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Custer Battles, LLC was a defense contractor headquartered in Newport, Rhode Island, with offices in McLean, Virginia. The company now appears to be out of business. At one time the company offered services that include security services, litigation support, global risk consulting, training and business intelligence, but had no background or track record in offering any of these services.[1]

In June 2003, Custer Battles took its services to Iraq and became a minor contractor supporting the Coalition Provisional Authority and the U.S. government. In October 2004, the company was sued under the False Claims Act. As a result of this being the first lawsuit concerning contractors in Iraq, the company received significant attention throughout the media. In March 2006, a jury ruled against Custer Battles, but the verdict was set aside by a District Court judge. The case was appealed, and in April 2009, the Fourth Circuit reversed the district court judge.


Background

Custer Battles was founded in October 2001. The company was named after its founders, Scott Custer and Michael Battles. Custer is a former Army Ranger and defense consultant, while Battles is a former Army officer and CIA intelligence officer who ran unsuccessfully for the United States Congress in Rhode Island in 2002.

From 2001-2003, Custer Battles claims to have provided crisis management and assistance to humanitarian organizations working in high-risk conflict areas throughout the world, but they have been unable to document those contacts, and the IRS form 990 for Global Relief Solutions, the predecessor to Custer Battles, shows the company bringing in less than $150,000 a year in gross income.

In June 2003, Custer Battles was competitively awarded a contract to secure the Baghdad International Airport. The 12-month contract with the Coalition Provisional Authority was worth $16.8 million. The company continued to expand its business in Iraq, and became a minor subcontractor operating in the country.

The company continued to expand its operations in Iraq through 2003 and 2004 until fraud charges, supported by internal Department of Defense investigations, resulted in the company being barred from future contract considerations by the Department of Defense. In early 2005 Custer Battles ceased operations in Iraq.

Allegations of fraud in Iraq

CPA case

In October 2004, a qui tam [2] lawsuit by Robert Isakson and William Baldwin was unsealed against Custer Battles. The suit, brought under the False Claims Act, alleged massive overbilling on two contracts with the Coalition Provisional Authority in Iraq in 2003. [3]

In July 2005, Judge T.S. Ellis III ruled that Custer Battles' contracts with the CPA were prosecutable under the False Claims Act, denying Custer Battles' lawyers claims that the company had no contract with the US government. The Judge also ruled that money paid for by the Development Funds for Iraq (DFI) could not be prosecuted under the False Claims Act, as the US government was not involved in administering these funds.

In March 2006, a jury found Custer Battles liable for the submission of 30 false claims, each one of which is subject to a US$5,000 -11,000 civil fine. However, in August 2006, Judge Ellis, of the Federal District Court in Alexandria, Va overturned the verdict on a technical grounds. Judge Ellis's ruling was, in turn, reversed by the Fourth Circuit in April 2009, in effect reinstating the jury verdict. The Fourth Circuit also ruled that Judge Ellis had erred in limiting the scope of the damages on the dinar exchange contract, and gave the plaintiffs the option of seeking a new trial for additional damages. [4]

Baghdad Airport case

Another trial, with the same set of whistleblowers, concerned a separate $16.8 million contract awarded to Custer Battles to provide security at Baghdad International Airport. As this contract was paid for by seized Iraqi funds, Judge Ellis ruled that the entire contract was susceptible to the False Claims Act, and not just part of it in the previous case. The basic allegations were that Custer Battles had failed to provide adequate security staffing under its Firm-Fixed Price contract of $16.8 million.

False Claims case

In 2009 the 4th Circuit Court of Appeals ruled that Custer Battles must face a lawsuit for fraudulently billing the U.S. government for its "risk-management" services in Iraq. The federal appeals court affirmed summary judgment for Custer Battles on the Baghdad airport contract, but reinstated the claims relating to the dinar-exchange contract and reversed the order limiting them to $30 million in damages.

