Agility attempts to vault fraud charges
By Pratap Chatterjee
WASHINGTON - Agility, a Kuwait-based multi-billion-dollar logistics company
spawned by the US invasion of Iraq, is scheduled be arraigned on February 8 on
criminal charges of overbilling US taxpayers for food supply contracts in the
Iraq war zone that were worth more than US$8.5 billion.
If the lawsuit is successful, the company could owe the US government as much
as $1 billion.
Agility, originally known as Public Warehousing Corporation (PWC), boasts that
it once supplied one million meals a day to US soldiers and contractors in the
Middle East. The company's Mercedes trucks hauled delicacies ranging from ice
cream to
lobster tails to feed soldiers living on military bases scattered throughout
Iraq.
Today, it has contracts to provide food to the US Agency for International
Development (USAID) in Djibouti in the Horn of Africa and - until about a month
ago - was supposed to ramp up food delivery to the troops newly posted in
southern Afghanistan.
In a lawsuit filed on November 18, 2005, Kamal Mustafa Al-Sultan accuses
Agility of cheating him of a share of profits from the lucrative contract
because he refused to go along with alleged corruption. A former business
partner of PWC/Agility, Sultan is a cousin of the company founder and CEO,
Tarek Abdul Aziz Sultan Al-Essa.
After conducting a grand jury investigation, the US Department of Justice (DoJ)
joined Kamal Sultan and filed criminal charges against PWC/Agility on November
9, 2009, immediately boosting the original lawsuit's chances of success.
"We will not tolerate fraudulent practices from those tasked with providing the
highest quality support to the men and women who serve in our armed forces,"
said Tony West, assistant attorney general for the District Court for the
Northern District of Georgia, in a press release.
"As this case illustrates, the Department of Justice will investigate and
pursue allegations of fraud against contractors and subcontractors, whether
they are foreign or domestic," he said.
Joint venture leads to falling out
PWC was part of the Sultan family's business empire, which is grounded in
high-end supermarkets and mega-stores across the Middle East. Starting in the
late 1990s, Tarek Sultan teamed up with ex-US soldiers to bid on lucrative US
government projects.
PWC's first major contract, initially advertised in May 2002, was for a US
Defence supply center called Prime Vendor Subsistence to supply food to US
military bases in the Middle East in anticipation of the invasion of Iraq.
(Halliburton/KBR cooks and serves the food, but it does not supply it.)
At the time, Tarek Sultan had no experience in food supply, nor did he have a
personal track record with the US military - a requirement for bidding on the
contract. However, KMSCO, run by his cousin, Kamal Sultan, had
multi-million-dollar US military contracts dating back to 1996 for "life
support, food supplements, and ice".
In a January 2007 interview with IPS, Kamal Sultan says he agreed to create a
joint venture with Tarek in June 2002 to provide PWC with the qualifications to
bid.
In May 2003, PWC won the initial Prime Vendor contract. Soon after that, Kamal
Sultan alleges, PWC officials asked him to take part in a scheme to defraud the
military. When Kamal refused, Tarek Sultan dropped KMSCO from the contract,
thus depriving Kamal Sultan of his expected 30% profit share.
Over the next four years, the two men waged a series of legal battles in
Kuwaiti courts, with each side alternately gaining the legal upper hand.
Supporters and critics
The company has powerful supporters in the US military. Its brochures quote
General David Petraeus, now the head of US Central Command: "Agility has
performed a miracle across Iraq."
Some see less a miracle and more profiteering. Rory Mayberry, a Halliburton/KBR
food production manager for a dining facility at Camp Anaconda, testified
before Congress in June 2005: "For example, tomatoes cost about $5 a box
locally, but the PWC price was $13 to $15 per box. The local price for a
15-pound box of bacon was $12, compared to PWC's price of $80 per box. ... PWC
charged a lot for transportation because they brought the food from
Philadelphia."
Connections with the Kuwaiti government was a factor in Agility's operations,
according Saad Salem Al-Qattan, a Kuwaiti businessman who owns Al-Rakeb Co
Petroleum Electricity & Construction Services (RAPICO), which is involved
in a land dispute with PWC/Agility. "They get options, privileges, that no one
else can get, because they used to be part of the [Kuwaiti] government," he
said.
Asked about the US military contracts, he shrugs: "They [PWC/Agility] are
greedy, and the [US] military doesn't know where to go."
Several lawsuits have been filed against the company. Beth Hanken, an Iowa
businesswoman, sued PWC/Agility when she lost contracts to supply pork to the
military. The case was dismissed. The only lawsuit that has stuck so far is
Kamal Sultan's 2005 charge against PWC and its top officials.
After the court unsealed the records in November 2009 when the DoJ joined Kamal
Sultan's lawsuit, PWC/Agility posted a statement on its website: "Kamal Mustafa
Sultan, owner of Kamal Mustafa Sultan Company ... has a long history of strong
animosity towards PWC, its officers and its employees."
PWC/Agility added that Kamal has filed more than 40 court actions against PWC,
its executives and its employees in Kuwaiti courts, but that "all of the court
actions have been unsuccessful".
But whether or not Agility wins in court, it is already losing at the cash
register. Immediately after the DoJ joined the case, the Pentagon barred
PWC/Agility and its subsidiaries from Federal contracts by placing it on the
"Excluded Parties List System."
DynCorp, a business partner, followed suit in late December by dropping
PWC/Agility from a major US military logistics contract in southern
Afghanistan.
In November, PWC/Agility said it "is confident that once these allegations are
examined in court, they will be found to be without merit".
Since then, PWC/Agility has attempted to reach a settlement with the DoJ by
offering to pay a $600 million fine, according to reports in the Kuwaiti press.
"No agreement has been reached so far and there is no guarantee these
negotiations will lead to a solution," the company stated at the end of
December.
A criminal arraignment of PWC/Agility scheduled for early January has been
postponed five times so far, the latest delay coming at the eleventh hour on
January 29. US Magistrate Christopher Hagy agreed to a new date of February 8,
although he expressed exasperation.
"There's a point at which this stops," Hagy said.
Unless these settlement discussions bear fruit, the arraignment could lead to a
trial in which spectators can expect a fascinating view into the extent of
corruption engendered by the US occupations of Afghanistan and Iraq.
Pratap Chatterjee is a senior editor at CorpWatch. This article was
produced in partnership with CorpWatch.
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