December 23, 2004
Iraq Contractor Claims Immunity From Fraud Laws
The off-shore shell games of Custer Battles reflect an even more perplexing puzzle about the status of the Coalition Provisional Authority. Does U.S. law have jurisdiction over the contracts written by the CPA? And if it does, how in the heck do you collect on funds that were made up of seized Iraqi assets? Maybe the shell games began with the CPA? .... Just a thought.
CorpWatch
Dec. 23, 2005
Iraq Contractor Claims Immunity From Fraud Laws
Seized Oil Assets Paid For Offshore Overbilling
by David Phinney
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.
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.
Posted by davidphinney at 02:26 AM | Comments (0)
December 09, 2004
'Contract Meals Disaster' for Abu Ghraib Prisoners
Is this how the situation began deteriorating at Abu Ghraib?
CorpWatch
Dec. 9, 2004
'Contract Meals Disaster' for Iraqi Prisoners
by David Phinney
Rotten food crawling with bugs, traces of rats and dirt. Rancid meats and spoiled food resulting in diarrhea and food poisoning.
This is what detainees at the Abu Ghraib prison near Baghdad were regularly given to eat by a private contractor in late 2003 and early 2004, causing anger to swell to a furious boil between the U.S. military guards and the prisoners.
Foul as the food was, there never was enough. The private contractor, run by an American civilian who was subsequently killed, routinely fell short by hundreds of meals for Abu Ghraib's surging prison population. When the food did arrive, there were often late and frequently contaminated.
So went another sad chapter in the story of the Abu Ghraib prison, where U.S. military personnel and private contractors would make headlines and ignite international outrage over allegations of torture psychological abuse in May of this year.
Captured in photographs now infamous for portraying naked, hooded prisoners and smiling guards, the behavior is believed to be one of the most damning acts toward Iraqi civilians by coalition forces. Other acts of violence toward the prisoners include physical abuse and still unproved allegations of rape and murder.
The Abu Ghraib prison, already infamous under Saddam Hussein’s regime, for overcrowding, ill-treatment and torture, was opened up by the over-extended military soon after the April 2003 occupation.
The inmates were a mix of petty and hardened Iraqi criminals, suspected members of the resistance, and thousands of innocent bystanders hauled out of their homes in midnight raids or off the streets of Baghdad. Many say that they just happened to be in the wrong place at the wrong time, but were held without charges by coalition forces for months before being released.
Unable to run the prison themselves, the U.S. military hired private translators from Titan, a California-based company, interrogators from CACI, a Virginia-based company, two large and well known military contractors. In addition, they hired a small, virtually unknown contractor from Qatar, to provide food to the inmates.
A shocked Army Major, David Dinenna of the 320 Military Police Battalion, was one of the first to recognize the food problem. In a string of frantic e-mails to commanders during October and November of 2003, he called for assistance from his chain of command while working at the prison.
"Contract meals Disaster," he called it in an October 27 e-mail last year. "That is the best way to describe this issue … As each day goes by, the tension within the prisoner populations increases," he continued. "For the past two days prisoners have been vomiting after they eat."
The food was largely to blame for a November 24, 2003 prison riots in which Army guards shot four detainees after the prisoners failed to comply with commands to stop and disburse. A subsequent Pentagon investigation found that prisoners were not attempting a "mass" escape as first thought.
"All evidence indicates that the detainees were simply protesting the deplorable food and living conditions," the report concludes, which attributes the same reasons to a second prison riot on December 24, 2003.
Dinenna's messages and the riot investigations are part of a collection of documents from a classified report by Army Major General Anthony Taguba that was leaked to the news media last spring together with the now-famous photos of naked prisoners. The documents were originally obtained by several news organizations, including US News & World Report, Rolling Stone and the Center for Public Integrity in October 2004.
Torin Nelson, a contract interrogator who worked at the prison from November 2003 until February 2004 and aided in the Taguba investigation as a witness, arrived at Abu Ghraib just days after the November riot.
He recalls being told by witnesses that none of the guards had been informed about the ongoing problems of bad food given to the prisoners. "Because the guards didn't understand Arabic, they didn't know the prisoners were complaining about the food," Nelson said. "They thought there was an uprising."
Frustration erupted into screaming and the protest ignited panic among the guards. Guns were pointed as more and more prisoners gathered in the outburst. The situation spun out of control, Nelson said. "The guards began firing non-lethal rounds at the prisoners, but ran out. Then, what I was told, they got permission to use lethal rounds.
While the U.S. Justice Department is now investigating six private contractors working as interrogators and translators for Titan and CACI, for their roles in the mistreatment, the food contractor remains forgotten and unnamed in the numerous Pentagon investigations of the prison conditions that have been made public.
