CORPORATE CRIME REPORTER

Jury Finds Custer Battles Liable in Iraq False Claims Act Case
20 Corporate Crime Reporter 11(1), March 9, 2006

A federal jury in Alexandria, Virginia has found contractor Custer Battles and its owners – Scott Custer and Michael Battles – liable for fraud in the first Iraq military contract case prosecuted under the False Claims Act.


The jury hit the defendants with a $10 million judgement.


The case was filed on behalf of the government by two former employees – Robert J. Jackson and William Baldwin.


The federal government refused to join the case.


And Patrick Burns of the advocacy group Taxpayers Against Fraud says it was a political decision.


“I believe this case was declined for political reasons,” Burns said. “The hope was that the whistleblowers would go away and that this case would not be a front page story. Out of sight, out of mind. In Iraq, the U.S. government’s position on fraud has been – don’t ask, don’t tell, don’t listen.”


“The government has 50 Iraq cases under investigation,” Burns said. “But at some point we need some movement. The contractors in Iraq have been able to control the show. To the rest of the world, it appeared the U.S. government was winking at fraud. At some point, the government needs to show that it is serious and will prosecute and hold people accountable.”


The jury found that the U.S. funds spent under the Custer Battles contract were fraudulently billed.


In addition, the jury found more than 30 separate fraudulent acts, each one of which is subject to an $11,000 penalty.


The jury also awarded Pete Baldwin $230,000 for being demoted and constructively discharged.


Under the False Claims Act private citizens with special knowledge of fraud against the federal government may pursue a case to recover money in the government's behalf, with the potential for triple damages and up to $11,000 per fraudulent claim.


Should the private citizen win the case, the whistleblower is eligible for up to a 30 percent award, with the other 70 percent going to the government.


The False Claims Act lawsuit alleged that the company defrauded the government of $3 million worth of services as part of an Iraqi money-exchange program in which a new Iraqi currency was distributed following the collapse of Hussein's government.


Another trial, with the same set of whistleblowers, is scheduled on a separate $16.8 million contract Custer Battles was awarded to provide security at Baghdad International Airport.


Retired brigadier general Hugh Tant III told the court that Custer Battles' fraud "was probably the worst I've ever seen in my 30 years in the Army."


Tant testified that in one case, Custer Battles contacted to supply trucks to the military and provided vehicles that did not run and had to be towed to the site.


When confronted, 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."

 


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