[Congressional Record Volume 150, Number 138 (Tuesday, December 7, 2004)]
[Senate]
[Pages S11871-S11872]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
WHISTLEBLOWER: FIRM DEFRAUDED IRAQ OCCUPATION AUTHORITY
Mr. DORGAN. Mr. President, the largest area of deficiency for the
Congress in the last few years has been the failure to have oversight
hearings on issues that demand oversight hearings. I have held some
hearings as chairman of the Democratic Policy Committee, in cases where
members of other committees have asked for oversight hearings and they
have been denied. This has been particularly true, by the way, when it
comes to Halliburton.
Let me give an example of why oversight hearings are critical. This
comes from a report recently on National Public Radio. I will read this
because it describes why this Congress must begin exercising its
oversight responsibility. This is about waste, fraud, abuse, and the
American taxpayers being cheated.
Let me read some of it:
Custer-Battles was a young company founded by former Army
Rangers Scott Custer and Michael Battles who came to Iraq on
borrowed money. An August Wall Street Journal article said
that he (Mr. Battles) only had $450 when he convinced an
official to put Custer-Battles [his new company he formed] on
a list of bidders at an airport security contract.
Mr. President, I ask unanimous consent for 5 additional minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DORGAN. An August Wall Street Journal article said Mr. Michael
Battles, a former Army Ranger, showed up in the country of Iraq with
$450. He and his partner, former Army Ranger Scott Custer, convinced an
official to put Custer-Battles, a new company, on a list of bidders for
an airport security contract. They promised to get the job done fast,
and they won the contract, which included two upfront cash advances of
$2 million each.
Then there was a fellow, a former FBI agent, whose name is Isakson
who said 2 weeks into this job, by this two-person company that showed
up with no money but got $2 million of advanced funding for this
contract at the airport--Isakson, a former FBI agent, said something
went wrong. ``They approached me to participate in a scheme to defraud
the government.'' Isakson said it involved bidding for cost plus
contracts which guarantee payment for a contractor's actual cost plus
an agreed to profit margin.
This is what Isakson said:
They would take and open a company in Lebanon and buy
materials through the Lebanese company, which they owned,
then the Lebanese company would sell it to their American
company [Custer-Battles] at a highly inflated rate and then
they would charge their profit on top of the highly inflated
rate. In other words, they would make a [big] profit plus
another profit.
Isakson said he refused to go along, and he warned company officials
that such a plan would put them in jail. Again, this is an ex-FBI
agent. He said he could not go along with this. It will put you in
jail.
The next day at the airport, Isakson claims, Custer-Battles security
guards cornered him in a hallway at gunpoint. His brother and his 14-
year-old son were there as well.
Isakson said:
They said you're terminated and you're under arrest and
don't move or I'll shoot you.
Isakson said the guard took their weapons and ID badges and
eventually turned them out of the airport compound, where they made the
dangerous journey from Baghdad to the Jordanian border. He has filed a
lawsuit against Custer-Battles over the ordeal, and he is also a party
to a $50 million Federal lawsuit filed in Virginia under the False
Claims Act.
The other whistleblower in this case is a Pete Baldwin, a former
country manager for Custer-Battles in Iraq who now runs another firm
there. Baldwin describes a web of false billing practices designed to
inflate costs and boost company profits. He cites a deal to provide
forklifts on a security detail.
Now, this is what Baldwin says:
They confiscated old Iraqi airways green and white
forklifts and transported them out of the airport facility
which Custer-Battles had control over and painted them blue,
then sold them back to the [U.S.] government on a lease.
He says:
This is a blatant example where something was actually
acquired free and sold back to the government [after they
were repainted blue].
So Baldwin took his suspicions to Government investigators and quit
over the company's billing practices. Now Baldwin claims his life has
been threatened because of his actions.
The Pentagon has suspended Custer-Battles from receiving further
military contracts and sources, according to NPR, say a Federal
criminal investigation is ongoing. However, a civil probe ended in
October when the U.S. Justice Department declined to join in the
whistleblower case.
Here is the key, and it is an interesting piece of information: A
spokesman says the Bush administration has made a policy decision that
cheating the Coalition Provision Authority in Iraq is, for the most
part, not cheating the U.S. Government. Let me say that again. This is
quoting Mr. Gracing:
The reason they gave to us is that the Bush administration
has made a policy decision that cheating the Coalition
Provision Authority in Iraq or basically the military, and
for the most part the U.S. military, is not the same as
cheating the U.S. government.
The fact is, the Coalition Provisional Authority was us. It was our
money, our resources, our people. So here we have a company that takes
forklift trucks from an airport property, moves them someplace to a
warehouse, paints them blue, sells them back to the Coalition
Provisional Authority, which pays for them with U.S. taxpayer funds,
and our U.S. Justice Department says: That's all right. We'll close our
eyes while you cheat us because the Coalition Provisional Authority is
not really the U.S. Government. Are they nuts? Don't they care whether
we are being cheated?
These are the kinds of things that literally beg for oversight
hearings. Yet this Congress is dead silent on these issues. I said I
have held oversight hearings about Iraq with respect to Halliburton.
The minute you talk about Halliburton, somebody raises the Vice
President. I did not talk about the Vice President in those hearings,
but I talked about Halliburton and about
[[Page S11872]]
cheating. This is about Halliburton. It is not about anybody else.
When a company says they are feeding 42,000 soldiers and being paid
for it by the U.S. Government and it ends up they are only feeding
14,000 soldiers a day, and 28,000 meals are being paid for that are not
being fed, it seems to me there ought to be aggressive oversight
hearings to figure out what is going on, who is cheating the
Government. Yet there is dead silence.
I come from a really small town, about 300 people. We have one small
little cafe right in the middle of Main Street. My guess is, if
somebody got a check for 4 meals that were never served, they would
sure know that, and the same goes for 14 meals, or 40 meals. It would
appropriately be a big deal in my hometown. But 28,000 meals that are
billed but were not delivered to U.S. troops? In my little town, they
would call that cheating and fraud. Yet there is dead silence with
respect to the oversight responsibility we ought to have as a Congress
to find out what is happening, why, and who is responsible.
Mr. President, I will have more to say about this as well, and we
intend to continue to hold oversight hearings as well in the Democratic
Policy Committee.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Wyoming.
Mr. THOMAS. Mr. President, we are in morning business, as I
understand it.
The PRESIDING OFFICER. Yes, with Senators permitted to speak for up
to 10 minutes each.
Mr. THOMAS. I thank the Chair.
____________________