The contractor's name, American Service Center (ASC), based in Qatar, has surfaced only after dozens of inquiries by CorpWatch over the past month to the Pentagon and military officials in Iraq.
The little known firm boasts on a simple company Web site that it offers services in the line of housing, furniture, vehicle rentals, telephone and internet services. Closely affiliated to a sister company, Advanced Internet Center, ASC claims to work with the U.S. Amy in Qatar and military contractors such as ITT and Dyncorp.
No mention is made of food services or Abu Ghraib. ASC's owner and chief executive, Ali Hadi, hesitates to talk about the contract or his company's performance at the prison and declined to respond to numerous e-mails with questions about his company.
"I have no information about the project," Hadi said during a phone call as he traveled to a Qatar airport en route to Dubai. "I am the owner of the company," he said, "not the operator,” adding that ASC subcontracted the food contract for the prisoners to a local Baghdad caterer.
Despite the finding of abysmal performance in providing food to prisoners, Hadi said ASC holds about "10 to 16" other contracts with the U.S. military, but he is unsure if they are "active."
Any knowledge about the Abu Ghraib contract died with ASC's contract manager, Ray Parks, Hadi claimed. A 56-year-old West Virginia native and former Vietnam veteran, Parks was ambushed and murdered in his Baghdad driveway by three gunmen wearing black robes on the morning of February 16. At the time, Parks was preparing to resign from his job as director of ASC.
Family members of Parks immediately demanded a thorough investigation of events surrounding his murder. Millie Mercer, sister to Parks, said that an Army investigator called the Parks family, but then disappeared. Very little came of the investigation, Mercer said. The investigator "was transferred."
Parks had been a government contractor for many years outside the United States and went to Iraq because he "wanted to help people." He took a job with ASC in June 2003 to work in computers, she added. Mercer wants to hear nothing more about her brother's death. She prefers holding on to the good memories. "So many contractors are seeing much bigger horrors," she said.
But Major Dinenna appeared to believe that Parks was contributing to the horror of Abu Ghraib in his e-mails. "Parks is full of shit and not the least bit trustworthy," Dinenna wrote in a second Oct. 27, 2003, e-mail complaining about food for prisoners marked "URGENT URGENT URGENT."
Dinenna was responding to an earlier e-mail from an Army Major Green, who discounted Dinenna's complaints about the food service and other services ASC was relied upon to provide. "Who is making the charges that there is dirt, bugs or what ever in the food?" Green asked in his e-mails. "If it is the prisoners, I would take it with a grain of salt."
Dinenna fired back: "Our MPs (military police), Medics and field surgeon can easily identify bugs, rats, and dirt, and they did."
In addition to providing food services, ASC was also retained under an $8.2 million agreement to provide "life support" services to the U.S. military at the prison, Hadi said.
But there appears to have been confusion about that support contract among prison commanders. In his string of e-mails, Dinenna faults Parks for constant delays in providing proper lighting for the prison to help in security and prevent escapes.
Then after months of pushing Parks to provide the lighting, Dinenna discovered from a commanding officer that ASC was not responsible for the job.
The ASC contracts are only another example of poor contracting performance in Iraq and bad planning on the part of the Pentagon, said Peter Singer, an expert on the contracting for military services at the Brookings Institution in Washington, DC.
"It just shows how the Pentagon has operated on an ad hoc basis," Singer said. "They were lacking in the needed planning, services and doctrine to manage large scale prisons. Everything was done at the last minute."
Nelson believes that the end result of last minute planning resulted in long term problems for the United States and its role in Iraq. "All the sickness and rotten food not only produced a safety and security concern for the guards and the prisoners," he said. "It was also a morale factor. Here were all these rich Americans coming to Iraq to fix things and they couldn't even afford to feed the prisoners."
A group of interrogators also complained to Colonel Thomas Pappas, the Army officer in charge of the prison, in November 2003, about the poor quality of the food served to the inmates by the food contractors. Nelson says that the sickness made it hard for the interrogators to extract information from detainees. "Anything that affects the morale of the locals affect our mission," he added.
In May 2004, the contract for food service at Abu Ghraib was taken away from ASC, according to Army spokesman Jeff Magruder in Baghdad who said the company apparently was responsible for most aspects of the prison, ranging from power generation to food services.
ASC "did a good job on the other stuff but obviously not so good a job on the food services side for both detainees and soldiers," Magruder said. "Their main problem was that the food would sometimes be rotten and the calorie content was not up to their standards."
Today the food for detainees and soldiers is "much better," Magruder says. Meals for detainees "now far exceed all international standards for calorie content and provide food that is more culturally sensitive. Also, during Ramadan they worked an alternate chow schedule to assist those who were fasting."
You can contact the author, David Phinney, at phinneydavid@yahoo.com.
Posted by davidphinney at 02:35 AM | Comments (0)