- The Washington Times - Friday, April 10, 2009

RICHMOND, VA. (AP) - A federal appeals court revived a civil fraud case Friday against a military contractor accused of cheating the U.S. government on a contract to replace old Iraqi currency that featured images of Saddam Hussein.

A three-judge panel of the 4th U.S. Circuit Court of Appeals unanimously ruled that a lower court erred in tossing out the claim by two whistleblowers that Custer Battles violated the federal False Claims Act.

U.S. District Judge T.S. Ellis III had in 2006 dismissed a jury’s $10 million judgment against the company. The judge ruled that any fraud was perpetrated against the U.S.-led Coalition Provisional Authority, which governed Iraq from May 2003 to June 2004, not the government itself.

But the appeals court said it didn’t matter that the U.S. government was just one of several financial contributors to the coalition _ the Fair Claims Act still applies, although any damages would be limited to those sustained by the U.S. The court said whistleblowers Robert J. Isakson and William D. Baldwin can seek a new trial.

Custer Battles received a $3 million advance, paid with a U.S. Treasury check, for the project to change Iraq’s currency, the dinar. Under the contract, Custer Battles was to be paid actual expenses plus 25 percent.

However, the court said a company spreadsheet showed Custer Battles overcharged. For example, the contractor provided two flatbed trucks at a cost of $18,000 but charged the coalition $80,000. Two generators cost the company $74,000, but it billed the coalition $400,000.

“I don’t know what more we could possibly ask for,” said U.S. Rep. Alan Grayson, a Florida Democrat who argued the case on behalf of the whistleblowers in December, one month before joining Congress. “The appeals court actually invited us to go after more.”

Victor A. Kubli, another lawyer still representing the former Custer Battles employees, said no decision had been made about seeking another trial. However, he said the ruling establishes an important legal precedent.

“This opinion demonstrates that when you have U.S. taxpayer money funding these overseas coalitions that are becoming more and more prevalent, the False Claims Act still applies to protect the taxpayers. That’s what was lacking before today. That’s huge,” Kubli said.

Barbara Van Gelder, attorney for Custer Battles, said she had not finished reading the opinion and could not comment.

In a related matter, the appeals court upheld the lower court’s dismissal of a fraud claim stemming from Custer Battles’ contract to provide security at the Baghdad airport. Isakson and Baldwin alleged that the company did not provide the promised number of employees, but the appeals court agreed with Ellis that the firm provided only a staffing estimate, not a promise.

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