WhistleBlower: Firm defrauded Iraq Occupation Authority (Senate, dec 7)

[The Straight Story]

WHISTLEBLOWER: FIRM DEFRAUDED IRAQ OCCUPATION AUTHORITY -- (Senate - December 07, 2004)

GPO's PDF

---

Mr. DORGAN. Mr. President, the largest area of deficiency for the Congress in the last few years has been the failure to have oversight hearings on issues that demand oversight hearings. I have held some hearings as chairman of the Democratic Policy Committee, in cases where members of other committees have asked for oversight hearings and they have been denied. This has been particularly true, by the way, when it comes to Halliburton.

Let me give an example of why oversight hearings are critical. This comes from a report recently on National Public Radio. I will read this because it describes why this Congress must begin exercising its oversight responsibility. This is about waste, fraud, abuse, and the American taxpayers being cheated.

Let me read some of it:

Custer-Battles was a young company founded by former Army Rangers Scott Custer and Michael Battles who came to Iraq on borrowed money. An August Wall Street Journal article said that he (Mr. Battles) only had $450 when he convinced an official to put Custer-Battles on a list of bidders at an airport security contract.

Mr. President, I ask unanimous consent for 5 additional minutes.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. DORGAN. An August Wall Street Journal article said Mr. Michael Battles, a former Army Ranger, showed up in the country of Iraq with $450. He and his partner, former Army Ranger Scott Custer, convinced an official to put Custer-Battles, a new company, on a list of bidders for an airport security contract. They promised to get the job done fast, and they won the contract, which included two upfront cash advances of $2 million each.

Then there was a fellow, a former FBI agent, whose name is Isakson who said 2 weeks into this job, by this two-person company that showed up with no money but got $2 million of advanced funding for this contract at the airport--Isakson, a former FBI agent, said something went wrong. ``They approached me to participate in a scheme to defraud the government.'' Isakson said it involved bidding for cost plus contracts which guarantee payment for a contractor's actual cost plus an agreed to profit margin.

This is what Isakson said:

They would take and open a company in Lebanon and buy materials through the Lebanese company, which they owned, then the Lebanese company would sell it to their American company at a highly inflated rate and then they would charge their profit on top of the highly inflated rate. In other words, they would make a profit plus another profit.

Isakson said he refused to go along, and he warned company officials that such a plan would put them in jail. Again, this is an ex-FBI agent. He said he could not go along with this. It will put you in jail.

The next day at the airport, Isakson claims, Custer-Battles security guards cornered him in a hallway at gunpoint. His brother and his 14-year-old son were there as well.

Isakson said:

They said you're terminated and you're under arrest and don't move or I'll shoot you.

Isakson said the guard took their weapons and ID badges and eventually turned them out of the airport compound, where they made the dangerous journey from Baghdad to the Jordanian border. He has filed a lawsuit against Custer-Battles over the ordeal, and he is also a party to a $50 million Federal lawsuit filed in Virginia under the False Claims Act.

The other whistleblower in this case is a Pete Baldwin, a former country manager for Custer-Battles in Iraq who now runs another firm there. Baldwin describes a web of false billing practices designed to inflate costs and boost company profits. He cites a deal to provide forklifts on a security detail.

Now, this is what Baldwin says:

They confiscated old Iraqi airways green and white forklifts and transported them out of the airport facility which Custer-Battles had control over and painted them blue, then sold them back to the government on a lease.

He says:

This is a blatant example where something was actually acquired free and sold back to the government .

So Baldwin took his suspicions to Government investigators and quit over the company's billing practices. Now Baldwin claims his life has been threatened because of his actions.

The Pentagon has suspended Custer-Battles from receiving further military contracts and sources, according to NPR, say a Federal criminal investigation is ongoing. However, a civil probe ended in October when the U.S. Justice Department declined to join in the whistleblower case.

Here is the key, and it is an interesting piece of information: A spokesman says the Bush

administration has made a policy decision that cheating the Coalition Provision Authority in Iraq is, for the most part, not cheating the U.S. Government. Let me say that again. This is quoting Mr. Gracing:

The reason they gave to us is that the Bush administration has made a policy decision that cheating the Coalition Provision Authority in Iraq or basically the military, and for the most part the U.S. military, is not the same as cheating the U.S. government.

The fact is, the Coalition Provisional Authority was us. It was our money, our resources, our people. So here we have a company that takes forklift trucks from an airport property, moves them someplace to a warehouse, paints them blue, sells them back to the Coalition Provisional Authority, which pays for them with U.S. taxpayer funds, and our U.S. Justice Department says: That's all right. We'll close our eyes while you cheat us because the Coalition Provisional Authority is not really the U.S. Government. Are they nuts? Don't they care whether we are being cheated?

These are the kinds of things that literally beg for oversight hearings. Yet this Congress is dead silent on these issues. I said I have held oversight hearings about Iraq with respect to Halliburton. The minute you talk about Halliburton, somebody raises the Vice President. I did not talk about the Vice President in those hearings, but I talked about Halliburton and about

GPO's PDF

cheating. This is about Halliburton. It is not about anybody else.

When a company says they are feeding 42,000 soldiers and being paid for it by the U.S. Government and it ends up they are only feeding 14,000 soldiers a day, and 28,000 meals are being paid for that are not being fed, it seems to me there ought to be aggressive oversight hearings to figure out what is going on, who is cheating the Government. Yet there is dead silence.

I come from a really small town, about 300 people. We have one small little cafe right in the middle of Main Street. My guess is, if somebody got a check for 4 meals that were never served, they would sure know that, and the same goes for 14 meals, or 40 meals. It would appropriately be a big deal in my hometown. But 28,000 meals that are billed but were not delivered to U.S. troops? In my little town, they would call that cheating and fraud. Yet there is dead silence with respect to the oversight responsibility we ought to have as a Congress to find out what is happening, why, and who is responsible.

Mr. President, I will have more to say about this as well, and we intend to continue to hold oversight hearings as well in the Democratic Policy Committee.

Mr. President, I yield the floor.

The PRESIDING OFFICER. The Senator from Wyoming.

Mr. THOMAS. Mr. President, we are in morning business, as I understand it.

The PRESIDING OFFICER. Yes, with Senators permitted to speak for up to 10 minutes each.

Mr. THOMAS. I thank the Chair.

[Old and In the Way]

1. There was a time when I'd be outraged by this kind of corruption.

Now, it bearly registers from all the daily deluge.

I found this administration's comments that ripping off thr CPA is OK because it's not the US government quite interesting, though. I suspect that has to be the case because we know it's open season for Republican corruption in the ME. How many billions have disappeared from the CPA? I suspect that Custer-Battles is a minor player in some real world-class ripping off of US taxpayers whom might think, foolishly, that Iraq is not perfect vehicle for these Republican criminals to huge amounts of US tax dollars with zero oversight.

It's the corruption, stupid.