll system. Mr. Cullen, whose responsibilities as a consultant to Danubia are similar to those he had at Custer Battles, didn't reply to emails seeking comment.

David Douglass, a lawyer representing Custer Battles in its bid to get the jury verdict against the company overturned, says Custer Battles and Danubia are separate entities. "Custer Battles sold Danubia some equipment and some of its people went to work for Danubia in Iraq, but you're talking about two completely different companies," he says. Messrs. Douglass and Levinson say Messrs. Custer and Battles have no link to Danubia.

Danubia decided to focus its operations on volatile western Iraq, the scene of near-daily violence, marking a shift from Custer Battles's work around Baghdad. Marines stationed in western Iraq employ logistics companies to deliver supplies, and the logistics firms hire security firms to guard their convoys.

Danubia's business strategy called for undercutting rival security companies. Danubia general manager Amy Clark -- who held a similar position with Custer Battles -- says other companies charged $15,000 per convoy, while Danubia charged just $7,500. "We told people that we were the Target of security, not the Nordstrom's," she says.

The firm won a series of government-related contracts worth $1.28 million per month, according to internal Danubia emails.

Just two months after taking over Custer Battles's assets, Danubia itself sought a buyer, hoping an infusion of cash would help it meet payroll and other obligations. The suitor was Windmill International, a Virginia-based financial-services firm run by Douglas Combs, who had served as a special assistant to acting Secretary of the Navy Hansford Johnson in 2003. On May 26 of last year, Windmill International put out a press release announcing that it had "acquired a major shareholding in Danubia."

The announcement was premature. As Windmill International executives carried out their final due diligence, they grew alarmed about the murky nature of Danubia's ties to Custer Battles. "It began to feel like a shell game," says Christopher Johnson, Windmill International's attorney.

Hoping to salvage the deal, Mr. Levinson met in July with Windmill International's chief operating officer, Peter Majeranowski, in downtown Bucharest. Mr. Majeranowski says in an interview that Mr. Levinson had the demeanor of a "beaten man laying all of his cards out on the table" during the three-hour session, which ended close to midnight.

Mr. Levinson says he told Mr. Majeranowski that Danubia was unable to make its payroll in Iraq or raise money to expand the business because of its perceived ties to Custer Battles. He says he cited the example of a Kurdish security company that claimed Custer Battles owed it several hundred thousand dollars. Mr. Levinson says the Kurdish company was withholding payments it owed Danubia as a way of recovering the disputed funds. He added that Danubia's then-general manager in Iraq resigned after continually being presented with bills that belonged to Custer Battles.

Mr. Majeranowski says he felt sympathetic to Mr. Levinson personally. "He kept saying that he wasn't a wealthy guy and that he needed the job, and I never felt like he was being dishonest," Mr. Majeranowski says.

Still, after the meeting, Mr. Majeranowski told colleagues in an email that Windmill International should "pull out and pull out hard" of the deal, because of potential legal and operational problems posed by Danubia's association with Custer Battles. The company ended the negotiations with Danubia in late August.

Danubia managed to generate enough revenue to keep operating in Iraq. Two months ago, crisis hit. On the morning of April 10, a long convoy of supply trucks guarded by Danubia personnel left the Camp Victory compound near Baghdad's international airport. The convoy was bound for an American military outpost outside Fallujah.

When the convoy approached a bridge in Fallujah, a roadside bomb tore into one of the security vehicles, puncturing its tires, destroying its bulletproof windshield and wounding the head of the Danubia security force and another Danubia guard, according to Danubia reports of the encounter. The vehicles limped into a military compound outside the city to regroup, then made their way to their original destination, a American military outpost on the other side of Fallujah called Taqqadam.

Later that afternoon, as the convoy attempted to return to Baghdad, the vehicles were hit by a trio of roadside bombs. They pushed forward to a small Marine checkpoint, where they took sniper fire from a nearby mosque and machine-gun fire from a passing vehicle full of Iraqi police officers, Danubia said later. The Danubia team suffered four more casualties. A wounded Pakistani truck driver was dragged away by insurgents and several of the gravel trucks were destroyed.

The Danubia team made its way through Fallujah, and linked up with a second Danubia convoy to make the return trip to Baghdad. What happened next is subject to dispute. In an account submitted to the U.S. military, a Danubia security guard said uniformed Iraqi National Guard personnel and men on nearby roofs wearing ski masks fired at the convoy as it tried to enter the Baghdad airport complex. The Danubia personnel returned fire and finally made it back to the Danubia base in Baghdad that evening, thinking the incident over.

