Kuwait-based military contractor wins court delay

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By Walter Pincus
Washington Post Staff Writer
Saturday, November 21, 2009

A Kuwaiti-owned company indicted in Atlanta this week for alleged fraud in connection with a multibillion-dollar contract to supply food and other products to coalition troops in Iraq, Kuwait and Jordan won a court delay Friday, indicating that it may be planning to fight the case, whether in Georgia or elsewhere in the United States.

Public Warehousing Co. KSC, which is also known as Agility, has hired the U.S. law firms Jones Day in Georgia and Vincent Elkins in Washington "solely to contest jurisdictional issues," according to a company resolution signed by chairman and managing director Tarek Abbul Aziz Sultan Al-Essa. In a statement, the company said the court delay until Dec. 1 was granted "to examine whether the government followed the law when providing notice of the charges."

Public Warehousing, which has grown from a small Kuwaiti-based warehouse and delivery firm with revenue of $154 million in 2002 to a worldwide firm operating in 120 countries with revenue of $6.3 billion in 2008, has denied the federal fraud charges.

Despite the indictment, the company will continue to hold the coalition food-delivery contract for Iraq, Jordan and Kuwait through December 2010. However, Dennis J. Gauci, a spokesman for the Defense Logistics Agency, which has general oversight of the contract, said that the indictment prevents Public Warehousing or any of its associated companies from bidding on new contracts while the charges are pending.

According to a government listing, 28 subsidiaries are affected, many of which hold other U.S. government contracts worth an estimated total of $5 billion. In June 2005, for example, one was awarded a three-year, multibillion-dollar contract -- known as Heavy Lift VI -- to transport military personnel, supplies and equipment among destinations within 600 miles of Camp Arifjan, the main coalition logistics base in Kuwait -- a pact that has since been extended through June 2010.

The current head of a group within Public Warehousing known as Agility Defense & Government Services is retired Maj. Gen. Daniel G. Mongeon, who joined the company in January 2006 after retiring the previous October with 34 years of Army service. His last post was as director of logistics for the Defense Logistics Agency, working out of Fort Belvoir. In July 2005, Public Warehousing won the bid for a second multibillion-dollar food contract, but a spokesman for the company said Mongeon had no role in the award.

In June, when the food contract option was extended for an additional 18 months despite the then-ongoing federal investigation, Mongeon was quoted as saying: "We welcome news of the extension. It's another indication that we've been able to maintain exceptional performance under the most challenging conditions."

Contracting out of the wars in Iraq and Afghanistan, involving hundreds of billions of dollars being poured into countries with histories of corruption, has led to more than 100 criminal investigations and dozens of convictions. The Public Warehousing case is one of many that centers on Camp Arifjan, the base for convoys of contractor trucks going in and out of Iraq.

Former Army Maj. John L. Cockerham is awaiting sentencing after pleading guilty of taking bribes of $9.6 million while he worked at Camp Arifjan beginning in 2004. Army Lt. Col. Marshall Gutierrez, another officer stationed at the base, committed suicide in 2006 after allegations he was involved in corruption.

Public Warehousing had never supplied foodstuffs before it put together a bid with another Kuwaiti firm that was already supplying food to American troops. That partnership, which involved Kuwaiti first cousins, split up in 2003 after the first contract was won. Two year later, the departing partner became the whistle blower whose accusations led to the federal investigation.

Speaking of the indictment Tuesday, Sen. Claire McCaskill (D-Mo.), who leads a special Senate panel on contracting, said: "We can't continue on this path. We need to reform our system so that the government doesn't keep getting taken for a ride. Ending monopoly contracts like this one is a good place to start."

Acting U.S. Attorney F. Gentry Shelnutt called Monday's indictment "only the first step." In an unusual addition to the press release about the case, Shelnutt asked that anyone with information that may be useful to the investigation, but not limited to Public Warehousing, should call the Defense Department hotline.


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