The wheels of justice grind slowly on the question of whether a fledgling firm defrauded as much as $50 million on security contracts in Iraq.
Custer Battles was dragged into federal US District Court in September 2004 after being accused of illegally pumping up costs on plum contracts handed out by the Coalition Provisional Authority, including a $16.5 million deal in June 2003 to protect the Baghdad International Airport as well as a second $21 million security agreement to protect the program to install Iraq’s new currency.
That’s pretty good money for for a company that had no track record in providing security. It was even better money for the company’s two founders, Scott Custer and Michael Battles, who paid themselves just under $3 million each in dividends on January 2, 2004, I am now told by a very good source.
These two budding Horatio Algers divvied up their booty just six months after bagging their first Iraq contract and seven months after they were said by a glowing Wall Street Journal story that they maxed out their credit cards and borrowed the cab fare to the airport:

Barely funded with credit cards and money borrowed from a friend, their nine-month-old company had neither guns, accountants nor guards.

How they landed the multimillion contracts (funded by a cloudy cocktail of US appropriated money and seized Iraqi assets) on the heels of the Iraq invasion remains a continuing debate. Still, most every news story that mentions the company also notes that Battles was a former Republican candidate for Congress in Rhode Island.
Other sources speculate to me that there was a close relationship with a certain Federal Aviation Administration official working in Iraq at the time.
Former Custer Battles employees and plaintiffs, W.D. “Pete Baldwin” and Robert Isakson, claim in court that the company routinely engaged in accounting trickery and used a corporate shell game involving Cayman Island subsidiaries to drum up charges by tens of millions of dollars with a clear intent on plundering funding for reconstruction efforts.
Lat July, Judge T.S. Ellis from U.S. District Court in Alexandria, Virginia, denied a motion by Custer Battles to dismiss the case on the grounds that the money involved was not drawn from U.S. funds. Then he said the case would move quickly to a conclusion on the question of fraud.
Apparently, that goal is slower than Christmas. It’s now almost January, and Ellis hasn’t uttered a peep on the case.