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Defense Contractor Pays $95 Million to Resolve Allegations of Criminal, Civil Activities Related to Food Service Contracts

Foreign companies that do business with the United Sates are not beyond the reach of its laws when it comes to waste and fraud. The Department of Justice proved this to be the case when last month they announced that Agility Public Warehousing Co. KSC (Agility) – a Kuwaiti company – had agreed to resolve criminal, civil and administrative cases against it regarding their food contracts with the Department of Defense. The company’s contract covered food service for U.S. Troops from 2003 through 2010. As a part of a global resolution, Agility has agreed to pay $95 million to resolve civil fraud claims, to forgo $249 million in claims to DOD and to plead guilty to theft of government funds. For its part, the DOD’s Defense Logistics Agency (DLA) will release a claim of $27.9 million against Agility and lift its suspension of the company. (Agility had been suspended from entering into federal contracts for a period of seven years.)

“This settlement marks the conclusion of a lengthy investigation that demonstrates the Defense Criminal Investigative Service’s (DCIS) commitment to ensuring that tax dollars spent to support Department of Defense programs and missions are protected from fraud and abuse throughout the procurement process, but especially during overseas combat operations which are the most vulnerable,” said Special Agent in Charge John F. Khin of, DCIS-Southeast Field Office. “This extremely complex investigation required DCIS agents and our partners to tenaciously sort through and piece together an unprecedented volume of information and documents, and persevere through many years of exhaustive work, to bring this case to a resolution.”

The civil complaint alleges that Agility and TSC knowingly overcharged the DOD for locally available fruits and vegetables despite agreeing that they would pay 10 percent less than the amount billed. The United States also alleged that Agility failed to disclose rebate and discounts it obtained from US suppliers as it was contractually obligated to do so. The criminal charges against Agility alleged that it concealed consolidation fees that it should have paid and that this caused an inflated price to be paid by the United States. Starting in 2006, Agility filed a number of claims seeking additional payments in the amount of $249 million alleging that DLA owed this money for its performance under a series of military contracts. The agreement reached last month requires Agility to release all claims to this $249 million.

another Kuwaiti The allegations that are the basis of this agreement arose from a civil lawsuit that was filed against Agility and company – The Sultan Center Food Products Company, K.S.C. (TS) – by Kamal Mustafa Al-Sultan, a former vendor of Agility. Al-Sultan filed his suit under the whistleblower provisions of the False Claims Act. These provisions permit individuals to sue on behalf of the government and to share in any recovery. Mr. Al-Sultan is scheduled to receive $38.85 million as a result of the civil action he filed. If you have chosen to report a False Claims Act violation we advise you to contact a qui tam law firm. Qui tam law firms will be able to put you into contact with an attorney who will be able to advise you on such matters. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).