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Custer Battles LLC cleared of fraud charges

2/14/2007

The first False Claims Act ("FCA") lawsuit to be litigated against a private contractor involving work performed in Iraq for the Coalition Provisional Authority ("CPA") was resolved today. In a 22-page Memorandum Opinion dated February 2, 2007, docketed today, United States District Court Judge T. S. Ellis ruled in favor of Scott Custer, Mike Battles, and the company they founded, Custer Battles LLC, dismissing allegations that Custer Battles committed fraud in connection with its contract with the CPA to provide security support services at the Baghdad International Airport. In making this ruling, Judge Ellis determined that "the undisputed facts manifestly demonstrate" that the fraud alleged had not been and could not be established. Previously, in an Opinion and Order dated August 16, 2006, Judge Ellis set aside a jury verdict against Custer Battles related to the other contract at issue in the case. Judge Ellis ruled as a matter of law that, despite testimony from twenty witnesses over twelve days, the evidence was insufficient to establish the fraud alleged, i.e., that Custer Battles submitted false claims and records to the United States in connection with that contract.

This case has attracted political and media attention because it provides a window into contracting between private companies and the CPA for work performed during Iraq reconstruction under former Ambassador Paul Bremer. In the past, the Custer Battles story has been invoked to illustrate alleged fraud and abuse by contractors in Iraq, incompetence by the CPA, and the challenges posed by the Iraq reconstruction effort. While today's decision vindicates Custer Battles' record of performance, it also underscores the difficulty of assigning responsibility for the largely failed effort to reconstruct Iraq after the fall of Saddam Hussein.

In response to the decision, Scott Custer stated, "We have always maintained that our company did its best to perform its contracts in Iraq under unimaginably difficult conditions. In fact, we consistently met or exceeded the terms of our contracts with the CPA. It was not until well after our contracts were completed that these allegations were brought against us by competitors. Obviously, we're relieved by today's decision, but it does not dispel the cloud that hangs over us or erase the two years of legal battles we've fought to clear our name."

David L. Douglass, counsel for Custer Battles stated, "The facts of this case really showed just how difficult it is for private contractors in Iraq given the fluid and dangerous circumstances under which they operated, the inexperience of the government personnel, and the lack of clear legal guidance."

Robert T. Rhoad, also counsel for Custer Battles added, "I've known Scott Custer for over 20 years. He and Mike Battles are both decorated Army veterans who have long histories of dedicated and honorable service to this country and I am proud to represent them. Even the suggestion that they would do what they've been accused of doing is ludicrous. Of course, it is one thing to proclaim and much another to prove. We are incredibly fortunate that Judge Ellis, unswayed by politics and publicity, took the time and effort to carefully analyze the law and undisputed facts to ultimately conclude that the fraud allegations related to Custer Battles' performance under the Baghdad International Airport contract were wholly lacking, legally and factually."