More Milestones in the Iraq War

A pair of defense contractors pleaded guilty to rigging bids for contracts to ship military supplies to Iraq, the Justice Department said today.

Both came just days after the country solemnly marked the 4,000th American combat death in the five-year-old war there. And one of the investigations is continuing.

In one case, a logistics company acknowledged that it had falsely billed the government for expensive air freight services when it had actually sent material by ship. It then misrepresented the actual delivery dates.

In the other, a manufacturer of cargo nets, tiedowns, and other shipping equipment pleaded guilty to having conspired with several of its competitors to rig bids for Pentagon contracts.

The logistics company, National Air Cargo of Orchard Park, New York, settled criminal and civil fraud allegations by pleading guilty to one count of knowingly making a false statement and by agreeing to pay $28 million in fines and restitution.

That sum includes $11.75 million to resolve allegations that it violated the False Claims Act, a criminal penalty of $8.8 million, and criminal restitution of $4.4 million. The company also agreed to forfeit assets worth $3.05 million.

A former National Air Cargo employee, Mark Oehm, will receive $3.3 million as his share of the proceeds of the False Claims Act settlement. Under the False Claims Act, private citizens can sue suspected fraudsters on behalf of the federal government and receive a share of any settlement or judgment.

The cargo equipment manufacturer, Peck & Hale L.L.C. of West Sayville, New York, pleaded guilty in federal court in Islip, New York, to two counts of bid rigging. It also agreed to pay a $275,000 fine and to help federal prosecutors in their continuing investigation of other conspirators.

The case against Peck & Hale was the sixth prosecuted so far in the investigation, which began two years ago. One of the earlier cases involved Peck & Hale's former sales director, who was accused of having conspired to rig bids and accept a kickback.

"The Antitrust Division will vigorously prosecute those who steal taxpayer dollars by depriving the U.S. military of the benefits of competitive contracts, especially during wartime," said Thomas O. Barnett, the assistant Attorney General in charge of the Justice Department's Antitrust Division.

The first count said that Peck & Hale conspired to rig bids on contracts for Navy sling hoist assemblies between December 2002 and January 2004. The second involved a separate conspiracy to rig bids on cargo-securing systems for munitions, vehicles, and aircraft in transit.

by Elizabeth Olson