Custer Battles is Guilty, maybe not of fraud, but at least of treason

While not guilty of fiscally defrauding the US Government, a US private military company is guilty of defrauding the American project in Iraq to almost treasonist depths by contributing to the recruiting messages of our enemy: Americans don't care and are just here for the money.

A favorite and appropriate poster child of corruption in Iraqi Reconstruction -- the private military company Custer Battles -- has just had its $10 million damage verdict overturned. Before you go rioting (and looting) in the streets demanding “No Justice, No Peace”, the judge was, unfortunately, right. In the effort to reinforce the image of the Coalition of the Willing, the Bush Administration successfully firewalled war profiteers from accountability. This resulted not only in wasted and misdirected resources (time and money) but also further trashing of our image of the commited democracy-builder. Where are our priorities?

The Coalition Provisional Authority was never intended to be a part of or an agent of the US Government (USG) for a variety of reasons, including distancing policy from Congressional influence and oversight.  Despite funding by US tax dollars that flowed freely and without liability or concern for product (tangible or intangible) quality, creating CPA by CENTCOM was part of the plan to not be labeled “The Occupier”.

This was core to the rhetoric we began to believe, including why we did not need to uphold the Geneva Conventions requiring a guarantee security for the local population (i.e. preventing looting, enforcing normalcy / law, etc). The “CPA” by its name was The Coalition and not US. The reality is quite different, just as the Private Security Companies operating in Iraq are agents (explicit or implicit) of the USG and yet are seen as Agents of the US mission by locals and other non-US entities, the Administration, including L. Paul Bremer and General Tommy Franks, discounted any perception on the ground to the contrary.

Firedoglake has some good information and related links worth reading on, somewhat summarized by these comments:

For now, here’s the rundown as I understand it: Custer Battles bilked the Coalition Provisional Authority, funded by U.S. taxpayers through our government, for millions. (Ellis writes, "The contract at issue is between the CPA and Custer Battles…") It is quite clear that fraud did occur. Judge Ellis did not rule on that specifically, but it appears as though he is convinced Custer Battles committed acts of fraud.

In this ruling, the CPA is considered a transitional government independent from the U.S., though undoubtedly financed by American taxpayers. However, Custer Battles cannot be sued for defrauding the U.S. government because it was the now-defunct CPA that Custer Battles worked for and not the U.S. government itself. The U.S. money used by the CPA, it seems, is categorized as some kind of foreign aid to another country. Specifically in this instance, to the transitional government of Iraq, the CPA. Therefore, Custer Battles cannot be sued for defrauding the U.S. government because it was the CPA they bilked, which Ellis ruled there was insufficient evidence to suggest that that the CPA was a U.S.-entity.

From the court on the issue of denying the $10 million penalty:

The record establishes, without dispute, that only the $3 million advance, paid to Custer Battles by the CPA for work performed pursuant to the ICE contract, came from Seized Funds. The remaining funds for the ICE contract came from DFI Funds, which are Iraqi, not U.S. funds….

Specifically, defendants argued that there was no evidence of presentment to a U.S. government officer or employee because the CPA was an international entity, not an American entity, and because CPA personnel, even if U.S. officers or employees, were acting in their CPA capacities, not in their official U.S. capacities. In the end, summary judgment was denied without reaching the issue of whether the CPA was a U.S. entity.

The question of the status of the CPA is one of greater depth than just whether the CPA itself is an agent of the USG. Remember that for political reasons the CPA needed to be a “Coalition” effort to avoid the appearance, in the eyes of the White House and their media relations with the American public, of being an American administrative entity for Occupied Iraq (how long was the label occupier denied and avoided before reluctant acceding to reality?). The Coalition, which was rarely anything more substantive token participation by other countries (save at most the UK). If I recall, the third largest Coalition contributor, in terms of men, was exceeded by the contribution of Ohio through its National Guard units.

