Custer Battles

Discussion in 'Politics' started by dilloduck, Feb 15, 2005.

  1. dilloduck

    dilloduck Diamond Member

    May 8, 2004
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    Austin, TX
    I watched some of the hearings on this on CSPAN last night. Anyone else been following this. Seems like the Dems have found a conection they would like to exploit to drag Bush through the mud.

    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.’”

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