Iraq Contractor Accused of Offshore Shell Game [View All]

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by David Phinney, Special to CorpWatch


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 Oct. 8.

Custer Battles, headquartered in McLean, Va., first grabbed headlines in The Wall Street Journal after winning a $16.5 million contract in June 2003 to provide security for the Baghdad International Airport.

The nine-month-old firm had no track record in security and employed only a handful of people at the time. The two co-founders, Scott Custer and Michael Battles, boast of making their first payroll with personal loans and credit cards. Since then, the company has landed contracts totaling an estimated $100 million including protecting Iraq’s new currency and training the Iraqi army.

But once on the ground 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.

http://www.corpwatch.org/article.php?id=11575