Agility Indicted with $8.5B Fraud by US Government

November 17, 2009 by Keynesian

Agility-Logistics

Agility is currently suspended from trading at the Kuwait Stock Exchange. The reason? A U.S. grand jury indicted Agility with charges of fraud and conspiracy alleging that it overcharged the U.S. Army on $8.5 billion worth of contracts to provide food to soldiers in Iraq, Kuwait and Jordan. This U.S. indictment will prevent Agility from getting contract awards until the issue is resolved but will not impair existing contracts with the U.S. government.

Agility has been one of the very few stars in the Kuwait SE this year. This new comes as a severe blow to an already distressed stock market. Noting that Agility heavily depends on US contracts (75% of the group’s EBITDA) this is a major major major calamity. Agility is similar to Zain in that it is an operational company with numerous companies dependent on its success. Most of these companies are trading limit down as I speak. For example, NREC (National Real Estate Co.) owns 22.44% of Agility and is currently limit down. God bless the Kuwait SE.

Below is an the statement issues by Agility:

STATEMENT

Statement by Public Warehousing Co. (PWC)

Concerning Announcement of Indictment and Qui Tam Lawsuit

The Public Warehousing Company (PWC) has for some time worked with the government to seek a mutually agreeable resolution to a contract dispute between the U.S. government and the Company and is surprised and disappointed that the government has decided to take these actions.  Today, the Company was informed that the Department of Justice (“DOJ”) had obtained an indictment against the company and has intervened in a civil lawsuit under the False Claims Act, both of which allege that PWC committed fraud against the U.S. government.

The company has been the principal food supplier for the U.S. military in Kuwait and Iraq since 2003. PWC’s service has been timely, reliable and cost effective throughout its work on these competitively awarded contracts, and its performance has been unparalleled. The prices it charges have been negotiated with, agreed to, and continually approved as by the U.S. government since then.  The government has consistently found PWC’s prices to be fair and reasonable.

Since 2006, the company’s “fill rates” – the number of cases of food accepted compared with the number ordered – were consistently more than 99 percent, a number that exceeds the fill rates of U.S. domestic service providers.  That means that PWC was more successful in delivering food and other items to the military in a hostile war zone than other vendors have been within the safe environs of the continental U.S.

The court documents filed in the United States reveal that the investigation leading to the indictment and the False Claims Act lawsuit was instigated by Kamal Mustafa Sultan, owner of Kamal Mustafa Sultan Company, who has a long history of strong animosity towards PWC, its officers and its employees. A July 19, 2009 San Antonio (Texas) Express-News story raises major questions about the company:http://www.mysanantonio.com/military/Firm_tied_to_Iraq_scandal_profited.html

In the PWC matter, Kamal Mustafa Sultan brought a “qui tam” case under the False Claims Act in November 2005, which means that he has a financial interest in the outcome of the case. In Kuwait, Kamal Mustafa Sultan has filed more than 40 court actions against PWC, its executives and its employees, and all of the court actions have been unsuccessful.

The company has long cooperated with government reviews, inspections, audits and inquiries necessary to ensure taxpayer dollars are being spent appropriately. The company made every effort to resolve this with U.S. contracting agencies, including trying to get a formal interpretation of the contract by a neutral agency and going to mediation, but the government refused.

Our company has provided unparalleled service to U.S. troops and exceptional value for American taxpayers under the most demanding conditions ever faced by a contractor. Our success has come at a very high price. More than 30 employees have been killed and 200 injured in carrying out their work in a warzone. Attacks on our convoys have destroyed more than 300 trucks and damaged another 700.

An indictment and a complaint are merely allegations.  PWC is confident that once these allegations are examined in court, they will be found to be without merit.   As a result of the indictment,   PWC Logistics has been debarred from future contract awards until such time as a determination has been made about the company’s current responsibility as a contractor.  These allegations should have no impact on any current contracts with the U.S. government.

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36 Responses to “Agility Indicted with $8.5B Fraud by US Government”

  1. CuRiouS says:

    As you sow, so shall you reap.

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  2. PC says:

    It was only a matter of time :-(

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  3. Tim says:

    FINALLY – fair pricing? haha – Agility / PWC have been making $600 million dollar annual profits on the war since 2003 … and they have NOT been modest about it!

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  4. Frederick Harris says:

    Agility, along with other companies, have been getting away with too much. All you have to do is talk to the TCN’s who were hired by Agility and you’ll see exactly what’s been going on. Many TCN’s were hired at a highter rate of pay and when they arrived in Kuwait, their pay was reduced drastically.
    The bottom line is this….upper management continue to receive bonuses while many of the workers who make things happen don’t. This company claims that it has all these policies in place to ensure that employees are treated fairly. Why are there different pay scales for different nationalities? A secretary is a secretary, a driver is a driver, an operator is an operator regardless. The same skills shoud be paid the same rate.
    Agility, u know that you’re dirty so don’t try and pull the wool over our eyes. You’re just huge with billions of dollars so you can buy your way out of almost anything. We all hope that the Justice Department finds you guilty of fraud. You need to be put in your place.

