CORPORATE CRIME REPORTER
Machine Gun Fire on the Answering Machine: Battle Over Custer Battles Heats Up
20
Corporate Crime Reporter 16(3), April 12, 2006
One thing is clear.
They don’t like each other.
On one side – Robert Isakson and William “Pete” Baldwin –
who sued Custer Battles under the False Claims Act.
On the other, Scott Custer, Mike Battles, and the defense contracting firm they
set up to make millions in Iraq.
Last month, a federal jury in Alexandria found that Custer Battles defrauded
the U.S. government on one contract with the Coalition Provisional Authority.
That jury verdict opened the way to a $10 million payout to the government and
the two relators – Isakson and Baldwin – who brought the case under
the False Claims Act.
The federal government refused to join the case.
Isakson and Baldwin have another False Claims Act case pending against Custer
Battles.
That case will go to trial sometime later this year.
A federal criminal investigation into Custer Battles is ongoing.
In an interview with Corporate Crime Reporter, the lawyer for Custer
Battles, Robert Rhoad, a partner at Porter, Wright in Washington, D.C., alleged
that DRC, Inc. a company headed by Isakson – is being investigated by
the federal government for fraud on a contract in Central America.
The lawyer for Isakson – Alan Grayson – confirmed that there is
a dispute between DRC and the federal government over a contract in Latin America.
“Bob was doing a contract in Latin America for disaster relief,”
said Grayson. “A guy working for the local government asked for a bribe.
Bob said no and reported it to the authorities. After Bob reported it to the
authorities, relations on the contract went downhill. The guy who asked for
the bribe said – you did this wrong, you did that wrong. He reported these
shortcomings six years ago. There was back and forth between DRC and the federal
government for four years. And then Bob sued Custer Battles. At that point,
the U.S. government got more interested in the case against DRC case and pushed
it further along. Nobody has been found guilty of anything. There has been no
judgment of any kind entered. If you have lived through the past few years of
this process, you know that if you make an allegation of any kind against Custer
Battles, they will do anything to vilify you.”
Like what?
Grayson is a partner at Grayson & Kubli in McLean, Virginia. His partner
is Victor Kubli.
Grayson said that last year, on the night before he was scheduled to take the
deposition of Scott Custer in the False Claims Act case, “somebody left
a recording of machine gun fire on Victor Kubli’s home answering machine
and office answering machine.”
“When the next day Victor Kubli asked Scott Custer if he knew who did
it, Scott Custer laughed out loud,” Grayson said. “We called the
FBI and they came and took a recording of the message.”
Well, who left the recording of machine gun fire on Victor Kubli’s answering
machines?
“Who knew that there was going to be a deposition the next day?"
Grayson asks. "The lawyers and the participants knew.
That narrows it down.”
In the False Claims Act jury trial that resulted in a verdict against Custer
Battles last month, two pieces of evidence hurt the company.
First was testimony of Brigadier General Hugh Tant, who was in charge of the
Iraqi Currency Exchange contract – or ICE contract – which was the
subject of the lawsuit.
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.
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."
(For complete transcript of the interview with Alan Grayson, see 20 Corporate
Crime Reporter 13(10-16), March 27, 2006, print
edition only.)
Rhoad, Battles’ lawyer, told Corporate Crime Reporter that Tant’s
testimony to this effect “probably” tilted the jury against his
clients.
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."
Rhoad says that at trial, Miskovich said that he regrets having written those
words.
In an affidavit
dated October 13, 2004, Miskovich says that the questionable conduct occurred
“without the knowledge, control, and consent” of Custer or Battles.
For a complete transcript of the interview with Rhoad, see 20 Corporate
Crime Reporter 16(11-16), April 17, 2006, print
edition only.)
Corporate
Crime Reporter
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