Consider the decision to obfuscate the ownership of problems can be found in many places in the Iraqi project. The lack of sufficient resources to conduct and secure peace and stability operations, despite numerous recommendations from within the military and nearly everywhere else, virtually required the enlistment of private security forces (or Private Security Companies, PSCs). This contingent quickly ballooned to 20,000 (+/-) armed contractors, hiding Coalition force and strategy gaps. This number is possibly as high as 140,000 today (inclusive of Iraqis, Westerners, and “Third Country Nationals”). Their relationship to the mission in Iraq is similar of the CPA’s: not part of the US Government but of the Coalition and the International Reconstruction Effort. Plausible deniability, an age old theory, plays well in the legal forums but in the domain of perception, the charade won’t hold. 

On a side note: it would be interesting to see a detailed comparison of the Marshall Plan with the contemporary language of Iraqi Reconstruction. However, in lieu of a detailed quantitative / academic study, T. Christian Muller of the LA Times touched on this point a bit recently, but some discussion Post-WWII re-education and loans of the Marshall Plan are missing.

Remember early on there was much talk about invigorating the Iraqi economy with narrow and selective readings of what had passed before in the 1940’s. Central to the MP, of course, was re-education along with an infusion of money through loans. What we saw in Iraq was far, far different.

How did the court determine CPA was not an American agency or similar? From the court paper:

Discerning the status of the CPA is not an easy task. Relators and the government argue that the CPA is not a U.S. agency or entity, but merely an “instrumentality of the United States.”14 In reaching this conclusion, the government observes that the CPA’s creation was first announced by the Commander of the U.S. Central Command, was staffed, in large part, by employees of the United States government, and was led by a CPA Administrator appointed by and subject to the President. Moreover, not only did the United States have substantial influence and control over the CPA, but the CPA received a substantial part of its operating budget (approximately $1 billion) from Congress. In fact, Congress even purported to appropriate funds to the CPA “in its capacity as an entity of the United States.” 118 Stat. at 1225. Thus, it is tempting to conclude that the CPA was merely an alter-ego, a tool, or an instrumentality of the United States.

…there is no dispute that the CPA was not established by Congress. Instead, as described in a letter to the United Nations, the CPA was an entity created by the United States, United Kingdom, and its Coalition partners “acting under existing command and control arrangements through the Commander of Coalition Forces.” Moreover, the United Nations recognized the CPA, not as an instrumentality of the United States, but as an entity through which the Coalition nations acted “as occupying powers under unified command.” UNSCR 1483. And while the substantial majority of the CPA staff was comprised of United States employees, a significant portion-13%-hailed from other Coalition partners. Thus, the CPA may also be described as an international body formed by the implicit, multilateral consent of its Coalition partners, which would not be subject to the specific laws of its members states, including the FCA. Given the fluid nature of the conflict in Iraq and the challenges of establishing a new government in a war zone, it is not surprising that the organization of the CPA appears at times to have been ad hoc and to have relied heavily on the resources of its largest contributing member. Thus, it would seem that, like NATO or any other international organization created by the multilateral consent of multiple member nations, whether by treaty or otherwise, the CPA is not an instrumentality of each of its members states, distinctly subject to the laws of all of its members, but a wholly distinct entity that exercises power through a structure agreed to by its member states and that is subject to the laws of war and to its own laws and regulations. In any event, at this point, it is unnecessary to reach and decide this issue.

Firedoglake asks a key question: “Under what jurisdiction could such a claim be filed then?”

Like private security companies, Custer Battles (a Private Military Company, but not a Private Security Company) seems to have escaped because of a lack of oversight (and generally failing to carry out its duties) by Congress and a similar shortfall in foresight (and failure to listen… an endemic problem of America public diplomacy) by the Executive Branch. Congress has failed monitor or demand spending and accountability from the US Treasury and actions of US Military Personnel. The Administration and its Departments have repeatedly failed to create, monitor, and enforce contracts to the satisfaction of real security and real performance.

The actions of Custer Battles did more than line the pockets of profiteers, but it caused and had the potential of causing far more damage to the project in Iraq. From limiting the effectiveness of our mission by wasting funds, distracting personnel in the pursuit of solutions already contracted for but not delivered, Custer Battles did more than evade $10 million, it reinforced the perception of a lack of commitment to Iraqi success by feeding the image of plunderers. Remember, media is global and if we stand for democracy and justice, shouldn’t we practice it?