Kuwaiti firm accused of overcharging U.S. Army

16 Nov 2009 20:01:57 GMT
Source: Reuters
* $8.5 billion contracts fed U.S. troops in Middle East

* PWC now called Agility

(Adds quotes, details, byline)

By Matthew Bigg

ATLANTA, Nov 16 (Reuters) - A U.S. grand jury indicted a Kuwaiti company on Monday on charges of fraud and conspiracy alleging that it overcharged the U.S. Army on $8.5 billion worth of contracts to provide food to soldiers in Iraq, Kuwait and Jordan.

The grand jury in Atlanta indicted logistics firm Public Warehousing Company, K.S.C. (PWC) on multiple charges of fraud and conspiracy in connection with contracts issued by the U.S. Department of Defense between 2003 and 2005.

The charges stem from a probe into abuses in vendor contracts in the Middle East that involve the illegal inflation of prices, said Gentry Shelnutt, acting U.S. Attorney for the Northern District of Georgia.

"The indictment alleges PWC submitted false information and manipulated prices to overcharge for food," Shelnutt said.

"This indictment is only the first step. Our investigation of entities and persons who have defrauded the United States and our military is ongoing."

If convicted of violations of the False Claims Act, PWC faces probation and a fine of up to twice the gain it realized or twice the loss to the United States, Shelnutt said.

Overcharging amounted to $60 million over a 41-month period, according to Patrick Crosby, spokesman at the U.S. Attorney's office in Atlanta.

PWC Logistics, now called Agility , is a global provider of "integrated logistics solutions" listed on the Kuwait stock exchange, according to Agility's website.

The six counts charge PWC with crimes against the United States including: conspiracy to defraud, committing major fraud, making false statements, making false, fictitious or fraudulent claims and wire fraud.

The alleged fraud was committed through PWC's manipulation of its vendor contracts, which established its unit price using a formula of a manufacturer's invoice price plus a distribution fee to include the company's expenses and profit.

PWC overbilled the Army through scams including failing to purchase cheaper or discounted food, inflating its distribution fees and submitting fraudulent claims, a statement said.

The lawsuit followed an initial whistle-blower suit filed by Kamal Mustafa Al-Sultan, the owner of a company that partnered with PWC to submit a proposal for the contracts, according to Charles Miller, a Justice Department spokesman. (Editing by Chris Wilson)