It wasn't. The following day, a convoy belonging to a second Western security company was stopped by Iraqi National Guardsmen who said they were looking for a group of security contractors who had killed one of their officers the day before, according to an internal military investigative report compiled in the aftermath of the clashes. The Iraqi personnel later told military investigators Danubia had fired on them without provocation because it mistook them for insurgents, according to U.S. military officials familiar with the investigation. The Iraqis said that Danubia personnel killed three Iraqi officers, including a high-ranking colonel, according to the military investigative documents.

With Iraqi officers killed, possibly by Americans, the U.S. military told Danubia that it was opening a formal probe into Danubia's conduct in Fallujah and suspending the company from operating in western Iraq. Danubia was warned that personnel trying to evade the ban would be arrested by the U.S. military and detained for up to two weeks.

Ms. Clark, the Danubia general manager, says the military has yet to tell her the details of its investigation. Danubia's formal suspension was lifted after about a month, but when Danubia has sought routine clearance to operate convoys in western Iraq the military has refused, she says. Ms. Clark left for the U.S. and is unsure if she will return to Iraq. The company has reduced the number of employees in Iraq to 12 from 70.

But Danubia remains active in the country, providing teams of Western bodyguards to protect American and British engineers charged with repairing and modernizing Iraq's electricity infrastructure in and around Baghdad. Ms. Clark says the company is looking for new work and hoping the military will soon allow it to resume its security work in western Iraq.

magician

19 September 2006, 08:52

Iraq's missing billions (http://mathaba.net/0_index.shtml?x=531154)
Posted: 2006/03/20
From: Guardian

How did the American led interim government spend over $20bn, yet leave Iraqis with less electricity, less clean water and even worse hospitals than under Saddam?

By Maggie O'Kane

In a courtroom in Virginia a trial passed almost unnoticed last week that can help us understand why the occupation of Iraq has gone so disastrously wrong. The greed, incompetence and ill preparedness of the occupiers was spelt out in excruciating detail in the case against Custer Battles - two war profiteers who arrived broke and on the make in Baghdad during the early days of the occupation.

Their case helps to explain how the American led interim government managed to spend its way through over $20 billion of reconstruction money yet leave Iraqis with less electricity, less clean water and with hospitals in an even worse condition than during the worst of the days of crippling sanctions against Saddam. They were sanctions that claimed 250,000 lives over 10 years.

Details are now emerging of how other US companies massively overcharged for their work and failed to deliver on what they promised, and how contracts worth millions were subcontracted down to locals who were paid a fraction of what the big US companies were paid for the work.

Hospitals were left with sewage floating in the kitchens and operating theatres, without the most basic life saving equipment despite contracts worth millions being handed out to US companies by Paul Bremer's interim government. Now Bremer's successor Dan Speckhard has said in response to this that it is: "water under the bridge"

This week, as Iraq descends even further into hell, one wonders if the prospect of civil war could have been avoided if there had been a little more electricity, fresh water and the promise of better hospitals. The Iraqi people desperately needed some assurance; some proof that life might just get better - it never came.

When the two men who make up Custer Battles - Scott Custer and Michael Battles, (who ran unsuccessfully as a Republican Congressional candidate in 2002) - arrived in Iraq, one former workmate said they didn't have enough money between them to pay the $15 airport tax. Within months they had contracts worth $37.5 million for security and transport work.

In the case that ended last week, Custer Battles were found guilty under the false claims act on three counts. Now they've been ordered to pay back approximately $11 million. The attorney who led their successful prosecution told Dispatches: "There is an orgy of greed among the contractors in Iraq. American law was suspended, Iraqi law was suspended and Iraq basically became a free fraud zone.....in a free fraud zone you can steal anything you like."

According to Alan Grayson the attorney prosecuting Custer and Battles, the Bush administration's failure to prosecute them in the criminal courts signalled the Pentagon's indifference to the war profiteering of US companies. "For all practical purposes participating in it," Grayson said.

It's not the first time that those involved in Bush's administration have been linked with companies that have been accused of behaving improperly. The US Vice President Dick Cheney once headed the US company Halliburton- They received $1.6 billion of Iraqi money to help reinstate the country's oil supply. Auditors said $177 million were overcharged. Although Halliburton continues to deny this, it reached a settlement with the U.S government to repay $9 million. According to Henry Waxman, a Democratic congressman from California: "Halliburton gouged the taxpayer, government auditors caught the company red-handed, yet the Pentagon ignored the auditors and paid Halliburton hundreds of millions of dollars a huge bonus."

