Lawsuit says company defrauded US in Iraq

The first public lawsuit for fraud against the U.S. government in Iraq by a contractor will be heard in federal court in Washington, D.C.

The security company, Custer Battles LLC, is accused by a whistleblower of submitting phony bills to the Coalition Provisional Authority to inflate its costs and therefore its profits, the Washington Post reported Wednesday.

The company's contract allowed it to charge a profit as a percentage of the total value of the contract, the Post said. The company's lawyers told the newspaper profits were awarded as a fixed fee and were not affected by the costs of performing work.

The lawsuit alleges Custer Battles, which was barred from competing for federal contracts last year by the Air Force, created fake subsidiaries from which it "bought" services and then charged the government inflated prices.

It is scheduled to be heard in U.S. district court Thursday.

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