The Wall Street Journal: Fraude de la comida en Irak

U.S. Rebuffed Food-Fraud Case

By GLENN R. SIMPSON October 22, 2007; Page A6
The Justice Department received allegations in June 2006 of illegal dealings between a major army contractor in Kuwait and a U.S. food producer but ultimately declined to support the case.
The previously sealed civil lawsuit, seen by The Wall Street Journal, alleges that Public Warehousing Co. of Kuwait received kickbacks from Richmond Wholesale Meat Co. "in exchange for retaining Richmond and allowing Richmond to charge higher prices than other potential subcontractors."

SUPPLY CHAIN

• The Decision: The Justice Department in February declined to support a case alleging fraud by a U.S. food producer and Kuwait-based supplier to the U.S. Army.

• The Context: The rejection came a month after Justice issued grand jury subpoenas in a criminal investigation based on similar allegations.

The Justice Department's civil division declined to support the lawsuit this February, a month after Justice issued subpoenas in a criminal investigation of Public Warehousing based on similar allegations about its dealings with other U.S. food companies.

The lawsuit, filed in federal court in Philadelphia by an Iowa businesswoman, alleged collusion "to overcharge the U.S. government by millions of dollars."

Alan Grayson, lawyer for Iowa pork trader Beth Hanken and her firm Midwest Ventures Inc., said Justice told him it turned down the case for insufficient evidence.
Mr. Grayson said the Justice Department's civil division has turned down at least 13 civil False Claims Act cases involving Iraq War contracting fraud.

The Justice Department said it had declined to support some cases involving Iraq contracting fraud, but didn't say how many.

"The department is currently conducting a number of investigations into allegations of fraud and potential civil False Claims Act cases stemming from the work of government contractors in Iraq and the Middle East," spokesman Charles Miller said in a written statement. "The department takes such allegations seriously and is dedicating substantial resources to investigating these cases thoroughly and aggressively."

The Justice Department declined to address the details of Ms. Hanken's case. "We cannot provide any further comment on any ongoing government investigation," Mr. Miller said.
The case isn't on the electronic public-court docket. A federal judge ordered it to be unsealed if Justice declined to take the case.

Under the Civil-War era False Claims Act, U.S. citizens can file cases, known as qui tam suits, to recover money stolen from the U.S. government. The Justice Department then has the option of joining the case, and any settlement is shared among the plaintiffs, with the bulk going to the government.

Public Warehousing "has never been served with a qui tam complaint and, until we are served, we must assume that any complaint that has been filed remains under court seal," the firm said. "Therefore it would be inappropriate and a violation of the law for PWC to comment."

The company issued a statement saying reports last week on the federal criminal probe of its pricing practices were "inaccurate" and contained "misinformation," because the government helps set and approve all of its prices. The company confirmed it is under investigation for fraud.
A top official at Richmond Wholesale hasn't responded to messages seeking comment. No one at the company could be reached yesterday.

The official at Justice responsible for deciding whether to pursue False Claims Act cases has until recently been Peter Keisler, a Bush appointee who is acting attorney general and a nominee for a seat on the U.S. Court of Appeals for the District of Columbia.

Mr. Grayson, a Democrat who ran unsuccessfully for Congress last year, alleges that Mr. Keisler has turned down numerous Iraq fraud cases to protect the administration from political damage.
Justice said that isn't true. "Although we cannot comment on the number of cases that are under investigation or under seal, or on the investigations and the manner in which they are being investigated, we do not agree with any statement that might suggest that the Department is not giving these cases due consideration for political or other improper reasons, and there is no support for such a conclusion," Mr. Miller said.

Justice said it has reached four Iraq-related fraud settlements for a total of $14 million in more than four years of the war, which has cost taxpayers more than $450 billion. Officials insist efforts to recover stolen funds are in the works.

"Simply because some cases alleging fraud in Iraq have been declined does not mean that there is fraud that has been ignored, nor does it mean that there are not other matters that contain meritorious allegations that are being investigated and pursued," Mr. Miller said.
Ms. Hanken was in Kuwait on business when Iraq invaded in 1990, before the first Gulf War, and was briefly held captive by Iraqi troops. After her release she campaigned for the liberation of Kuwait and testified before Congress.

"I didn't do that so PWC could rip off American taxpayers," she said in an interview. "I am sick of getting jerked around."

Ms. Hanken alleges that Richmond and Public Warehousing executives sabotaged her efforts to sell meat products to the military by colluding to produce disparaging information about her company's products and performance. She alleged that "Richmond is overcharging PWC for meat products and PWC is overcharging the government."

Agents from the Pentagon, the Internal Revenue Service, and the Federal Bureau of Investigation are probing whether Public Warehousing passed on to the government improperly high prices from U.S. food producers in return for incentive payments from those producers and their agents.

Ms. Hanken alleges that an official at the Defense Supply Center of Philadelphia, a Pentagon contracting agency, improperly provided a copy of her complaint to the chief executive of Public Warehousing, prompting the Kuwaiti firm to threaten to sue her for defamation. Reached at home recently the official, Gary Shifton, declined to speak to a reporter.
Write to Glenn R. Simpson at glenn.simpson@wsj.com