In an investigation for Channel 4's Dispatches programme the Guardian sent their award winning Iraqi reporter, Ali Fadhil, to investigate the reality of the reconstruction on the ground by looking at a hospital for babies and children. As a doctor himself, Ali was able to offer a specialised insight. He discovered that often even crucial hospital projects were abandoned; basic works weren't carried out and the US companies were rarely called to account.

Even in areas where there had been no security problems, work was abandoned. He discovered that the US Interim government in Baghdad pursued a policy of de-Baathification, which consisted of sacking everyone including those who understood how the country was run. In the case of the health service, for example, the job of running Iraq's health service was handed to a Republican sympathiser and health administrator from Michigan with almost no international health or post-conflict experience.

The official US report into the rebuilding of Iraq blames unforeseen security costs, haphazard planning and shifting priorities for the failures. It ignores the fraud and profiteering despite the numerous cases now coming before the courts as whistleblowers come forward to describe army personnel packing thousands of pounds into backpacks and leaving the country.

The cliche that it the Iraqi was "all about oil" has been repeated to the point of tedium, but the rebuilding of Iraq IS all about money and the Iraqis have not seen much of it. The average labourer is paid seven dollars a day and they have seen at least $20 billion worth of contracts handed out to American companies.

Post invasion, post Abu Ghraib, post the internment of thousands of Iraqi men in prison without hope of trail- at least some fresh running water might have helped cool a situation now way out of control.

Dispatches: Iraq's Missing Billions goes out tonight on Channel 4 at 8pm.
http://www.mathaba.net/

The short URL for this item is: http://mathaba.net/news/?x=531154

PACE

19 September 2006, 08:58

Brother, I wouldn't give him tha much credit considering he was terminated before his first assignment.

Ironic how his wife was involved then and now this.

I agree with Magician.
There is something here, I just can't put a finger on it.
Battles' contacts/associates could allow him to move money under the radar anywhere in the world, IMO.
There is more to this Germany thing than is evident to me.
Or perhaps the insomnia is getting the best of me and I'm making something out of nothing, or letting the "conspiracy theorist" in me take control.
Does anyone know where Battles is right now?

Silverbullet

19 September 2006, 09:01

.I think that if Battles wanted to move money below the radar, he could do it. His Lebanese colleagues alone....would know what to do.

This thing in Germany does not make sense. At least, not on the surface, and not to me. .

My reply was in ref to the fact that he did not get the skill to move money from the past employment he claims, nothing else.

While he may be in select circles and carry himself in a certain way, the only foul proof method to judge him is by his actions. Those actions may fly in the face of what someone sees when they talk to him or look into his background, but they are a concrete barometer of his true character. I suspect his bearing and background contributed to him being able to get contracts through below the radar.

His wife's relatives are from the area in which this press release talks about.

As someone noted earlier if is more than likely that C & B and relatives were tagged and any amount of monetary movement would generate specific actions on the part of authoritues.

It will be interesting to see how this plays out.

magician

19 September 2006, 09:26

My reply was in ref to the fact that he did not get the skill to move money from the past employment he claims, nothing else.

Agreed.

While he may be in select circles and carry himself in a certain way, the only foul proof method to judge him is by his actions. Those actions may fly in the face of what someone sees when they talk to him or look into his background, but they are a concrete barometer of his true character. I suspect his bearing and background contributed to him being able to get contracts through below the radar.

This was indeed the case.

His wife's relatives are from the area in which this press release talks about.

As someone noted earlier if is more than likely that C & B and relatives were tagged and any amount of monetary movement would generate specific actions on the part of authoritues.

It will be interesting to see how this plays out.

On so many levels.

magician

19 September 2006, 09:46

Custer Battles Royale (http://www.corpwatch.org/article.php?id=13379)

Posted by David Phinney on March 10th, 2006
Our man in DC, David Phinney, has been covering the upstart private security contractor Custer Battles since long before the mainstream media had a clue who they were. Now the company, which has made millions in taxpayer money in Iraq, has been found guilty of federal contract fraud amounting to nearly $3 million. The firm was ordered pay nearly $10 million in restitution.