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    Keynesian Reply:

    I don’t know if that is all true, but it would be a shame if it is. However, I know they have deep-pockets. Just look at their most recent addition to the Board of Directors: Former U.S. Ambassador John D. Negroponte! Negroponte served as U.S. ambassador to Honduras, Mexico, the Philippines, the United Nations and Iraq. He also held positions on the National Security Council, served as deputy national security advisor to President Ronald Reagan, and was the nation’s first director of national intelligence. Now he sits on Agility’s Board.

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    John Mathews Reply:

    Of course they have deep pockets! Look at the pay scale of some of these hardworking third country nationals! The people that work the hardest to make things happen are the ones that always take it in the shorts.

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    WOB Reply:

    John,

    Third country nationals make far more on these jobs than they would back in their homelands. That’s why so many of them flock to the ME–it pays them handsomely — again, compared to what they’d be making back home.

    Kuwaiti Reply:

    No they aren’t paid according to their nationalities ! but the difference is due to that the company pays you basic salary and then you have the allowances which differs !!!!
    There are few allowances that are for Kuwaiti only !!

    and YES!!!, we do deserve being paid this money it is our country and it is our money!! Same goes vice versa if we are in another country we will be treated as foreignors

    If anyone doesn’t like it then he should have stayed and worked in his own country ! But oh yes some can’t fidn jobs there or they fidn better jobs here. So it is their problem accepting it!

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    John Mathews Reply:

    Kuwaiti’s don’t pay us, the US does. The US pays Kuwait and then the company pays the employees. Am I correct so far? You say it’s your money? What’s your money? If the US didn’t save Kuwait from Iraq, you’d be working hard just like the other TCN’s in Kuwait. Or have you forgotten?
    I have never seen any work ethic by Kuwaiti’s. They’re constantly off from work, or, when they come to work, they sit and talk and have servants bringing them their tea. In the Sultan Centers, they cut in front of everyone (not Americans) and are just arrogant. They drive like maniacs and everything is “wasta.” So if you’re Kuwaiti, you have lots to learn about work….cause you don’t know how to work.

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  5. AAA+ says:

    This ‘fraud’ needs to be looked at in the overall context of a war. If soldiers eat lobsters for lunch in a war zone then someone has to pay a premium for it. You cannot say lobsters cost KD 0.5 per kg in Sultan Center in Kuwait, why are you charging me KD 1.5 per kg for delivery in Iraq

    http://www.thisisjustcool.com/cool-pictures/us-army-canteen-in-iraq/

    Next time you are in an airport check out the price of water in the airport cafeteria. It is easily double the rate in the supermarket just outside the airport complex. Does that mean the airport cafeteria is indulging in fraud.

    Differential pricing is a way of life

    By the way, why single out Agility when there are bigger issues at stake

    http://www.dailymail.co.uk/news/article-1228480/Army-tells-soldiers-fighting-Afghanistan-buy-Taliban-bags-gold.html

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    John Mathews Reply:

    AAA, you don’t call millions and billions a big stake? If not, what is?

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    Peace not War Reply:

    I don’t see what the deal is for the brave men & women who go out to risk their lives for us. Don’t they deserve a decent possible last meal? It’s not like they get paid the big bucks to be there or danger pay?
    I have dealt with Agility in the past. We go out for several quotes. They were the best priced & they gave use excellent service. If the US government thought they got ripped off, they should check themselves instead of listening to others. Everyone in America is entitled to make money. Instead of hiding so much information & having everyone make speculation good or bad, the truth should be properly disclosed. What if it happened to your company? or you? If the US government is found to be wrong, the damage is done. Not that I’m on Agility’s side but on the side of fairness. I hope Justice is not blind in this case.

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  6. Yacoub says:

    The litigation is on $60 million which in worst case scenario may go up as much as $2 billion, I wonder how did you arrive to $8.5 billion!

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    Keynesian Reply:

    The litigation is on $8.5Bn worth of contracts. The prelim fraud numbers are estimated to be around $68M. This means if indicted, it would be fined with at least double that: $136M. Sorry for the confusion. Please refer to this later and more detailed post:
    http://www.alphadinar.com/2009/11/18/agility-fraud-case-examined/

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  7. toti lacorte says:

    it seems prayers from those underpaid employees are answered whoo to agility`s consecutive year lost report, no need to report now…

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  8. Well WISHER says:

    As far as salaries Agility pays better than other companies it has yearly bonus n some good features but right now US government has taken a very tough decision to cancel all their contracts because which for sure thousands of employees are going to suffer.

