Crony capitalism and the occupation of Iraq

Custer Battles could be the name of the scandal that finally sinks the Bush Administration.

What qualifications did a company called Custer Battles have to get several no-bid security contracts worth more than $100 million a year from the Coalition Provisional Authority, including the contract to provide security for Baghdad Airport? The company was brand new, and neither of its principals had any actual security experience, though one was a fomer Army Ranger and defense consultant.

Why, the best qualification of all: the other principal was a Republican contributor and a former Republican congressional candidate (who is also a Fox News commentator). The name, which sounds like a sick joke, is actually the last names of the two principals.

Contracts in hand, Custer Battles seems to have proceeded to steal everything that wasn’t nailed down and to pry up most of what was. With a few shell companies to do phony invoicing, it manged to inflate $3 million in costs on a cost-plus contract to $9 million. One estimate of the total fraud reaches $50 million.

And it’s quite possible that, because the CPA technically wasn’t part of the United States Government (an arrangement designed precisely to get around procurement rules), the False Claims Act doesn’t apply, and the thieving war profiteers will get away with it. At least that seems to be the reason why the Justice Department declined to join in the whistleblower lawsuit (technically, a qui tam action) despite voluminous documentation of a most egregious set of frauds.

Not just frauds, either. One of the whistleblowers is a former FBI agent named Robert Isakson. Christian Miller rerports in the LA Times :

The false claims complaint said that after Isakson complained about Custer Battles practices, he and his 14-year-old son were held at gunpoint by company employees. The employees then kicked Isakson and his son off the airport base, leaving him to take a taxi through war-torn Fallouja to return to Jordan.

The Custer Battles affair shows the same pattern of putting politics before victory that led to the staffing of the CPA with a staff of people chosen for political reliability (having posted resumes on the Heritage Foundation website) rather than knowledge of the business they ere going to handle, knowledge of Iraq, or knowledge of Arabic.

The firm has now been suspended from getting any new contract awards, but it gets to keep billing on its current contracts. No word about whether Mike Battles will keep reporting for Fox News.

Is it any wonder the reconstruction of Iraq has gone so badly? And the worse it goes, the harder it is for us to attract Iraqi support. The Bush/Rove commitment to “strategery” above all has, in this case, almost certainly led to the unnecessary deaths of American soldiers.

Who approved the contract to Custer Battles? And why? What disciplinary action has been taken? What is being done to make sure this doesn’t happen again?

Jeanne d’Arc has a good summary. Google reports 81 news stories today, including one by Seth Borenstein for Knight-Ridder and another by Matt Kelly for AP.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

2 thoughts on “Crony capitalism and the occupation of Iraq”

  1. Neo-Cronyism

    "I actually voted for the $87 billion before I voted against it.''
    Here's yet another reason why. More here. Oh, who cares anymore, just give it all away. (via Atrios)

  2. Crony Capitalism? Surely not!

    Mark A. R. Kleiman: Crony capitalism and the occupation of Iraq And people wonder why I'm so incredibly bitter and outraged all the time about the CPA. The upshot: the security company responsible for BIAP defrauded US taxpayers of millions…

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