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Contract or accused of fraud in Iraq
Using Nepalese Ghurkas hired from abroad to fill out its limited staff, the company quickly expanded its presence, winning a contract in August 2003 to supply logistical support for a massive currency exchange in which Iraqis turned in their old dinars for new currency.
That contract committed the Coalition Provisional Authority to paying for all the company's costs for setting up centers where the exchanges would take place, plus a 25 percent markup for overhead and profit, according to the Air Force memo. Custer Battles then created a series of "sham companies" registered in foreign countries, the memo said. The companies were then used to create false invoices making it appear they were leasing trucks and other equipment back to Custer Battles. The scheme had the effect of inflating the 25 percent markup allowed under the contract, the memo said.
In October, company representatives accidentally left a spreadsheet in a meeting that was later discovered by CPA employees. The spreadsheet showed that the currency-exchange operation had cost the company $3,738,592, but the CPA was billed $9,801,550, a markup of 162 percent.
SpokesmanReview.com August 13, 2004
...through street smarts and canny use of their military experience, the two New Englanders have become a rarity in Iraq: a U.S. business success story amid the country's haphazard reconstruction. Custer Battles now employs around 700 people and is expanding beyond Iraq's war zone, with plans to get into shrimp farming and home loans. It expects to garner revenue of $200 million next year.