Custer Battles: ex-special forces special business structures

From the Seattle Times

Attorneys for a U.S.-based security company accused of setting up sham companies in a multimillion-dollar fraud scheme in Iraq are contending that the company cannot be sued under a key federal anti-corruption law because the allegedly stolen money belonged to Iraqis, not Americans.

The potentially precedent-setting case could undercut fraud claims involving billions of dollars in reconstruction contracts issued by the U.S.-led Coalition Provisional Authority (CPA) and paid for with about $20 billion from the Development Fund for Iraq.

Arguments broke out in federal court Friday over two fundamental questions: whether the CPA, which ruled occupied Iraq until June 28, can be considered a U.S. agency, and whether fraud involving Iraqi money can be subject to suits under the False Claims Act, considered one of the federal government's most important tools against fraud

Custer Battles was one of the first U.S. contractors on the ground following the fall of Saddam in April 2003. The company's two founders, Scott Custer and Mike Battles, were former special-forces soldiers who opened for business with almost no money and little experience.

Nonetheless, the company won at least four contracts in Iraq worth millions of dollars, including a deal to provide security at Baghdad's international airport and another to help Iraqis swap their old currency for new dinars minted by the CPA.

Custer Battles has denied any fraud was committed, attributing the allegations to disgruntled former employees who have since emerged as competitors to Custer Battles.