ATLANTA (AP) — As a federal judge debates whether to allow fraud charges against a key U.S. military supplier, the Kuwaiti company's American subsidiary said Friday that its bottom line is beginning to suffer.
Attorney Tom Bever said in a court hearing that Agility DGS Holdings has lost employees and revenue since prosecutors in Atlanta charged its parent, the Public Warehousing Co., in November with defrauding the U.S. government of at least $68 million while supplying soldiers in Kuwait, Iraq and Jordan.
Bever said the firm "may prevail, but we'll be a dead company." He did not specify how much revenue or how many employees the company has shed. He also urged the judge to order prosecutors to speed up the discovery process.
Public Warehousing has sought to block the charges, arguing that prosecutors failed to properly serve the company. Frustrated federal prosecutors have countered by ratcheting up their rhetoric against the Kuwaiti firm as negotiations over a possible settlement have stalled.
Prosecutors called the firm a "fugitive from justice" in a court filing earlier this week and on Friday prosecutor Richard Reed said the case is about "war profiteering."
Barbara Nelan, another prosecutor, said the company is playing a complicated game of "catch-me-if-you-can."
The firm's attorneys, meanwhile, have sought to depict the case as a contract dispute, not a criminal matter.
"It's a contract case. It's not about performance. Food was delivered to the client 99.6 percent of the time," said Bever. "It's not an issue about whether the prices were charged were fair."
The indictment alleged that the Kuwaiti company manipulated a complex funding formula to defraud the U.S. government of at least $68 million, though prosecutors said that figure could grow as the investigation continues. Prosecutors initially zeroed in on only the Kuwaiti company but expanded the charges in April to include two American subsidiaries.
The legal back-and-forth has frustrated both sides and prosecutors said Friday that the government likely won't renew its contract with the company, which has received more than $8.5 billion in taxpayer money since the first of its two contracts were signed in 2003.
But Nelan said the Kuwaiti company will continue supplying the military through December, despite misgivings from the Justice Department.
"We don't like it," said Nelan. "We still feel we're being overcharged."
The indictment said the Kuwaiti company provided false invoices and statements to a logistics center and knowingly inflated prices since 2003. And it said the company received rebates and discounts from vendors that it did not pass on 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 the state of Georgia to conceal fees that should have been paid to the company.