David has been at the trial in recent weeks, and sends us this post-verdict dispatch:

Scott Custer and Michael Battles discovered contracting business to be so good in Iraq for their new private security firm that they soon paid themselves bonuses between $3 million to $4 million in January 2004.

One month later company managers fired off internal memos warning the two entrepreneurs that the firm was regularly charging for goods and services never delivered or, if they were, at freakishly inflated prices.

That’s just one of the tasty items to come out of the three-week trial that found their company, aptly named Custer Battles, liable for massive contract fraud while working for the Coalition Provisional Authority after the March 2003 invasion On Thursday, a federal jury in Alexandria, Va., determined that Custer Battles must now shell out more than $10 million in penalties and damages.

"What they did is treason," claims attorney Alan Grayson, the lead attorney for two former Custer Battles business associates who filed the fraud suit more than two years ago. "There's no other word for it."

The $10 million judgment addresses only part of the complaint filed by the two whistleblowers, Robert Isakson and William Baldwin, which accuses Custer Battles of orchestrating a sweeping swindling scheme on Iraq contracts with the use of bogus invoices, forgery and shell companies in the Cayman Islands to fraudulently pump up their billings.

Thursday's verdict rules on a CPA contract to protect the multi-billion currency exchange program that replaced money used by Saddam Hussein's regime with new Iraqi dinars. A second trial is expected on a $16 million security contract for Baghdad's airport. Damages for the airport contract could reach $40 million or more if the company is found of wrongdoing.

During the three-week trial, Grayson was able to tease out the tale of the $3-million-plus bonuses.

"On January 2nd, 2004, you took a bonus of $3 million out of the company, did you not?" Grayson asked Michael Battles as he sat on the witness stand.

"I didn't take a bonus necessarily, but I took a draw," Battles, a 2002 Republican candidate for Congress in Rhode Island, responded curtly.

Grayson: "What's a draw?"

Battles: "A draw is a disbursement of funds to the principals.... And I was happy to say that, yes, we were successful enough that I took a $3 million draw."

At one point Battles attempted to deflect any responsibility in the management of his company by insisting he was largely involved with business development and "strategic initiatives." He rarely took a hands-on executive role, he said.

"One thing I learned as lieutenant is that the secret to successful leadership is to surround yourself with people smarter than you are," he said.

Later, Battles shared another lesson: "In retrospect, one of the things I've learned is don't put your name on your company,"

Meanwhile, it looks as though Isakson and Baldwin will be counting their money. Individuals are allowed to sue on behalf of the government when they have knowledge that the government is being defrauded. They may receive up to 30 percent of the money paid by Custer Battles.

Those not counting their money will be the Iraqi people. Much of the money paid to Custer Battles was from seized Iraqi assets. Judge T. S. Ellis III, of the Federal District Court in Alexandria, Va., had ruled early in the trial preliminary proceedings that the False Claims Act applies only to bills paid directly from the American treasury.

magician

19 September 2006, 09:48

ABCs of the Custer Battles Scandal (http://www.corpwatch.org/article.php?id=13380)

Posted by David Phinney on March 10th, 2006
Here are some answers to some common questions about the Custer Battles federal contract fraud trial and its aftermath:

1. Why didn't the US Justice Department join in the Custer Battles lawsuit?

The plaintiffs invited them. After investigating under closed seal, the department decided against it. BUT, I did notice a Justice official sitting in the courtroom quietly taking copious notes on the proceedings.

2. Will there be criminal prosecution of Michael Battles and Scott Custer now that they have been found guilty of fraud in a federal civil case?

The plaintiffs' attorney Alan Grayson thinks not: "This is a huge embarrassment for the administration and they don't want to do anything to publicize it," Grayson said. "It's just another example of corruption and fraud that the administration does nothing about and willingly participates in. The Bush administration had people running around lining up contracts for contractors who turned out to be people who stole millions upon millions from the taxpayer."

3. Because Custer Battles was largely paid with seized Iraqi Assets, will Iraq be entitled to any or all of the damages?

No. It is considered war booty and property of the invading forces.

magician

19 September 2006, 09:50

http://www.govexec.com/dailyfed/0306/031006k1.htm]Military contractor ordered to pay $10M for Iraq overcharging

By Kimberly Palmer
kpalmer@govexec.com

A jury has ordered Custer Battles, a military contractor, to pay $10 million for fraudulently billing the government on Iraq reconstruction contracts.

