Company Charged in $8B Troop Food Fraud
(CBS/ AP) A Kuwaiti company has been charged with conspiring to defraud the U.S. in connection with multibillion-dollar contracts to feed American troops in Iraq, Kuwait and Jordan.
Federal prosecutors said Monday that Public Warehousing Co. made false statements and submitted false claims to manipulate prices and overcharge for food for troops.
The company is registered in Kuwait and has received more than $8.5 billion in food supply contracts.
“The largest shareholder of its parent company – named Khalid Sultan – has been linked to the terrorist organization Revival of the Islamic Heritage Society known as RIHS; he also acts as the leader of the Islamic Salaf Alliance, the political arm of RIHS. RIHS has been designated by US Treasury as a terrorist organization,” CBS News’ Investigative Team reports.
Read CBS’ Investigative Team’s 2007 report on food fraud allegations (excerpt below)
Acting U.S. Attorney Gentry Shelnutt says the fraud investigation is ongoing.
“This indictment is the result of a multi-year probe into abuses in vendor contracts in the Middle East involving the illegal inflation of prices in contracts to feed our troops,” said Criminal Chief F. Gentry Shelnutt, the current Acting U.S. Attorney for the case.
The case was filed in federal court in Atlanta, and the company is scheduled for a first court appearance on Friday. A phone listing for the company could not immediately be found. (Link to original)
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Affiliations & Connections:
Public Warehousing Co. (PWC), is part of Agility Logistics and the following list of names may be familiar to some of you:
U.S. Army Lieutenant General Paul Cerjan (Ret.)
21 July 2008
Paul Cerjan Joins Agility Defense & Government Services
U.S. Army Lieutenant General Joseph Cosumano (Ret.)
2 September 2008
Agility DGS Names Cosumano To Head Taos Industries
Gulf Catering Company for General Trade and Contracting (GCC SERVICES)
Taos Industries, Inc.
Threat Management Group
Impeva Labs
According to Rory Mayberry’s testimony ”Then KBR switched to a new supplier, PWC. PWC prices were almost triple from what Tamimi’s were. For example, tomatoes cost $5 a box locally, but PWC prices was $13 to $15 per box.” “When I had the military check some of the food shipments, they would turn the food items away. But there wasn’t any marking of the record, so KBR just sent the food to another base for use. The problem with expired food was actually worsened with the switch to PWC because it took longer for the food items to get to the base as they were shipped from the U.S. to a warehouse in Kuwait.”
Taos Industries, Inc., a wholly owned subsidiary of Agility Defense & Government Services, is a partner in the DCP Team, a Joint Venture with DynCorp International and CH2M Hill. DCP Team is a contract holder of this U.S. Army contract, which provides global, multi-functional contingency logistics support to the U.S. Army and other U.S. Government agencies as required. As a strategic partner in the DynCorp International team, Agility DGS and Taos Industries will provide supply chain and logistics capabilities to rapidly support the logistical requirements of deployed forces.
Do we have reason to hope there will be more indictments to follow?
–Forseti
I wonder if the investigation includes Najlaa International Catering Services? Supposedly Perry Dalby, Paul Cerjan’s righthand man when they were both at KBR, is Najlaa’s Director of ME Ops. Hmmmm, maybe these are some of the former Army officials they are looking at?
Mr. Dalby joined KBR at least 1 year after KBR awarded the food (“subsistence”) prime vendor contract to PWC.
The preceding note from “Curious” is inaccurate to the extent that it attempts to implicate Mr. Dalby or suggest he may have had involvement with any impropriety.
Paul Cerjan (Ret. LG) was KBR’s LOGCAP III Program Manager at a time when GCC received many KBR subcontracts for DFACs. This is significant only to the extent that Mr. Cerjan later worked for Agility and Agility later acquired GCC. This alone suggests no impropriety by Mr. Cerjan, Agility or KBR.
