U.S.A.: Custer Battles Fights Back
Last summer, reports in national publications, such as the Wall Street Journal and the New York Times, told the story of a plucky upstart company, Custer Battles LLC, successfully snaring contracts in Iraq during the frenzied days after Saddam Hussein's ouster.
Then along came DRC Inc.
These days, Custer Battles is on the ropes, the company and its reputation shattered by accusations first aired in lawsuits against it by DRC, the Mobile-based disaster services firm headed by globe-trotting former FBI agent Robert "Bob" Isakson.
DRC has accused Custer Battles' officials of kidnapping him and his 14-year old son at gunpoint and, more importantly to government officials, of using offshore shell companies and other means to bilk the Coalition Provisional Authority out of tens of millions of dollars.
The companies' split over a contract providing security and other services at Baghdad International Airport has in recent months evolved into a national story with implications for federal investigations of other companies, such as Halliburton, that were paid with coalition funds and not directly by the U.S. government.
The Coalition Provisional Authority was the American-led government created to govern Iraq after Hussein's ouster and until that role could be transferred to the Iraqis, as it was last June. Much of the money the CPA used to pay contractors, including Custer Battles, had been seized from the toppled Iraqi government.
On April 1, Custer Battles, recently described in a nationally syndicated column as "the poster child for corruption in the occupation of Iraq," went on the offensive.
The company filed a counterclaim -- sort of a lawsuit within a lawsuit -- accusing DRC of the sorts of activities, such as fraudulent billing, leveled by Isakson.
The Virginia-based Custer Battles also presented a different version of teenager Bobby Isakson's arrival to and exodus from Baghdad. As the company describes it in the countersuit, the elder Isakson showed terrible judgment in bringing his son to Baghdad and repeatedly refused offers by Custer Battles to fly the boy out of the country.
"Custer Battles never held Isakson, his son or any DRC representative at gunpoint and never confined or restricted them in any way," according to the counterclaim.
On Monday, Isakson compared Custer Battles' court filing to a person charged with murder who "goes after the district attorney."
"They're desperate, and they'll do anything, try anything, lie about anything, try to throw any mud they can possibly throw," said Isakson. "We tried to do right, saw them trying to commit a crime, told them not to do it, they attacked each one of us, and when they kept on doing the crime, we reported it."
Among other things, the company that's named after its principals -- ex-CIA officer Mike Battles and former Army Ranger Scott Custer -- accused Isakson and DRC of:
Billing Custer Battles for millions of dollars for work that wasn't done or that Custer Battles, not DRC, had already paid for.
Vastly overstating DRC's financial and personnel resources and its ability to deliver the services Custer Battles hired it to provide, leading to delays, shoddy work and problems for Custer Battles in fulfilling its contract with the coalition.
Using its position to steal "confidential Custer Battles pricing data and business proposals to help pilfer Custer Battles' clients."
Recruiting Nepalese Ghurka soldiers to Baghdad, confiscating their return plane tickets to Nepal, failing to pay them, then billing Custer Battles for their services. Custer Battles paid the Ghurkas after they came to company officials complaining that DRC hadn't paid them, the company contends.
When asked about each allegation, Isakson gave the same response: "It's a lie."
A few things aren't in dispute.
After American-led forces seized the Baghdad airport, the CPA sought proposals for a contract to provide security and other services at the airport compound. Custer Battles won the contract with a pitch that it could do the job quicker than larger, better-known contractors.
Around June 2003, the company was introduced to Isakson, whose company had provided similar services after the first Gulf War. Some sort of arrangement was reached -- it's really not clear from the court filings -- for DRC to assist Custer Battles with the contract.
Almost immediately, the two companies began bickering.
According to the April 1 filing, Custer Battles was considering firing DRC for failure to provide the services promised by Isakson when Isakson made "the reckless decision" to have his son "transported alone by vehicle from Amman, Jordan, to Baghdad with $9,000 cash strapped to his chest."
When company officials discovered this "inexplicable action and confronted Isakson," the Mobile businessman "pleaded with Custer Battles to allow his child to stay in Iraq."