The jurors in the federal courthouse in Alexandria, Va., found Thursday that Custer Battles and its owners, Scott Custer and Michael Battles, had overcharged the government on a contract to replace old Iraqi currency with new bills. They also awarded William Baldwin, one of the whistleblowers who brought the case, $230,000 in back pay for being demoted after complaining about Custer Battles' billing practices.

Damages were calculated at $3 million, an amount that gets tripled under federal law. Other penalties also were added.

Under the False Claims Act, private citizens can bring cases against companies they believe have defrauded the government, even if - as in this situation - the Justice Department decides not to pursue the case. The two whistleblowers in this case, Baldwin and Robert J. Isakson, are eligible to receive 30 percent of the damages. The remaining 70 percent goes to the U.S. Treasury.

Baldwin worked for Custer Battles in Iraq and also worked for DRC Inc., a contractor that worked with Custer Battles. Isakson is managing director of DRC.

Sen. Chuck Grassley, R-Iowa, questioned the Justice Department's decision not to take on the Custer Battles case. "The jurors in this case listened to the arguments and sent back a strong statement of intolerance for fraud, waste and abuse of taxpayer dollars. I remain concerned as to why the Justice Department chose not to join this case," he said in statement e-mailed to reporters Thursday.

In the complaint filed in court, Isakson and Baldwin accused Custer Battles of "war profiteering" that resulted in tens of millions of dollars of damage and the deaths of four company employees as the result of faulty trucks.

During the trial, retired Army Brig. Gen. Hugh Tant III told the court that the trucks were "very dangerous," and that brake failure led to a wreck. "I felt these two men turned their backs on us and it crushed me internally," he said. Tant directed the Iraqi currency exchange program for the Coalition Provisional Authority in Iraq in the fall of 2003.

The case raised the legal question of whether the False Claims Act could be applied when contractors were paid with funds that came through the currency contract and not directly from the U.S. government. In this case, the judge ruled that the False Claims Act applied because the currency contract was funded by the federal government.

According to an analysis of the court's decision by Brian A. Hill, a lawyer at the Washington-based firm Miller & Chevalier, "The touchstone for [False Claims Act] liability is not who controls payment of the money at issue, but who owns the money that is being paid out." Hill's analysis was published by the Washington-based Bureau of National Affairs Inc. He said that the court's logic will potentially affect other cases involving Iraq reconstruction contracts.

Custer Battles attorney David L. Douglass said several legal issues remain in play, including whether the claims were ever presented to the U.S. government for payment (or if they were only presented to the Coalition Provisional Authority). These issues, he argued, could negate the jury's decision. "The evidence overall shows [Custer Battles] fulfilled the contract according to its terms," he said.

"What this case illustrates is the peril government contractors face when they're dealing with unusual situations, novel institutions or any situation where they're asked to execute a contract when the rules are not clear," said Douglass. Emergency situations such as contracting related to Hurricane Katrina pose the same problem, he said. Douglass argued that confusion resulted in Custer Battles being asked to perform services that were not in the contract.

"Some people thought Custer Battles was intending to submit false claims, but they were just trying to comply with requests for what they needed to get paid," he said, while acknowledging that the jury rejected that view.

Alan M. Grayson, attorney for the whistleblowers, did not return a call seeking comment.

magician

19 September 2006, 09:54

Last one. For now.

US: Contentious Close in Private Security Contractor Whistleblower Case (http://www.corpwatch.org/article.php?id=13366)

by Andrew Miga, Associated Press
March 7th, 2006

ALEXANDRIA, Va. --Rhode Island-based defense contractors Custer Battles were "war profiteers" and "war whores" who filed phony claims for some of the millions of dollars they made in Iraq, an attorney for two whistleblowers told a federal jury during final arguments in a civil lawsuit Tuesday.

"It's not like stealing from a bank, because people's lives are at stake," said attorney Alan Grayson. "They let you down. They let down America. You should do something about that."

Defense attorney David Douglass countered that his clients, company co-founders Michael Battles and Scott Custer, were "honorable men doing a hard job at a hard time."

Both sides were making their final pitch to jurors who must decide whether Custer Battles, which had offices in Middletown, R.I., and Virginia, defrauded the government.

The heart of the civil suit is a $3 million advance Custer Battles received as part of a contract to build three camps for the Iraq currency exchange program run by the Coalition Provisional Authority in 2003.

Grayson cited a long list of what he alleged were bogus invoices and forged signatures in pressing his case.

He zeroed in on three invoices for work on a helicopter pad in Mosul. One was for $175,000, a second was for $157,000 and a third was $96.000.

