By Griff Witte
Washington Post Staff Writer
Saturday, August 5, 2006
A German prosecutor is investigating the possibility that an American contractor who was ordered to pay the government millions of dollars for cheating on a contract in Iraq may be using his wife to funnel money through foreign bank accounts, according to a letter from the prosecutor.
A federal jury ruled in March that Custer Battles LLC, which operated out of Fairfax, defrauded the U.S.-led Coalition Provisional Authority of $3 million during work to furnish Iraq with a new currency in the first months after the invasion. The ruling was the first civil fraud verdict arising from the war effort.
The company's founders, Army veterans Mike Battles and Scott Custer, were ordered by the jury to pay more than $10 million in damages. Custer Battles has challenged the verdict, arguing that the CPA was not a U.S. entity and that federal anti-fraud law does not apply. A judge has yet to rule on the challenge, and the money has not been paid.
In a letter dated July 27, German prosecutor David Kirkpatrick revealed he had opened a criminal money-laundering investigation into the transfer of at least $2 million from Battles to his wife, Jacqueline Battles. Kirkpatrick said Jacqueline Battles, who lives in Germany, had opened "several bank accounts in the last few weeks using her maiden name Vihernik."
"The way the money was transferred shows that she is informed about the suspicious background of those transactions," Kirkpatrick wrote in a letter to Alan Grayson, the attorney who represented the plaintiffs who had sued Custer Battles for fraud. "Obviously she was trying to channel the money through accounts in a number of countries for the purpose of concealing the origin of those amounts."
Kirkpatrick wrote that he had tracked down about $1 million and was searching for the rest.
The existence of the letter was reported yesterday by the Associated Press. A copy was obtained by The Washington Post.
Grayson represented two former workers in a lawsuit against Custer Battles under federal anti-fraud laws, alleging that the company used phony Cayman Islands companies to defraud the provisional authority, which governed Iraq in the first year after the invasion. The case is one of several to emerge from the $21 billion U.S. reconstruction effort that involve allegations of fraud.
Grayson said yesterday he believes Battles is attempting to avoid having to pay the judgment against him.
"It's clear from this that Battles is trying to hide the very money that is about to be taken from him, and that's illegal," Grayson said.
Custer Battles' attorney, Robert T. Rhoad, rejected that claim. "I don't believe there's any merit to that whatsoever," he said.
Rhoad said that the prosecutor's investigation was based on "a misunderstanding" and that Custer Battles does not owe any money to the government, pending the judge's ruling.