Grayson: Political Fix in on Prosecution of Custer Battles – Fried Frank Motion to Dismiss – $2 Million

13 Corporate Crime Reporter 20(1), March 23, 2006

Scott Custer and Mike Battles are now the poster boys of Iraq fraud.

Earlier this month, a federal jury in Alexandria, Virginia hit the two and their defense contracting firm – Custer Battles – with a $10 million verdict for ripping off the federal government on Iraq contracts.

The case was filed under the False Claims Act by Robert J. Isakson and William D. "Pete" Baldwin, two whistleblowers who used to work for Custer Battles.

Isakson and Baldwin were represented by Alan Grayson.

Back in February 2004, when the case was filed, Custer Battles hired corporate America’s favorite False Claims Act defense attorney – Fried Frank’s Jack Boese – to defend the case.

Grayson now says that Boese and Fried Frank delivered a motion to dismiss the False Claims Act complaint – and charged Custer Battles $2 million.

How does he know this?

“Scott Custer told us at a settlement conference that Mr. Boese charged $2 million for a motion to dismiss,” Grayson said. “Custer wouldn't pay it. And Boese decided to leave the case.”

Boese was replaced by Custer’s University of Vermont buddy Robert Rhoad – now a partner in the D.C. office of Porter Wright Morris & Arthur.

Did the $2 million fee strike Grayson as high?

“Yes,” Grayson said. “It strikes me as very high. I don't believe we have ever charged that much for an entire case, start to finish.”

We asked Boese about the fee and he sent us an e-mail: “We do not comment on client matters.”

Rhoad said that motions to dismiss are still pending.

If Judge T.S. Ellis III denies the motions, then Custer Battles intends to appeal to the Fourth Circuit.

As for Grayon’s claim that Boese billed $2 million and that this led to a change of defense attorney, Rhoad said “Mr. Grayson is wrong.”

“His comments regarding the reasons for the change in counsel are completely inaccurate,” Rhoad said. “There were a host of timing and tactical considerations, which led Mr. Custer to believe that there would be a better fit with my firm.”

“I was at the settlement and didn’t hear Custer say anything like that,” Rhoad said. “I do not believe that Mr. Custer ever said it. Mr. Custer thought Fried Frank was great up to the pre-trial stage. He felt the fit was better with our firm.”

“I have no idea what he was billed,” Rhoad said. “I don’t believe that he was billed $2 million for a motion to dismiss. Fried Frank represented them for at least eight months. I’m almost 100 percent certain that Mr. Custer did not make that representation, although legal costs came into play.”

Custer Battles was the only one of dozens of False Claims Act cases alleging fraud on Iraq contracts to go public.
The rest are under seal.

The cases reflect what Senator Byron Dorgan (D-ND) has called “an orgy of greed.”

The evidence in the Custer Battles case was damning.

Brigadier General Hugh Tant, was in charge of the Iraqi Currency Exchange contract – or ICE contract.

Grayson says that under that contract, Custer Battles was to provide trucks and living quarters for people doing that work.

Grayson said that Tant testified that Custer Battles delivered 36 trucks to transport currency – 34 of which did not work.

“Some of them actually had to be towed into the motor pool,” Grayson said. “The brakes on the trucks didn't work. The trucks broke down on the road with over $10 million inside of them, making some very juicy terrorist targets inside of them, as you can imagine.”

General Tant testified that when confronted with this evidence, 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."

Grayson said that also damning was a memo written by Custer Battles corporate integrity office Peter Miskovich who concluded that Custer Battles own documents were “prima facie evidence of a course of conduct consistent with criminal activity and intent."

Grayson wants a criminal prosecution of the Custer Battles defendants.

He says that federal agents assigned to the case want a criminal prosecution.

He says the Defense Department wants a criminal prosecution.

He says that the assistant U.S. Attorney assigned to the case – Richard Sponseller in Alexandria – told Grayson that “the case was being declined by the government because a decision had been made downtown, as he put it – downtown could be the Justice Department, the White House – he didn't specify – a decision had been made downtown that cheating the Coalition Provisional Authority was not the same as cheating the U.S. government.”
“We took away from the conversation that the White House had decided to get rid of the case because it was a case involving Coalition Provisional Authority contracts,” Grayson said.

Did Sponseller say it was a political decision?

“He did not say it was a political decision,” Grayson said. “But it was clear from the course of the conversation that it was not a legal decision.”

Grayson believes a political fix is in.

“Mike Battles ran for Congress in 2002,” Grayson said. “His first and one of his largest single campaign contributors was Haley Barbour, the head of the Republican Party. Another large contributor was Fred Malek, from Nixon enemies list fame and who was George Bush's campaign manager.. . .The idea that there is no political element in this decision not to prosecute Mike Battles is silly.”

Has anybody in the government ever told you the political fix was in?

“No,” Grayson said. “But as Sherlock Holmes said – when you have eliminated the impossible, whatever remains must be true. There is no other explanation here.”

(For complete transcript of the six-page question answer format interview with Alan Grayson, see 20 Corporate Crime Reporter 13(10-16), March 27, 2006, print edition only.)




Corporate Crime Reporter
1209 National Press Bldg.
Washington, D.C. 20045