He claimed Custer Battles and its subsidiaries submitted "repetitious invoices billing for the same thing over and over again."

Douglass denied the charge, saying there was no evidence any of those invoices were submitted for billing purposes.

He said Custer and Battles hired accountants and others to handle such billing transactions.

"They weren't involved in that process," he said.

Iraq was a chaotic, confusing and dangerous place, Douglass said. He said his clients were performing a vital service under "unbelievably difficult circumstances" for the CPA's crash program to get a new currency in place for the war-torn country.

"Ladies and gentlemen, we understand the big picture after three weeks of testimony," said Grayson. "The big picture is greed."

Whistleblowers Robert Isakson and William Baldwin, former business associates of Custer Battles, sued on behalf of the government. The government could collect triple the amount of the alleged fraud. Whistleblowers can receive a portion of the money.

But Douglass said Baldwin had an axe to grind with his former employers, who had demoted him.

"He set up a competing company and they sue Custer Battles, a great way to compete," said Douglass in sarcastic tones.

Custer was solemn-faced as the attorneys wrapped up their cases. Battles was not in the courtroom.

Battles and Custer are former Army Rangers in their mid-30s who co-founded the company, which provided security and other services in Iraq after the U.S.-led invasion. Battles, a West Point graduate, ran unsuccessfully for Congress in Rhode Island in 2002.

magician

19 September 2006, 10:05

Ok. I lied.

This is the last one. For now.

:)

A Florida Campaign Clash for Grayson & Kubli Partner (http://www.law.com/jsp/law/sfb/lawArticleSFB.jsp?id=1157135237758)
Jason McLure
Legal Times
September 5, 2006
When Alan Grayson of McLean, Va.'s Grayson & Kubli kicked off his bid for Congress in the 8th District of Florida, his campaign materials used a quote from The Wall Street Journal labeling him a "one-man war against contractor fraud in Iraq." Central to that characterization was a high-profile jury verdict Grayson won in March on behalf of two whistleblowers in a False Claims Act fraud suit against Iraq contractor Custer Battles.

What the rarely understated Grayson has been leaving out of his campaign literature, however, is that last month a judge in the U.S. District Court for the Eastern District of Virginia vacated much of that verdict on the grounds that the now-defunct Coalition Provisional Authority, which hired Custer Battles, wasn't a U.S. government entity and thus wasn't covered by the False Claims Act.

Grayson, who labeled the company's co-founders, Scott Custer and Michael Battles, "war whores" and was scolded by Judge T.S. Ellis for making a dirty joke during the trial, says he plans to appeal the judge's ruling to the 4th U.S. Circuit Court of Appeals. But he's not tempering his rhetoric. "Custer and Battles are pathetic, fundamentally evil people who will eventually end up in prison," Grayson says.

Robert Rhoad, a lawyer for Custer Battles in the D.C. office of Porter Wright Morris & Arthur, calls Grayson's statements hyperbole. "Mr. Grayson's bitterness toward my clients is somewhat understandable since it appears he has based his congressional campaign in large part on what has become his failed case against them," Rhoad said in a written statement.

Meanwhile, Rhoad has taken issue with a Grayson campaign press release that touts Grayson for "enlisting the help of German police and prosecutors" in attempts to seize foreign assets controlled by the wife of Michael Battles -- asserting that the effort to draw criminal authorities into a civil dispute violates court procedures. In a court filing, Grayson acknowledged that it was, in fact, German authorities who contacted him.

Grayson's opponents in today's Democratic primary, local marketing consultant Charlie Stuart and County Commissioner Homer Hartage, have tried to cast him as a Washington trial lawyer out of touch with the Orlando, Fla.-based district. But Grayson, a former executive at IDT Corp., has won some name recognition in the region by committing $500,000 of his personal fortune to the campaign and blanketing the area with radio and television ads.

He also claims to have 75 paid staffers working the phones and canvassing the streets. "I never count anybody out that has a lot of money," says Aubrey Jewett, a political science professor at the University of Central Florida.

Despite Grayson's push, Jewett says the front-runner is still Stuart, the scion of a prominent local family. Even if Grayson pulls off an upset, he'll remain an underdog in the general election and will need a strong anti-Bush tide to beat Republican incumbent Rep. Richard Keller. "In a normal year, Keller's not particularly vulnerable," Jewett says.

PACE

19 September 2006, 18:46

.

