[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.

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