| By many accounts, Custer Battles was a nightmare contractor in Iraq. The company's two principals, Mike Battles and Scott Custer, overcharged occupation authorities by millions of dollars, according to a complaint from two former employees. The firm double-billed for salaries and repainted the Iraqi Airways forklifts they found at Baghdad airport—which Custer Battles was contracted to secure—then leased them back to the U.S. government, the complaint says. In the fall of 2004, Deputy General Counsel Steven Shaw of the Air Force asked that the firm be banned from future U.S. contracts, saying Custer Battles had also "created sham companies, whereby [it] fraudulently increased profits by inflating its claimed costs." An Army inspector general, Col. Richard Ballard, concluded as early as November 2003 that the security outfit was incompetent and refused to obey Joint Task Force 7 orders: "What we saw horrified us," Ballard wrote to his superiors in an e-mail obtained by NEWSWEEK.
Yet when the two whistle-blowers sued Custer Battles on behalf of the U.S. government—under a U.S. law intended to punish war profiteering and fraud—the Bush administration declined to take part. "The government has not lifted a finger to get back the $50 million Custer Battles defrauded it of," says Alan Grayson, a lawyer for the two whistle-blowers, Pete Baldwin and Robert Isakson. In recent months the judge in the case, T. S. Ellis III of the U.S. District Court in Virginia, has twice invited the Justice Department to join the lawsuit without response. Even an administration ally, Sen. Charles Grassley, demanded to know in a Feb. 17 letter to Attorney General Alberto Gonzales why the government wasn't backing up the lawsuit. Because this is a "seminal" case—the first to be unsealed against an Iraq contractor—"billions of taxpayer dollars are at stake" based on the precedent it could set, the Iowa Republican said.
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