I know his Prof's a whole lot better and I will go off of what they said about him.
RAT OUT!!!
RAT,
I'm curious as to the opinion of Battles by his Profs.
I'm assuming you mean his instructors from West Point.
If that is a wrong assumption, please forgive me.
Did you teach there also?

PACE

RAT

19 September 2006, 21:37

RAT,
I'm curious as to the opinion of Battles by his Profs.
I'm assuming you mean his instructors from West Point.
If that is a wrong assumption, please forgive me.
Did you teach there also?

PACE

PACE,

PM on the way bro.

RAT OUT!!!

PACE

20 September 2006, 11:19

PACE,

PM on the way bro.

RAT OUT!!!

Interesting stuff!
Thanks.
P

Miguel

20 September 2006, 12:09

Like Rat knows anybody with an education level higher then a GED.

RAT

20 September 2006, 13:13

Like Rat knows anybody with an education level higher then a GED.

HAHAHA... What is a GED???? :eek: :D

Bastige.

Pace,

Visa versa. You are 100% right on the assessment that you PM'ed me about... I could not agree more on who was involved.

I'll respond to your PM tonight. I am at lunch on this Palm Pilot deal...

As for Miguel, don't ever eat next to him in a restaurant. Or is you do make so you don't see any one with back packs on. :P

Seriously glad to see you are doing great Miguel.

RAT OUT!!!

zdfg

20 September 2006, 19:41

GED = Good EnoughDiploma

magician

2 April 2007, 00:47

War contractors settle in Manatee
Accused of fraud in Iraq, ex-partners happy in Lakewood Ranch (http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070401/NEWS/704010825)
By TODD RUGER
todd.ruger@heraldtribune.com

MANATEE COUNTY -- When they bought homes in quiet Lakewood Ranch, Scott Custer and Mike Battles were becoming the poster children for wasted government money in war-torn Iraq.

The two former Army buddies and their defense contracting company, Custer Battles LLC, were banned from government work.

Then they were featured as war profiteers on a segment of "60 Minutes," based on the accusations in a whistle-blower lawsuit.

A jury found that they cheated the U.S.-led coalition government in Iraq out of millions of dollars. A second whistle-blower case was headed to trial.

And then the fraud cases went away totally.

A judge overturned the jury's verdict against them because the coalition government -- not the U.S. government -- was the victim. The same judge threw out the other lawsuit as well on another defense motion, saying there was no proof of fraud.

So instead of having to pay back $10 million in restitution and fines, they are raising their children near relatives in Southwest Florida and starting new businesses.

Florida has long been a haven for people eager to leave behind family, legal or financial troubles. The state's homestead protection laws are among the strongest in the nation, a fact that is not lost on the attorneys here who specialize in asset protection.

And in a state where people come and go constantly, neighbors are mostly judged by how they fit in here, instead of by what they might have done elsewhere.

Now Custer has an Internet company, Thesiger Ventures, which is based in a UPS store on Market Street by the Publix.

Battles, a former CIA agent and congressional candidate from Rhode Island, says he is "an entrepreneur and investor."

Both Custer and Battles said they did nothing wrong in Iraq, but declined to comment in detail about their work there. They agreed only to comment for this story by e-mails approved by their attorneys. Both say they plan to stay here.

"We love Lakewood Ranch for the convenience, the open space, the schools and access to quality medical care," Battles wrote in an e-mail. "It is an ideal location to raise a family."

But even with the fraud cases resolved, their legal troubles have followed them here, to some extent.

The two Rangers

Battles, 36, is a West Point graduate and former CIA operations officer who ran for Congress in 2002. A Republican from Rhode Island, he also appeared on Fox News as a commentator on national security.

Among his political contributors was Custer, 38.

The two had served in the Army Rangers together, and Custer had founded a nonprofit group whose mission was to provide security to relief workers in post-war environments.

They formed Custer Battles LLC in 2001 as a security firm.

One of the first contracts they got in Iraq was to provide security at the Baghdad International Airport in 2003.

In war-torn Iraq, bricks of $100,000 cash went to pay for security and rebuilding contractors, among them Custer Battles, at a time when banks were nonexistent and contracts were written on whatever paper could be found.

Over a 13-month period, Custer Battles landed more than $100 million in defense contracts, including a contract to provide equipment for distributing the new Iraqi currency.

It started to fall apart when one spreadsheet was left behind after a meeting in Iraq with an Army general in 2003.

