February 15, 2005 by s.z.

War, Huh!  What is it Good For?

For today's lesson, let's review the Washington Post's "Lawmakers Told About Contract Abuse in Iraq" (hey, it's not abuse, since I've heard that many contracts undergo much the same thing as part of fraternity hazing):

A government contractor defrauded the Coalition Provisional Authority of tens of millions of dollars in Iraq reconstruction funds and the Bush administration has done little to try to recover the money, an attorney for two whistle-blowers told Democratic lawmakers yesterday.

The lawyer, Alan Grayson, represents two former employees who charged in a federal lawsuit that the security firm Custer Battles LLC of Fairfax was paid approximately $15 million to provide security for civilian flights at Baghdad International Airport, even though no planes flew during the contract term. Grayson said the firm received $100 million in contracts in 2003 and 2004, despite a thin track record and evidence the government was not getting its money's worth.

Yes, reportedly there were few, if any, governmental flights coming into the Baghdad airport during the contract period, so Custer Battles reassigned most of its security personnel to other jobs -- but continued to bill the Coalition Provisional Authority (CPA) at the original contract price, submitting monthly invoices which falsely claimed that all 130 security personnel were there at the airport, doing what they were contracted to do.

You can see the lawsuit here. The airport scam is just one of the allegations. 

Others include:

While working on a $21 million contract to safeguard Iraq's new currency as it was being distributed, Custer Battles set up shell companies through which to bill items needed for the contract so they could "inflate costs and create a mark-up in excess of that normally permitted under a cost-plus contract."

Custer Battles (CB) arranged for the forklifts used for moving Iraqi currency to be shown as being leased through their shell companies (at a cost of thousands of dollars per month per forklift).  At least one of the forklifts (and perhaps as many as eight of them) had actually been "liberated" from Iraqi Airways.  

When it first set up shop at the airport, CB ordered its employees to confiscate the forklifts (which Iraqi Airways had been forced to abandon during the war), and paint over the Iraqi Airways insignia.  The shell companies then made up lease documents so that the CGA could be billed for CB's use of the equipment which CB had appropriated.

And, one of my favorite stories:

A firm called Washington Group International had an Army Corps of Engineers contract to work on the reconstruction of the power lines in northern Iraq.  Custer Battles got the $12 subcontract to provide security for the project -- and reportedly the bidding process involved little or no competition.  CB subcontracted the job to a Kurdish company, Falcon Security, for $4 million, giving CB a profit of $8 million. 

Here are more details, from an A.P. story from August 2004:

Mr. Custer says that from the outset he viewed the job as extremely high risk -- he expected at least 12 guards would die -- and priced the job accordingly. Three months of protection, he told the engineering company, would cost $12 million. Washington Group accepted and ended up extending the contract to six months for $20 million.

When the bills arrived at the Pentagon, government auditors threw a fit, according to correspondence between the parties. Most of the guards hired by Custer Battles came from a Kurdish subcontractor who paid its employees less than $200 a month. Pentagon auditors contend that more than two-thirds of the bill is unwarranted. [...]

Mr. Custer says his company did nothing wrong. Three vehicles were destroyed in various attacks; no guards died. "I built a lot of profit into that contract because there was so much risk," he says. "I wouldn't do it any differently now."

Um, yeah.  The local Iraqis who actually did the work could have been killed while toiling for $200 a month, and so Custer Battles deserves $8 million for assuming all that risk.

Anyway, back to the Wash Post story:

Yesterday's appearances were organized by the Democratic Policy Committee. Its chairman, Sen. Byron L. Dorgan (D-N.D.), said the witnesses were called in response to a recent report by the inspector general for Iraqi reconstruction that concluded that the governing authority had inadequate controls over $8.8 billion in Iraqi funds it was supposed to oversee. Former administrator L. Paul Bremer has denied those allegations. Dorgan said Democrats had attempted to get Republican colleagues to hold hearings on the issue but were unsuccessful.

"There is a massive amount of waste, fraud and abuse going on here, and nobody seems to care very much," Dorgan said.

Hey, it's only tens of millions of dollars in tax-payer funds -- why should anybody care about that? 

The Pentagon has suspended Custer Battles from receiving new contracts, but Grayson said the Justice Department declined last fall to help pursue the case, now pending in federal court in Alexandria.

