ALEXANDRIA, Va. - A company founded by two former soldiers devised a scheme of shell companies and fake invoices to defraud the U.S. government of millions of dollars in Iraq, a federal jury was told Wednesday.
"Some people think they can get away with anything," attorney Alan Grayson told a jury in the case of two whistleblowers suing contractor Custer Battles LLC.
"When you hear the crude and crass ... audacious scheme that the defendants executed," Grayson said, "you will ask yourselves: 'Did they really believe they could get away with this?'"
Attorneys for the company countered that there was no fraud - but rather confusion and misunderstandings over contracts signed in chaotic, post-invasion Iraq run by overwhelmed and inexperienced occupation authorities.
The experience of Custer Battles "was critical to success in Iraq" because they had the contacts and know-how to do things the U.S. military couldn't do, said attorney David L. Douglass, representing the company founded by former Army Rangers Scott Custer and Michael Battles.
Attorneys were making opening statements in the courtroom of U.S. District Judge T.S. Ellis in suburban Washington.
Whistleblowers Robert Isakson and William Baldwin are suing their former employer, Custer Battles, accusing company officials of defrauding the U.S. government of about $50 million while doing security work in Iraq.
Their attorney, Grayson, said that during the trial he will show the jury "dozens and dozens of fake invoices from sham companies" set up in the Cayman Islands by Custer Battles.
Grayson said one of the scams the company pulled was providing 16 trucks on lease to the U.S.-led Coalition Provisional Authority - vehicles that had to be "dragged into the military base because they did not function."
When the military protested that they didn't work, a company official responded that they had been asked to provide trucks, "not trucks that work," Grayson alleged in opening arguments.
As part of a contract to provide security at Baghdad's airport, the company took forklifts abandoned by Iraqi Airways, painted them to cover the airline's name, and then charged the coalition thousands of dollars on fake invoices, claiming it was leasing the equipment, the whistleblowers allege.
But Douglass - Custer Battles' attorney - said the evidence will show that "no false claims were submitted."
He said Battles, a West Point graduate and former CIA employee, and Custer, who served with the 101st Airborne Division, provided valuable services in Iraq.
He said his clients "are the victims of confusion" and misunderstandings about the contracts the company had, and some resentments among employees.
"This is not a case of war profiteering," agreed Barbara Van Gelder, attorney for a third Custer Battles official, Joseph Morris. "This is a simple case of payback and self-protection."
Van Gelder noted that one contract was for Custer Battles to provide housing, protection, food and other materials for three centers needed in the program to exchange Iraq's old dinars to a new currency system.
"We are not talking about running down to Home Depot," Van Gelder said.
"This was what Custer Battles was supposed to do," find trucks, generators and so on she said, adding that the company had to "scrounge to get these things" in a dangerous, war-torn country.
Under the law, individuals may 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.
- 174 War & Disaster Profiteers Campaign