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.
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http://www.corpwatch.org/article.php?id=11575 Global Eye: Dream Team
By Chris Floyd
Oct 15, 2004, 22:16
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Custer Battles is not, as you might think, named for that earlier undermanned, overconfident military incursion that ended in disaster at Little Big Horn. No, the ill-omened moniker comes from the company's founders: ex-Army Ranger and "Special Operations" vet Scott Custer and his partner, fellow Special Opnik Mike Battles, who also brings his experience as a clandestine CIA officer, FOX News commentator and failed Republican congressional candidate to the mix.
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But their gravy train hit a roadblock last week, when the firm was suspended from further government pork-gobbling. The Pentagon and FBI were forced to launch investigations after former company executives -- including ex-FBI man Robert Isakson -- filed a "whistleblower" lawsuit against CB citing what the Pentagon itself called "adequate evidence of ... fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements" and other offenses "indicating a lack of business integrity." Actually, that sounds like a dream resume for a top post in the Bush Administration, but with a pesky civilian court making noise, the Pentagon pets are in the doghouse -- for now.
CB's alleged shortcomings in business integrity include setting up offshore front companies and sham sub-contractors to inflate costs in its lucrative, Halliburtonish "cost-plus" contracts, where the government covers all expenses and guarantees a set profit for favored cronies. The company's own documents also detail "forged leases and inflated invoices" and an outrageous $6 million overcharge on its expenses in the currency-exchange racket. When Isakson objected to the scams, two unnamed "top company officials" burst into his office with machine guns, held him and his 13-year-old son at gunpoint for hours, then stripped Isakson of his ID, money and gun and told them to find their own way out of Iraq, the LA Times reports. Father and son finally made their way through the hellhole of Fallujah to safety in Jordan.
Custer Battles still has friends in high places, however. In what legal experts say is a "highly unusual move," the Justice Department is refusing to join the case, which could recoup tens of millions of defrauded taxpayer dollars. The reason given for this coyness is the usual cartload of cowflop from Attorney General John "Jesus is King of America" Ashcroft. His office says the federal government has no jurisdiction in the matter because CB's contracts were not with the federal government but with the "Coalition Provisional Authority" -- i.e. the occupation authority appointed, led and funded by, er, the federal government. Such logical contortions are beyond the ken of mere mortals, of course -- but then the Lord works in mysterious ways, His cronies to reward.
Ashcroft's divine non-intervention effectively puts the kibosh on the case: As Knight Ridder notes, whistleblowers -- and taxpayers -- win 95 percent of such fraud-recovery suits when the Justice Department joins in, but only 25 percent when the feds stay on the sidelines. Thus it's a good bet that the smooth operators will get to keep every drop of blood money they've squeezed from Iraq. And why not? Plucky little guys with plenty of moxie always win out in the American Dream.
...
Yet this pretty tale of cash-strapped kids chasin' the dream is rather belied by the partners' hard wired connections into the military-corporate power grid that rules the former American republic -- and by Mike's other career as well. He's a top executive in the Camelot Group, a heavy player on the international "private equity" scene -- colleagues of the Carlyle Group, that deep well of backroom deals where Bushes and bin Ladens once watered together.
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http://www.axisoflogic.com/artman/publish/article_12664.shtmlBig risks and rewards for Iraq's "Dogs of War"
STAY ALIVE, GET RICH
There is no official record for the number of local or foreign security contractors in Iraq, although the most frequently cited estimates put the total at 15,000-20,000.
By contrast, Britain, the second biggest contributor to the U.S.-led coalition, has around 8,500 troops in Iraq.
"It's the largest ever deployment of private security companies, without parallel," said Christopher Beese of ArmorGroup, a 20-year-old British private security company.
"But it's impossible to know exactly how many because so many agencies are involved and there's no central register."
According to Beese, the industry has grown so big after last year's U.S.-led invasion of Iraq that it can no longer be left to operate in an unregulated, international policy vacuum.
"When all this is over, we're going to have to sit down with governments and other companies and work out what went well and what didn't. We must push for regulation so that there is more openness. At the moment, nobody is required to give any information," he said.
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http://www.reuters.co.uk/newsPackageArticle.jhtml?type=topNews&storyID=586806§ion=news
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