Gen. Hugh Tant had called Battles and Custer to the meeting. The partners were providing the military with trucks to transport large sums of the Iraqi currency. The trucks kept breaking down, making the cash an easier target for terrorists and thieves.

The spreadsheet that the general found detailed the actual cost of contract items, the amount billed to the government and the profit to the company, the general testified in a later court hearing.

The government launched audits and investigations based on the spreadsheet and found several dozen instances of fraud. That includes false invoices to the Coalition Provisional Authority in Iraq that totaled more than $8.5 million.

"My impression of their work was, it was probably the worst I've ever seen in over 30 years of my time in the Army," Tant said. "The absolute worst."

No criminal charges have been brought against Custer and Battles. But a competitor, DRC Inc., filed federal whistle-blower lawsuits against them, making a litany of fraud accusations. In one case, the jury found several dozen instances in which Custer Battles defrauded the government.

Custer Battles was found to have used shell companies, fake invoices and even stolen forklifts in elaborate schemes to defraud the Coalition Provisional Authority that ruled Iraq after the invasion. The jury ordered the company to pay $10 million in damages.

Then the judge, T.S. Ellis, ruled that the accusations could not be the subject of a whistle-blower lawsuit in the U.S. courts because the fraud victim was the Iraqi government.

The same judge tossed another whistle-blower lawsuit against Custer and Battles out of court last month, saying there was no evidence of fraud.

Because of the Air Force investigation, Custer Battles has been banned from getting contracts with the military until at least 2009.

Far from Iraq

Custer paid $790,000 for his four-bedroom home in Lakewood Ranch in late 2004, just after the Air Force suspended the firm's contracting privileges. Battles followed a few months later, purchasing a ranch on Goldenaster Place in the Riverwalk Ridge neighborhood for $590,000.

The fraud cases did little to disrupt their quiet lives near the clubhouse, where neighbors know almost nothing about the accusations against them.

Battles is now caring for his ailing father and watching his 4-year-old son.

He said his wife is in Germany with their other son, caring for her ailing father.

In an e-mailed response to a reporter's request for comment, Battles refers to himself as a simple family man who is baffled by the accusations lobbed at him.

"I have a fantastically supportive wife who has suffered more than I have as a result of this situation," Battles wrote. "My wife's only flaw is poor taste in men and I am willing to overlook that for a very long time."

Custer said he moved here to raise his 21/2-year-old son near his grandparents in Sarasota. He says he and his wife were looking for a quiet life in the suburbs, and they have found it in Lakewood Ranch.

"While sounding corny, I sat at an intersection on Lorraine Blvd and watched 1st and 2nd graders riding their bikes to school with no supervision," Custer wrote in an e-mail to the Herald Tribune. "This was not possible in Rhode Island or D.C., but it was both my wife's and my experience growing up."

He says he is "currently focusing on other endeavors."

The neighbors can hardly believe they are the same people mentioned in the "60 Minutes" report.

"It does seem very out of character," said Custer's neighbor Cheri Thomas, who was in the midst of making plans to carpool their children to Saint Stephen's Episcopal School in Bradenton.

"I do like them."

Back to court

There is one more whistle-blower lawsuit against Custer Battles in federal court, this one accusing the partners of conspiring with Pentagon officials who steered defense contracts to them. It remains sealed.

And Custer and Battles are still being used as poster children for government waste in Iraq.

According to Sen. Patrick Leahy, chairman of the Senate Judiciary Committee, a federal investigation found that Custer Battles billed the government a total of $10 million when its actual costs were less than $4 million. Leahy, D-Vt., mentioned Custer Battles as he filed an anti-corruption bill early this year.

And former presidential candidate Sen. John Kerry mentioned Custer Battles in his press release about another anti-fraud bill, filed last month.

"Unfortunately, the war in Iraq and the actions of companies like Halliburton and Custer Battles have become symbols for questions about government waste and a near total lack of accountability," Kerry said.

Custer and Battles' old competitor, DRC, is also going after them in court, trying to collect on a $1.4 million debt from a contract dispute in Iraq.

The company filed a federal lawsuit against Custer Battles in Tampa, arguing that moving to Florida was just a way for Custer and Battles to hide assets and that the houses should be forfeited.

In his e-mail to the Herald-Tribune, Custer sounded confident that he will weather all the accusations he has faced:

"At the end of the day, I have no doubt that my reputation will return intact and my wife and I will continue to contribute to our local community as we raise our family."

Last modified: April 01. 2007 12:00AM