Wife of banned U.S. contractor held on suspicion of laundering

BERLIN (AP) — The wife of an American military contractor accused of cheating U.S. taxpayers has been arrested on suspicion of laundering her husband’s purportedly ill-gotten gains after investigators seized about $1 million from her accounts, a prosecutor said yesterday.

Jacqueline Battles, a German citizen, was detained after a German bank informed authorities about “suspicious transactions” on her accounts two months ago, prosecutor David Kirkpatrick said.

German investigators seized about $1 million in suspect funds, Mr. Kirkpatrick, a prosecutor in Darmstadt, said in a telephone interview.

“She is in investigative custody,” Mr. Kirkpatrick said. Mrs. Battles, who lives near Darmstadt, has not been formally charged, and Mr. Kirkpatrick wouldn’t say where she was being held or when she was taken into custody.

In March, a U.S. jury ordered Mrs. Battles’ husband, contractor Mike Battles, and business partner Scott Custer to pay $10 million for swindling the U.S. government in connection with Iraq rebuilding projects involving their Middletown, R.I.-based company, Custer Battles LLC. The firm also had a primary office in McLean, Va.

According to the Providence Journal, Mr. Battles ran unsuccessfully in the 2002 Republican primary for the right to challenge Rep. Patrick J. Kennedy, Rhode Island Democrat, for his seat. Mr. Battles reportedly is a U.S. Military Academy graduate who once worked for the CIA. Mr. Custer is a former Army Ranger.

The firm reportedly won $100 million in Iraq contracts before being banned in 2004. There also are accusations that Custer Battles then set up sham companies to continue receiving Iraq contracts.

The March ruling was the first civil fraud verdict arising from the Iraq war. The suit had claimed that Custer Battles overcharged the Coalition Provisional Authority, which ran Iraq after the 2003 invasion, by as much as $50 million.

However, a federal judge overturned a substantial portion of the verdict on a technicality in July, saying any fraud was against the CPA in Iraq rather than the U.S. government, even though American taxpayers ultimately footed the bill.

One of the two whistleblowers who won the March verdict, Robert Isakson, is a plaintiff in a second civil lawsuit that says two former Pentagon officials schemed with Mr. Custer and Mr. Battles to form sham companies that sold illegal weapons on Iraq’s black market, where they could be bought by insurgents, the Associated Press reported in July.

According to a letter obtained by AP in August, Mrs. Battles is suspected of moving at least $2 million into overseas accounts to hide “the origin” of her husband’s money.

Mr. Kirkpatrick did not comment directly on the letter, which carried his name as the sender and was addressed to an American attorney for the two whistleblowers who said Custer Battles set up sham companies and submitted phony invoices for reconstruction work.

The letter said Mrs. Battles had opened several bank accounts under her maiden name of Vihernik.

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