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    John Mathews Reply:

    Well Wisher, they pay yearly bonuses? To who? We were all hired under those conditions but never saw a bonus. So where are you getting that they pay better than some companies? Compare TCN pay in Iraq and TCN pay for TCN’s who drive into Iraq constantly. You tell me

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  9. John Mathews says:

    It was only a matter of time before Agility got hammered. Sure, they have lots of money but it’s a shame how they made that money. When you treat your employees like dirt, you will pay. Go pray some more, maybe it’ll help you kiss up and make up.

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  10. Hmoud says:

    Dear John Mathews,

    I am deeply disappointed with your comment on Kuwaitis Work ethic. It is very narrow minded to generalize and say Kuwaitis have no work ethic. In every Country, Community, or Society etc. their are the good people and bad people (People who have a work ethic and people who do not). You are also stereo typing and pointing fingers on very negligible facts that you find every where. Have you ever been to Detroit ?(They cut lines over there) Miami (They drive like Maniacs). It is true that America is more civilized then Kuwait but we are a new country that got our independence in 1964 compared to 1740 or something like that of America. So please do not talk about Kuwaitis like you really know Kuwaitis. That was just your experience in the high paying job you got( which your I assume you got just because your American). By the way if you are so bothered by Kuwaitis and think we cannot work I really think you should find a solution rather than complaining. Complaining is not Professional or proactive :P . Moreover, I think it is very ignorant to think that America saved Kuwait. If you put a little more effort and read about American Foreign Policy you will notice that America has been not solving problems in the Middle East but as Kissinger put it ” Crisis Management ” . I am really sorry to say your a victim of your American Media and you think you know everything just because you are Anglos axon …. I was surprised you didn’t say Kuwaitis are terrorists !!!!

    P.S. This blog was created by Kuwaitis who put a lot of time and effort to accomplish. Additionally, it is very neutral and only analyzes the facts logically. I really think you should rethink what you said .

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  11. Miss America says:

    If any one would do their research you would realize the Swiss are involved and it seems could be the country of origin…This is about an International ruling class getting contracts, kick backs, profiteering from a war, how disgusting, The global “good ole boys club”.

    I also agree with Hmoud and please accept this American’s apology for the ignorance some of my countrymen (oddly enough it usually comes from an angry white guy) spew from their lips “removing all doubt” Abraham Lincoln.

    And fyi, I am from the BB and grew up fundamentalist Christian/Republican and if we were busy practicing real Christianity “We are all God’s children” Ronald Reagan, we would not be casting stones at our brothers and sisters around the world but taking responsibility for our mistakes/sins.

    We are America who professes “We hold these truths to be self-evident, that all men are created equal” Thomas Jefferson wrote in our Declaration of Independence and we need to live up to those words! And stop allowing the exploitation of peoples in developing nations by the hands of our own countrymen. .

    Sincerely, Miss America

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  12. [...] after Agility’s issue with the US Government in mid November (click for details) KGL has been traded heavily. Since Agility’s case is not over yet and there is still no news [...]

  13. [...] 4. Agility Indicted with $8.5B Fraud by US Government [...]

  14. TIPS says:

    To all Agility Employees working in Kuwait – you should receiving overtime rates for any time worked over 48 hours. If you are not receiving this then you should seek assistance with the Kuwaiti courts. Agility Management are not only stealing from the US Government but they are stealing from you.

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    Bo6air Reply:

    @Tips:

    Yes they are. I hope all Agility Employees see this post

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  15. Carl Ainvire says:

    Agility did break most of the rules of their contract with the DOD (Dept of Defence)over all of thew years from 2003. they did force drivers at pain of dismissal to drive into Iraq without body armour, the minimum requirement under their contract. Many other firms provided costly truck armour for their workers. Agility were too cheap to keep anything close to 65% of required flak vests and helmets. Kuwait could have done more to enforce this, but it was really the US militaries responsibility as having responsibility for all contracted and sub-contracted workers. Agility were beyond miserly when workers got killed or severely injured by IED’s in Iraq. Agility was always laying off one group of drivers after discovering countries that would work for even less in such a dangerous war zone. No wonder they have many hatters. However they did get the job done. But lets remember that these charges aren’t about worker welfare, tareq sultan will have to meet his maker and explain about that another time, this is about fraud relating to the purchasing of products abroad, mostly in America. Yes, they were horribly greedy, not happy with a contract that gave them a 95% profit, they decided to be ultra clever in trying to milk more money out of the contract by charging hello money from their suppliers etc which did increase prices for the DOD. PWC turned itself from an insignificant warehouse and walmart style Kuwaiti company into the 8th biggest logistics company in the world through cash purchases of major regional logistic companies around the world. Every peeny of this came from their major DOD contract in Iraq. the US has been very generous to PWC / Agility, shmae on them for cheating as we who worked for them all knew they were. tareq Sultans other moral misdemeaners though may be far more costly when he faces a trip to hell after a peaceful old age death in his palatial home.

