Public Warehousing in talks with U.S. to settle fraud case

The Kuwaiti firm indicted last month for allegedly overcharging the Army on a multibillion-dollar contract to supply food to U.S. troops in Iraq, Kuwait and Jordan has announced it is negotiating with the Justice Department to settle the case.

Public Warehousing Co. made the announcement in a statement posted Monday on the Kuwait Stock Exchange Web site and added: "No deal has been struck so far and there are no guarantees that the negotiations will result in a settlement."

Last month, Public Warehousing -- which is in the process of changing its name to Agility -- was indicted in Atlanta for allegedly submitting inflated bills and false claims for food and other products supplied to the U.S. military over the past six years in contracts worth $8.5 billion. The company has denied the charges.

Public Warehousing has been prohibited from bidding on other government contracts while the charges are pending. The price of the company's stock on the Kuwait Stock Exchange has dropped 50 percent from its high this summer and dropped again slightly after the announcement on settlement negotiations. Kuwaiti newspapers reported that a settlement of $500 million to $600 million is being discussed.

Spokesmen for the company and federal prosecutors in Atlanta did not respond to requests for comment Tuesday.

Since the allegations emerged in 2005, Public Warehousing's chief executive, Tarek Abbulaziz Sultan al-Essa, has been changing some of the company's top leadership, recruiting former senior American officials.

In June 2006 he hired retired Army Maj. Gen. Dan Mongeon as president of his Defense & Government Services group, which held the U.S. military food and other logistics contracts. Mongeon had been the top operations officer at the Defense Logistics Agency until his retirement in 2005. Public Warehousing officials say Mongeon was not involved in the decision by the agency to renew the company's contract in July of that year.

In July 2008, Mongeon hired retired Army Lt. Gen. Paul Cerjan to oversee the food contract for the troops in Iraq and Kuwait.

In September 2008, the company hired retired Army Lt. Gen. Joseph M. Cosumano Jr. as president of its Taos Industries subsidiary. In July, the company announced that former U.S. ambassador John D. Negroponte had joined the board of directors of its Defense and Government Services group.

Negroponte, now vice chairman of McLarty Associates in Washington, said then in a statement that he could "provide useful insights and perspectives to the leadership of Agility as it guides the company to new levels of achievement."