By many accounts, Custer Battles was a nightmare contractor in Iraq. The company's two principals, Mike Battles and Scott Custer, overcharged occupation authorities by millions of dollars, according to a complaint from two former employees. The firm double-billed for salaries and repainted the Iraqi Airways forklifts they found at Baghdad airport—which Custer Battles was contracted to secure—then leased them back to the U.S. government, the complaint says. In the fall of 2004, Deputy General Counsel Steven Shaw of the Air Force asked that the firm be banned from future U.S. contracts, saying Custer Battles had also "created sham companies, whereby [it] fraudulently increased profits by inflating its claimed costs." Yet when the two whistle-blowers sued Custer Battles on behalf of the U.S. government—under a U.S. law intended to punish war profiteering and fraud—the Bush administration declined to take part. The government has not lifted a finger to get back the $50 million Custer Battles defrauded it of," says Alan Grayson, a lawyer for the two whistle-blowers, Pete Baldwin and Robert Isakson. In recent months the judge in the case, T. S. Ellis III of the U.S. District Court in Virginia, has twice invited the Justice Department to join the lawsuit without response. The administration has argued privately that the occupation government, known as the Coalition Provisional Authority, was a multinational institution, not an arm of the U.S. government. So the U.S. government was not technically defrauded. Lawyers for the whistle-blowers point out, however, that President George W. Bush signed a 2003 law authorizing $18.7 billion to go to U.S. authorities in Iraq, including the CPA, "as an entity of the United States government." And several contracts with Custer Battles refer to the other party as "the United States of America." [more]
- Pictured above: The 'Fraud-free zone': Willis (center) in Iraq with two CPA colleagues, preparing to pay a contractor in 2003. The
administration's reluctance to prosecute has turned the Iraq occupation
into a "free-fraud zone," says former CPA senior adviser Franklin
Willis. After the fall of Baghdad, there was no Iraqi law because
Saddam Hussein's regime was dead. But if no U.S. law applied either,
then everything was permissible, says Willis. The former CPA official
compares Iraq to the "Wild West," saying he delivered one $2 million
payment to Custer Battles in bricks of cash. ("We called Mike Battles
in and said, 'Bring a bag'," Willis told Congress in February.) Willis
and other critics worry that with just $4.1 billion of the $18.7
billion spent so far, the U.S. legal stance will open the door to much
more fraud in the future.