Custer’s Last Rip-Off

From Holden:

The Custer Battles contracting scandal exemplifies the corruption that permeated the Coalition Provisional Authority in Iraq.

Take one ethically-challeneged former Republican congressional candidate (and Fox News contributor), throw in a no-bid cost-plus security contract and a Justice Department willing to look the other way and this is what you get:

A politically connected start-up firm, awarded a no-bid contract to provide security for Baghdad’s airport, defrauded U.S. taxpayers of tens of millions of dollars, two top former workers charge in a lawsuit unsealed Friday.

The Bush administration decided not to join the whistleblowers’ civil suit alleging fraud against the company, run by a former Republican congressional candidate. The whistleblowers’ attorney said a Justice Department lawyer told him the reason was that the alleged victim was the U.S.-financed and led Coalition Provisional Authority, not the U.S. government.

Justice Department spokesman Mark Corallo said the department didn’t comment on why it declined to join such suits.

It’s unusual for the Justice Department to decline to join a suit that has a load of documents and when criminal prosecution is likely, said Patrick Burns, a spokesman for Taxpayers Against Fraud, a group that monitors citizen suits.

On Sept. 30, the Defense Department put the firm, Custer Battles LLC of Fairfax, Va., on a list that bans it from getting federal contracts, citing “adequate evidence of the commission of fraud, antitrust violations, embezzlement, theft, forgery, bribery, false statements or any other offenses indicating a lack of business integrity.”


The whistleblowers – Robert J. Isakson, a former FBI agent who investigated white-collar crime and was managing director for a Custer Battles partner, and W.D. “Pete” Baldwin, Custer Battles’ former in-country manager – charged that Custer Battles set up four shell companies in the Cayman Islands, Beirut, Lebanon and Cyprus to help inflate bills that were passed on to taxpayers.

“It’s a crying shame for somebody to go into fraud against the United States in the middle of a war,” Isakson told Knight Ridder on Friday.

Experts in contracting said the firm had little business and few employees until it got the Iraq contract in 2003, then it exploded into more than $100 million a year in revenues. Its founders are Scott Custer, a former Army Ranger and defense consultant, and former CIA officer Michael Battles, who ran for Congress from Rhode Island in 2002 as a Republican.

The Federal Election Commission fined Battles for misrepresenting campaign contributions [Battles got into the security business after losing a Republican primary for the Rhode Island U.S. House seat held by Democrat Patrick Kennedy. A Federal Election Commission audit of Battles’ campaign found several violations of campaign financing laws, including the taking of more than the $1,000 limit from some individuals and failing to report its finances properly.]. He’s a Fox News Channel commentator and is writing a book called “Blood in the Streets: Seizing Opportunity in Crises,” according to the company.

“This is corruption at its worst, perpetrated by Bush cronies and protected by the Bush administration,” charged Isakson’s attorney, Alan Grayson of Orlando, Fla.


Isakson, at the time the managing director for Custer Battles’ partner DRC Inc., helped Custer Battles set up operations in Iraq. When he told the company that a cost-plus contract wouldn’t bring much profit in a war zone because such contracts generally are capped at around 5 percent, he said, the firm’s officials told him they planned to form shell companies and buy or lease products from them to Custer Battles at higher prices.

Isakson said he was isolated after he objected. In July 2003, when he’d finished setting up the company’s camp at the airport, he said, two men armed with submachine guns, whom he’s identified as top company officials, detained him, his 13-year-old-son and his brother. He said they took his money, identification and gun, and left them on their own to get out of war-torn Iraq.