Isakson, according to the lawsuit, told Custer Battles officials that "he had no other place for his child."
Custer Battles "feared for the safety of the minor child and offered to fly Bobby out of Iraq on the Custer Battles chartered airplane," but Robert Isakson refused, the lawsuit claims.
The company contends that it gave Isakson a July 28 deadline for getting his son out of Iraq, ordered him not to let Bobby Isakson leave the relatively safe confines of the airport complex and continued to offer its plane to fly the teenager out of Iraq.
On July 29, Isakson e-mailed Scott Custer to apologize for missing the deadline and praised Custer for being "very honorable" in allowing Bobby Isakson to remain at the camp, according, according to an e-mail that's part of the court record in the case.
Isakson notified Custer Battles that he'd taken Bobby to the Baghdad home of a DRC subcontractor and that he and his son planned to leave Iraq the following day.
DRC's lawsuit against Custer Battles claims that Robert Isakson, his brother Bud Isakson and Bobby Isakson, were kidnapped at gunpoint by Custer Battles employees, escorted to the front gate of the airport and had their security badges "forcibly removed."
According to their version of events, the Isaksons were left to fend for themselves in a "war-torn and extremely dangerous area without sufficient transportation, funds or provisions for their safety."
The three managed to escape safely, arriving in Amman, Jordan, at 3 a.m., according to the DRC claim.
On Monday, Isakson blasted Custer Battles for attacking his decisions as a father.
"At the time I had what was perceived to be terminal illness, and I had no idea how long I was going to live," he said, adding that given his condition, he wanted to spend as much time as possible with his son.
Isakson's son has been traveling with him since he was 8 and is far more mature than his age would suggest, the father said. Custer Battles sought to make an issue of Bobby Isakson's presence "to get rid of me, so they could perpetrate their criminal activities," he said.
Plaintiffs including DRC, Isakson and his son initially made the kidnapping allegations in a lawsuit filed last summer in Baldwin County Circuit Court. That case was moved to federal court in Mobile and later dismissed for jurisdictional reasons. In December, the plaintiffs re-filed the suit in a federal court in Virginia.
DRC claims it's owed about $25 million in actual damages, including $904,455.10 for the kidnapping portion of the case. The plaintiffs are also seeking more than $50 million in punitive damages.
In its countersuit, Custer Battles notes that the $25 million in damages sought by DRC amounts to $9 million more than the total value (about $16 million) of the airport contract. Isakson pledged to handle DRC's portion of the work -- including building camp facilities for workers and providing food, laundry and other life-support services -- for $1.8 million, according to the court filing.
After the two companies parted ways, DRC "submitted false invoices totaling over $6 million," or triple Isakson's initial quote for DRC's services, according to the lawsuit.
In a separate action that has received widespread national attention, DRC, Isakson and a business associate, former Fairhope resident Pete Baldwin, have filed a whistleblowers' lawsuit on behalf of the federal government, accusing Custer Battles of defrauding the coalition out of more than $50 million.
Initially, the U.S. Justice Department declined to participate in the case. Reportedly, the Bush administration argued that the federal government didn't have jurisdiction over matters involving the coalition. Because whistleblower cases rarely succeed without the participation of the government, DRC's case appeared doomed.
An April 4 report in Newsweek focused on the case and the roles played by Isakson and DRC and quoted DRC's lawyer. According to that report, the Justice Department's apparent position that it had no authority over coalition expenditures incurred the wrath of government officials participating in investigations of other contractors, including Halliburton, which were paid with coalition funds.
Critics, including Republican U.S. Sen. Charles Grassley of Iowa, said that if it was indeed the Justice Department's position that it had no authority over coalition spending, then billions of tax dollars could go unaccounted for.
Earlier this month, though, the Justice Department opted to participate in the case against Custer Battles. The government's brief stated that contractors paid by the Coalition Provisional Authority can be sued by the U.S. government.
When cases brought under the False Claims Act lead to recovery by the government, the plaintiff-whistleblowers -- Isakson and DRC in this case -- can receive up to 30 percent of the money.
- 174 War & Disaster Profiteers Campaign