Perry Dalby (Ret. MG) began working for KBR near the end of Mr. Cerjan’s tenure with KBR. Their tenures with KBR overlapped for a period of less than 2 months. While both worked for KBR in Baghdad, Mr. Dalby worked in the IZ (Green Zone) and Mr. Cerjan worked at KBR’s office in South Victory. Mr. Cerjan previously relocated the bulk of senior management from the IZ to South Victory prior to Mr. Dalby’s arrival. Mr. Dalby later relocated to South Victory after Mr. Cerjan departed and was replaced by Steve Arnold. I believe Mr. Cerjan and Mr. Dalby had no prior working relationship or any other relationship preceding KBR. It is unreasonable to suggest that Mr. Dalby was Mr. Cerjan’s righthand man.
I worked closely with Mr. Dalby while at KBR and I was very impressed by him. Unlike almost all of the other senior leadership within KBR, Mr. Dalby was approachable and considerate. He was devoted to maintaining the highest ethics. Most importantly, he did not seem to pursue his own agenda or support past friends or former colleagues like most of the other leadership. His guidance was always simple and predictable: do the right thing and do it openly. He was widely respected by his subordinates and colleagues for his unwavering commitment to ethics.
I’ve worked for KBR in Iraq for a number of years. I enjoy the work and I also understand the validity of much of the criticism aimed at the company and its leadership.
I am compelled to reply to the anonymous contribution of someone who appears to be misinformed of the facts. I agree with most readers of this website that there are, and have been, some poor decisions made by poor decision-makers at KBR that have negatively affected some aspects of the war and in many cases the soldiers themselves. There have been many bad seeds among KBR’s leadership. However, it’s also important to recognize that there have been some individuals who have made significant positive contributions to the war effort, including Mr. Dalby.
I don’t believe Najlaa International Catering Services performed under any cost-plus contracts for the Army or under cost-plus subcontracts for KBR.
First of all, thank you well written comment. I don’t know Mr. Dalby and didn’t work with him or for him at KBR. He’s fortunate to have such an committed ally “retained on his team”.
I now am compelled to respond to your anonymous contribution and clarify a couple of your misconceptions. First and foremost, KBR did not award the Prime Vendor contract to PWC, the DoD did. If you had actually worked for KBR at the level you claim, you would know this.
Secondly, Najlaa had did in fact have contracts with KBR. Feel free to update yourself HERE
In response to this comment….I can not speak for Mr. Dalby personally….be you seemed to nail the rest of KBR management right on the head. Well said
US-v-PWC-Indictment
As for the comment:
It is very common that a person with Mr Dalby’s senior position leaves it up to his underlings to take care of the details and get the money goals met. Middle level management usually takes the fall. Who will it be here? Who should?
Who do YOU think should take the fall?
The point should not be to drive PWC/Agility a contractor who has performed and can perform in many ways for the benefit of our US troops out of the game. ( Agility after all has won highest ratings on delivery and reliable service amidst the most difficult wartime circumstances) We just don t know when and where they will be needed.
The point should not be just to have them pay and be punished end of story, nor should it be to just have a group of people there to take a nasty fall.
What should intelligently happen beyond a fine is for the companies who paid to be suppliers, and all Prime Vendors- domestic and overseas ( including and beyond Agility) to have a light shone once and for all. We should know who Prime Vendor Distributors have as suppliers and why. Allowance agreements need to be disclosed. Signed off by both the suppliers and distributors.
Fortune 500 employees and their boardmembers don’t like to commit systemic fraud.
Other Prime Vendors like Sysco and US Foodservice have just had more privacy, and they are more experienced on how to charge entry to be a national house supplier with an allowance program. It amounts to the same padded cost, as what is outlined in the above linked to indictment for PWC Agility. Their allowances are just more institutional, which does not make it right.
The ugly problem is sadly not simple as one offending distributor, it is a lot higher cost and broader than this indictment.
The DoD also has some responsibility here for AGAIN not overseeing the contractors.