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Military food supplier charged with fraud

ATLANTA -- The chief food supplier for the U.S. military in Kuwait and Iraq inflated prices and defrauded the U.S. government for multibillion-dollar contracts to feed American troops, federal prosecutors said Monday.

Kuwaiti logistics firm Public Warehousing Co. -- which the Defense Logistics Agency says is the military's prime food supplier in Kuwait, Iraq and Jordan -- has been charged with making false statements, submitting false claims and committing wire fraud, said acting U.S. Attorney Gentry Shelnutt.

The company, also known as Agility, has received more than $8.5 billion in food supply contracts. Federal prosecutors say its contract with the government is still in effect and scheduled to expire in December 2010.

Agility said in a statement it is ''surprised and disappointed'' by the federal charges and that it has long cooperated with federal reviews and audits designed to ensure taxpayer dollars are being spent appropriately.

It said the government has consistently found the company's prices to be ''fair and reasonable'' and that supply records show it was more successful in delivering food to the military in a war zone than some contractors working within the U.S.

The government's six-count federal indictment claimed the company manipulated a complex funding formula to defraud the U.S. government of at least $68 million while supplying soldiers in Kuwait, Iraq and Jordan, said Assistant U.S. Attorney Barbara Nelan.

She added, however, that the total could grow far beyond that sum because the investigation is ongoing.

The indictment said the company provided false invoices and statements to a logistics center, bought high-priced food items and then knowingly inflated prices. And it said the company received rebates and discounts from vendors that it did not pass to the government as required by the contract.

The company also inflated fees by asking vendors to manipulate the way the products were packed, enabling it to bill the government twice as much as it should have, prosecutors said. And they said the firm encouraged a vendor in Conyers to conceal fees that should have been paid to the company, leading to inflated prices.

''The defendants, tempted by monetary gain, betrayed the trust invested in them by the U.S. Army,'' said Brig. Gen. Rodney Johnson, the commander of the U.S. Army Criminal Investigation Division. ''And now they must face the consequences.''

The alleged scheme was first outlined in a civil whistleblower complaint filed by Kamal Mustafa Al-Sultan, the general manager of a contracting firm that partnered with Public Warehousing Co. in 2002 to submit a bid on a contract.

The lawsuit, filed in 2005 and unsealed this week, said that Agility, chief executive Tarek Abbul Aziz Sultan Al-Essa and supplier Sultan Center Food Products Co. have knowingly overcharged the government for fresh fruits and vegetables since 2003.