The NewStandard ceased publishing on April 27, 2007.

U.S. Partly Relents in Case Against Mercenary Firm Accused of Fraud

by Chris Shumway

Apr. 5, 2005 – After refusing on several occasions to participate in a lawsuit against an American mercenary company accused of defrauding the United States in Iraq, and after privately questioning whether the suit was even valid, the US Justice Department has decided that the case against the company should proceed through the federal courts. The decision potentially clears the way for additional fraud claims against contractors in Iraq to go forward.

The case in question involves a lawsuit filed last year by two whistleblowers using the federal False Claims Act against Custer Battles, a private, US-based paramilitary firm hired by the former Coalition Provisional Authority (CPA) to perform security and logistical work in Iraq, as reported more fully last Friday by The NewStandard.

A brief filed by the Justice Department late Friday argued: "To the extent contractors fraudulently frustrated the United States in the fulfillment of its rights or responsibilities as an occupying power, the United States should be able to use its laws, including the False Claims Act, to redress and deter that kind of conduct."

Friday’s brief marks the first time the Bush administration has acknowledged that the False Claims Act -- a federal law that allows citizens to sue for fraud on behalf of the federal government -- can be used against US contractors doing business in Iraq. The brief came at almost literally the last minute, as the judge hearing the case had given the administration until Friday to have a say on the matter. But the Justice Department declined to join the case as a co-claimant, leaving the individual plaintiffs to press the case on behalf of the US government and the American people.

Richard Sauber, an attorney for the company who last month rhetorically bet a Newsweek reporter $50 that the government would "not show up," Friday told the Washington Post he found the brief "disappointing."

"We don't believe the Justice Department's ruling was consistent with the language and spirit of the [False Claims Act]," Sauber explained. "And we have every hope that the court will agree with us."

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The NewStandard ceased publishing on April 27, 2007.


Chris Shumway is a contributing journalist.

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