Lawyers representing Custer Battles have denied the charges and have argued that the case should be dismissed because the money that was allegedly stolen belonged to Iraqis, not to Americans. Grayson said that argument has the potential to turn Iraq during the authority's administration of the country into "a fraud-free zone," with contractors not subject to Iraqi or American law.

What a great scheme!  Since the PGA was run by Tommy Franks and Paul Bremer, it means that Iraqi law doesn't apply.  And since the misused funds were Iraqi oil revenue (the revenue that was supposed to pay for the country's reconstruction), then American law doesn't apply either.  Meanwhile, American taxpayers have to foot the bill for the even more reconstruction costs -- and Michael Battles and his company get rich through fraud, and the White House and the Republicans don't seem to care.  Gee, I wonder why that might be?

Michael Battles and Scott K. Custer, both former U.S. Special Operations soldiers, founded the company in 2002. Battles ran unsuccessfully as the Republican candidate for Congress in Rhode Island that year.

After an interview with Custer in January 2004, agents from the Pentagon inspector general's office wrote, "Battles is very active in the Republican Party and speaks to individuals he knows at the White House almost daily, according to Custer." A White House spokesman had no immediate comment.

No, of course not.  Why would the White House want to comment on corruption, incompetence, cronyism, and war profiteering in relation to the glorious Iraq campaign (the Iraqis just had an election, you know -- so it's all been worth while, and there's no need to look too hard at the things that happened in the past).

Anyway, here's more on the history of Custer Battles, a true American success story:

The founders, Scott Custer and Michael Battles, are both former Army Rangers now in their mid-30s.

Battles, a West Point grad, also reportedly worked as a CIA officer for three years.  In 2002 he ran for a congressional seat in Rhode Island -- he was the Republican pick to run against incumbent Democrat Congressman Patrick Kennedy.  Battles, described by the RI press as a "businessman" and a "political newcomer," was endorsed by the state GOP -- his platform was based on stressing his military background while criticizing Kennedy's voting record on small business and trade issues.  However, a former Navy SEAL named David Rogers also decided to run as a Republican.  Rogers won the Republican primary, went up against Kennedy, and lost. 
Let's go back to that A.P story for what happened next:

In mid-2003, Custer Battles was trying to carve out a niche in the security-services industry with a small office in a Washington suburb and some contracts to teach states how to protect drinking-water supplies from terrorist attacks. Money was so tight that Messrs. Custer and Battles put the company's June 2003 payroll on their credit cards and borrowed $10,000 from a friend to fund an exploratory trip to Iraq.

In May 2003, Battles arrived in Baghdad. "He had $450 in cash and vague plans to open a hotel for foreign businessmen, an idea he soon scrapped."  While hanging out in the Republican Palace, passing out his card and schmoozing members of the CPA, he heard about the airport security contract and persuaded an official to put him on a list of bidders.  Two days later, CP won the contract, beating out the real security companies with actual experience by saying it could do the job cheaper and have security forces in place quicker (in just two weeks). 

But no bank would loan Custer Battles the money needed to buy equipment and take care of other startup costs -- so the CPA lent them $2 million in $100 bills, which Battles took to the bank in a duffle bag.  (Per Franklin Willis, a former CPA official, CB got $2 million in cash from the CPA on at least two occasions.)  Then Custer Battles managed to hire enough Nepalese guards and American ex-soldiers to fulfill their contract, and they made the airport their own personal turf.  And the scam was on!

Sure, then came complaints, lawsuits, accusations, and other unpleasantness, but, per that Aug. A.P. story, the company now employs over 700 people, and expects to garner $200 million in revenue this year. Not bad for a company that had to put the payroll on personal credit cards less than two years ago!

Per their website, the Custer Battles motto is "Transforming risk into opportunity."  Or, in other words, "Profiting from war."  To quote the Simpsons, "What a brave corporate logo!" ("I accept the challenge of Mr. Sparkle.")

We don't know the identity of those individuals in the White House whom Michael Battles is supposed to talk to almost every day, but we are sure that his reported Republican ties have nothing to do with why the Gonzales-headed DOJ doesn't want to prosecute anybody for fraud, and why the Republicans in congress don't seem to want to help recover any of the stolen loot.  No, we think it can all be explained by the administration's reluctance to admit that anything has ever gone wrong in George Bush's war.  

2:43:27 AM