The case will focus on what Judge Niemeyer calls an "astonishing spreadsheet" accidentally left by Michael Battles. Custer Battles was hired on a Cost-plus contract, meaning it would be reimbursed for its actual expenses plus 25 percent. The spreadsheet lists the actual cost and amount billed for many of its services. For example, Custer Battles billed the coalition authority $400,000 for life-support generators that cost $74,000 and invoiced $12,000 for laundry services that cost them $4,000.[5]

Custer Battles files conspiracy lawsuit

In April 2005, Custer Battles filed conspiracy and breach of contract lawsuits against Robert Isakson and William Baldwin, the same individuals who had previously accused Custer Battles of submitting false claims. The lawsuit also included Isakson and Baldwin's companies, DRC Inc and American Iraqi Solutions Group, both of Alabama. According to court documents filed in the U.S. District Court for the Eastern District of Virginia, Mr. Isakson breached his contract with Custer Battles when he brought his 12-year old son to Iraq with $9,000 in cash strapped to his chest.[6]

Custer Battles also alleged that Isakson and Baldwin conspired to start a new company, American Iraqi Solutions Group (AISG) and stole Custer Battles clients. This case was eventually moved from the US District court in Virginia to the US District Court for the Southern District of Alabama. Before going to trial, a settlement was reached and Custer Battles dismissed the charges. The amount of money paid by DRC, Isakson and Baldwin has been kept confidential.

Allegations of unrestrained force

In February 2005, Lisa Myers of MSNBC News reported a story concerning allegations of unrestrained force on the part of Custer Battles security operators in Iraq. In the story, four former Custer Battles employees are quoted as witnessing an incident where a Custer Battles vehicle rolled over a civilian vehicle and injured the occupants inside. The employees also detail an incident where Kurdish guards shot indiscriminately towards Iraqi civilians. According to one of the employees, Bill Craun, "what we saw the American public wouldn't stand for."

In response to the allegations, Ms. Myers interviewed the country director and convoy leader for Custer Battles. The convoy leader, Shawn Greene, adamantly denied that any of these incidents occurred, and detailed the exact incident in which he ordered the Custer Battles truck to hit and forcibly move a civilian vehicle. According to Greene, while his vehicle did damage the civilian car, there were no injuries. Paul Christopher, the Custer Battles country director, provided NBC News access to the company's mission logs, which detailed the event of hitting a civilian vehicle, the subsequent investigation with photos, and the documentation from the driver and witnesses that no one was injured. Both Greene and Christopher did detail accounts of actual combat situation of Custer Battles personnel where their vehicles were attacked by insurgents and Custer Battles personnel were forced to defend themselves through the use of deadly force. [7]

Jacqueline Battles Arrested Trying to Secret Funds

In September 2006, Jacqueline Battles, the wife of Michael Battles, was arrested in Germany after a German bank informed authorities about "suspicious transactions" on her accounts. German investigators seized about US$1 million from her accounts. Jacqueline Battles is suspected of moving several million U.S. dollars into overseas accounts to an attempt to hide her husband's money and court judgements. [8]

Website

Articles

Television reports

Documents

References

  1. ^ Custer Battles
  2. ^ http://democrats.senate.gov/dpc/hearings/hearing40/isakson.pdf
  3. ^ NPR: Contractor Alleges Firm Defrauded Iraq Occupation Authority
  4. ^ http://www.washingtonpost.com/wp-dyn/content/article/2009/04/10/AR2009041003448.html?hpid=topnews
  5. ^ Iraq Mercenary Group to Face False Claims Action Courthouse News Service April 14, 2009
  6. ^ CorpWatch : U.S.A.: Custer Battles Fights Back
  7. ^ U.S. contractors in Iraq allege abuses - Lisa Myers & the NBC News Investigative Unit - MSNBC.com
  8. ^ http://www.washingtonpost.com/wp-dyn/content/article/2006/08/04/AR2006080400978.html
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