IRAQ: Whistleblower Lawsuit Hinges on Status of Occupying Government

A federal judge presiding over a lawsuit by two whistleblowers must decide whether the Coalition Provisional Authority that ruled over postwar Iraq was an extension of the U.S. government or independent of it.

The whistleblowers are suing their former employer, Fairfax-based contractor Custer Battles LLC, accusing them of defrauding the U.S. government of about $50 million while doing security work in postwar Iraq.

During a pretrial hearing Thursday, Custer Battles' lawyer John Boese argued that even if the allegations are true, it was the CPA that was defrauded and not the U.S. government because his client was paid from funds seized from Saddam Hussein's regime and not from taxpayers.

"If the government didn't have any gain from the seized funds, it couldn't have suffered a loss by losing the funds," Boese argued.

But Alan Grayson, a lawyer for the two whistleblowers, Robert Isakson and William Baldwin, argued that under the laws of war and international conventions, an occupying force automatically gains title to any funds seized from the deposed government.

Furthermore, Grayson argued that the CPA was clearly an instrument of the U.S. government, especially since its administrator, Paul Bremer, was appointed by the Bush administration.

Grayson also said the allegedly fraudulent invoices submitted by Custer Battles were sent to Army contracting officers and that numerous federal statutes refer to the CPA as a U.S. entity.

"If the CPA was a government entity, it means that the U.S. government directly provided the money involved here to the contractor," Grayson said.

Boese countered that the deputy administrator of the CPA is a British official.

"Does this become a U.K. entity when he takes over in Bremer's absence?" Boese asked.

The Justice Department, which initially declined an invitation from U.S. District Judge T.S. Ellis III to weigh in on the CPA's status, agreed Thursday with the whistleblowers. Justice Department attorney Michael Hertz argued that Congress would clearly have been concerned about actions like those allegedly taken by Custer Battles when it created the whistleblower law.

The False Claims Act, as it is called, allows individuals to sue on behalf of the government when they have knowledge that the government is being defrauded. The law allows the government to collect triple the amount of the alleged fraud, and the whistleblowers are allowed to receive up to 30 percent of the money.

Baldwin and Isakson allege they were threatened and fired when they objected to Custer Battles' business practices.

Specifically, Isakson says that when he was fired, Custer Battles employees held him at gun point, took his weapon and security pass and left him to fend for himself outside the secure Green Zone in Baghdad. Isakson said he drove 120 mph across northern Iraq to Jordan to get out of danger as soon as possible.

The lawsuit says Custer Battles billed the CPA for work that was never done, employees who were never hired and equipment that never arrived.

Custer Battles has denied any wrongdoing and denied Isakson's account of his firing.

Ellis said after Thursday's ruling that he would issue a ruling soon.

• 174 War & Disaster Profiteers Campaign