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Army investigates defense contractor payments

WASHINGTON — Army criminal investigators are examining whether Combat Support Associates, a defense contractor that has earned more than $2 billion so far supporting U.S. troops in Iraq, overcharged the government. The company said it is cooperating in the case.

Combat Support Associates, based in Orange, Calif., performs vehicle maintenance, computer repairs and security work at Camp Doha, Camp Arifjan and other Army sites in Kuwait. Federal agents searched the company’s offices in Kuwait in August.

Gary Lewi, a spokesman for Combat Support Associates, said the company provided the agents with documents. He would not provide details because the inquiry is ongoing.

“CSA has acted in accordance with its contract, and no allegations have been conveyed by investigators,” Lewi said in a statement.

It’s not clear how much the company may have overcharged the government or for how long. The Army Criminal Investigation Command is leading the inquiry.

The investigation is among 168 by the Army Criminal Investigation Command related to contract fraud in Iraq, Kuwait and Afghanistan since 2005. The Army said 95 of those cases are pending. In some cases, investigations were closed because there was too little evidence to support charges or because a company was absolved. Other cases have resulted in criminal charges.

Combat Support Associates was awarded the base support contract almost a decade ago. It formed a Cayman Islands subsidiary to avoid paying taxes on its 2,000 American employees. That legal loophole, used by a number of U.S. companies, was closed in June when President Bush signed tax reform legislation.

Army Sustainment Command in Rock Island, Ill., oversees the Kuwait contract.

“The command is always concerned about any allegations of improprieties,” command spokeswoman Linda Theis said. “We will work with appropriate investigation authorities as needed.”

Under the terms of its so-called “cost plus” contract, Combat Support Associates is reimbursed for the work it does and gets a fixed fee on top as profit. Critics of these arrangements, including Republican presidential candidate John McCain, say companies have little incentive to control costs.

With too few government investigators and auditors to ensure every claimed expense is genuine, there is a heightened risk of waste, fraud and abuse. For the military, however, these open-ended contracts are useful in wartime situations when it can’t precisely define all the work that needs to be done.

Combat Support Associates was formed in 1998 by AECOM Government Services of Fort Worth, Texas, and two other companies — Research and Analysis Maintenance of El Paso, Texas, and Space Mark Inc. of Alaska.

In July 1999, Combat Support Associates was selected for a Camp Doha support contract, a 10-year deal potentially worth $547 million. In March 2003, when U.S. forces invaded Iraq, demand for the company’s maintenance and repair services increased dramatically as bases across Kuwait became hubs of activity for American troops.

The value of the contract ballooned as well: $2.2 billion has been spent between 1999 and 2008 on the Combat Support Associates contract.

There are scores of companies like Combat Support Associates being paid big money to perform unglamorous but essential chores for the military. But as reliance on the private sector for battlefield support has grown, the Pentagon’s ability to watch over taxpayer dollars has not.

The Army’s contracting budget alone jumped from $46 billion in 2002 to $112 billion last year. Yet the number of people who hunt down crooked companies and corrupt officials has stayed about the same.