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.What's been going on here? Maybe you have heard or read about Custer Battles before reading about them in this context. I hadn't. Such is the ignorance of the lowly and nearly frozen Winter Patriot. But I'm learning fast. And here is some of what I'm learning:
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.
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.Now this raises a few interesting questions, does it not? For instance, how did major contracts wind up in the files of a company which didn't even exist a few years ago? Who are the people behind this company, and how did they put themselves in a position to perpetrate such a major fraud?
At least it sure looks like a major fraud. According to Jason McLure,
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.Let's see: less than $4 million in costs, at an allowed profit margin of 25 percent, that's less than $1 million in profit, for a total of less than $5 million in invoices. But they billed the government nearly $10 million, so we're talking about an overbilling of roughly $5 million. Five million dollars! Does that sound major to you? Does it sound like fraud?
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.
Oh wait! Did I say "fraud"? I'm sorry! It's not fraud at all. At least not according to a lawyer representing the company, a certain "John Boese of the D.C. office of Fried, Frank, Harris, Shriver & Jacobson", who responded to questions about these documents by saying that they
"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."Well of course they didn't do anything wrong. They probably mistakenly gave the appearance of doing something wrong when they in fact were doing everything properly. Happens all the time, doesn't it?
Or else ... maybe the company hired people to forge documents that made it seem as though they were committing fraud when in fact they weren't. And maybe those kettles which supposedly cost only $10 each were probably gold-plated or diamond-encrusted or personally autographed by Elvis Presley or something, so that they were worth more than normal kettles. And therefore the claims of a "400 percent markup" were essentially misleading. Probably. Maybe. Or maybe not.
Maybe it was something more complicated, something more deliberate. Maybe it was an offshore shell game. Maybe:
Custer Battles employed a group of "sham companies" to create bogus invoices that vastly overstated the cost of items.This would be much more difficult to pass off as a mistake, wouldn't it?
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.Well that's not so simple, is it? But it certainly doesn't appear that the Winter Patriot's hypothesis of diamond-encrusted kettles is going to hold any water [ahem].
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.
Which leads us back to my other questions: Who are the people behind this alleged non-fraud, and how did they get these contracts for which they supposedly didn't overbill anybody?
They wouldn't happen to be well-connected, would they?
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.Oops. Maybe I was wrong about the connections, too. Former U.S. Army! One a former Ranger! This doesn't look good. Maybe it will get better. Or maybe not!
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."So one of the people behind this non-fraud is a Republican with CIA connections, who is "almost daily" in contact with individuals he knows at the White House? Who could ever believe such a thing?
Are you with me so far, folks? If so, we are probably jumping to all kinds of bogus conclusions. Probably a close examination of the timeline will show that all this talk of fraud and inside connections is "just one of those exaggerations". Don't you think so? Let's see...
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.Well that's not so special, is it? I mean, everybody knew that Bush was going to do that, didn't they? Everyone who was watching the news or reading the papers must have known, months in advance, that there was going to be an invasion of Iraq. I could have told you the USA was going to invade Iraq, just based on what I saw on TV on September 11th, 2001 [ahem].
So there's nothing special about advance knowledge of an attack on Iraq. It's less clear how a company could go about obtaining major contracts to work there, though. Let's see... how would you set your company up as a major security firm? Probably working security for a lot of important sites and events, that would do it. So that's what they probably did, no?
Well, um ... no!
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.So I was wrong again! Despite never having provided security for any site in the history of the company, they got the contract to secure Baghdad's airport! What a miracle!
And it must have been a miracle, mustn't it? Because if it wasn't a miracle, then ... I shudder to think! I'm more inclined to believe it was a miracle than to suspect shady dealing, aren't you? I mean, the one guy was a Republican with a CIA history and friends in the White House. They would never be involved in shady dealings, would they?
Of course not! And that's why I am so confident that all this is just a mistake, and that there was never any intent to defraud the government. Because who could even imagine such a thing? A CIA-connected Republican with friends in the White House? Defrauding the government? Perish the thought!
Probably it's all a big misunderstanding. And that's probably why the Justice Department isn't throwing the book at them. They could, but they aren't. Fancy that.
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.What a surprise that must have been! This is the same Justice Department we all know and love, is it not? Well at least it doesn't set any precedent. Setting a precedent to allow companies to defraud the government and escape the notice of the Justice Department would be a very bad move, wouldn't it? So it's a good thing that isn't happening...
In October, the DOJ, without explanation, declined to join the Custer Battles suit [...] A Justice Department spokesman declined comment on the case.
Or is it?
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. [...]Oh well. Wrong again! Sorry about that, folks. You lose some, you lose some.
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."
But not so fast! Not everyone loses. There's Custer and Battles, who might not lose as much as they could have.
And there are those other companies accused of bilking the government, whose suits are still pending. They are probably very happy that the Department of Justice has declined to join the suit.
And last but certainly not least, there's "John Boese of the D.C. office of Fried, Frank, Harris, Shriver & Jacobson", who still might convince somebody -- anybody -- that all those apparently incriminating documents
"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."So let's not be so pessimistic! There may be some winners after all. Stay tuned.
Tonight's song was written more than twenty years ago but it seems more fitting today than it did then. It's by David Lindley.
Talk To The Lawyer
And so they sent you to Afghanistan
to have you working for their master plan
I think it's maybe for the CIA
and when you're through they're gonna put you away
they're gonna put you in an institution
and put a wire up into your brain
because you know about the revolution
that kind of thing will drive a boy insane
better talk to the lawyer
talk to the lawyer
They do manoeuvers at the border-line
someone gets eaten up from time to time
and when you want to know the reason why
I'm sorry, sir, there's no reply
you're on a mission from the president
you got to bury all the evidence
you say you like it but you really don't
they say they'll cover but you know they won't
better talk to the lawyer
talk to the lawyer
Somebody called me just the other day
I said "who is it?" but he wouldn't say
I think he's working for the Secret Service
or maybe working for the FBI
I don't like it when they do me like that
I don't like it when they treat me that way
better talk to the lawyer
talk to the lawyer