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  16. Carl Ainvire says:

    As for Kuwait’s wage system it may appear patently unfair to those who believe in equality of labour but it is actually in many respects a fair system.
    Kuwait has a dearth of labour and needs to import skilled and unskilled labour.
    Now should they pay everyone Kuwaiti rates? (i.e. should texas farmers pay Mexican day labourers the same as a tax paying American? they don’t) It would be nonsensical of them to do so as the Kuwaiti’s wage is inflated by oil revenue. therefore if one wishes to work in Kuwait the Kuwait government decides fair pay bands for different global regions. Usually these bands mean that the employee will earn at least 3 times a good wage back home to re-imburse them for leaving their family and working in the gulf.
    Employees from the first world will not live in 3rd world accomadation, so if they require these workers they must fund suitable standards of housing etc. A second world middle manager will be very happy with a lower standard of housing and a third world national will have lower minimum standards based on what they grew up with. this causes a discrepancy in housing allowances. You won’t get the skills from the countries you want if you don’t provide a cempetitive package, basic HR.
    Supply and demand also comes into it, unskilled workers are easy to source, at one of agility’s units third world workers got a 20% pay cut after it was decided that they were paying them too much. Management realized this due to receiving 20,000 resumes from Fijian friends of current Fijian employees all stating that they would do the same job for 50% less. Indians later undercut the Fijians and later other nationalities undercut the Indians so wages kept being revised downwards allowing managers to look more profitable and thus receive far larger bonuses themselves.
    However despite these Agility quirks the Kuwaiti system is fair, many Indians I worked with had massive houses, pools, servants and chaufeurs, yes they were being paid less than the Americans working alongside them but by living in India they were able to leverage their wages into a far, far higher standard of living. While the Indians children headed to the best universities the Americans wondered how they would pay for a State College even. Was this unfair, should not the wages have been remodeled so as all could have the same standard of life back home? Come on. Some countries are far more expensive to live in and thats just tough for the westerner, however he needs a minimum to survive back in his own country where his family is based. Even poorly paid drivers will return home lording it up in their village as the rich son returned and will buy many businesses (shops etc) while in Kuwait and a big house, their children if clever will head to university. Most of Agility’s drivers make more than Indian GP’s (doctors). Yes they endure low standards, a low pay for Kuwait and a low place on the pecking order but foreign workers in Kuwait often get a great wage for back home and a chance to retire early.
    Kuwaits equivalent of the pension is also ok, 3 months pay after 5 years and then a months salary for each year worked after that in the same company. Many can go home with cash in hand of over two years work, while most western companies now pay nothing.
    Now having defended Kuwait on pay in their country we must ask why pay for people based in federal US camps in Iraq were so unequal despite the US being the beacon for equality in the world. We are all aware of what went on, even Congress investigated the slave labour used in building the US embassy in Baghdad. Why did this happen? Because contracting officers had too much on their plates, nobody took responsibility and hell the war was costing way too much as it was. the DOD itself allowed for very low bands of pay for certain jobs in their contracts and adopted whole-hearteadly the Gulf / Kuwaiti system of pay.
    I could tell you of plenty of areas where Agility committed massive fraud but these weren’t them.

    [Reply]

    Sal Reply:

    I never knew about internal fraud going on at Agility. I always thought Agility’s employees were very well paid with profit sharing schemes, but it seems they’re more of sharing scams..

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  17. Carl Ainvire says:

    As far as the bonus gripe with Agility is concerned, yes this was disgracefull, people were promised a set wage and a set bonus on leaving for Kuwait. On arriving in Kuwait contracts were signed listing pay packets but often not the bonus. Many times wages were never paid out at the agreed rate, this happened to many Americans and Indians. If you wanted to make a case in the courts you would lose your job, if you accepted the wages for 3 months under Kuwaiti law then you had accepted the new terms. Your choice, go home jobless and at a massive financial loss having given up a good job or get screwed by Agility? Contracts allowed for wage reductions too. Bonuses were often generous in units that held contracts with the DOD, often because the contracting officer intervened or because this unit was flush so everyone got the full amount as agreed. Many Indians in one unit recieved $35,000 as a bonus. Units that sub-contracted business from contract holding units within PWC / Agility did far worse, money was tighter and often American managers would sell out their American workers and foreign nationals in return for a bigger pay package for themselves. Everyone knows who these people were and the more generous units were often disgusted by their actions but did nothing. Personal greed by higher line managers is why you didn’t get your bonus or a semblance of what you were guaranteed each year when you were offered the job.
    Low down and rotten, yes, but not DOD fraud, though there was plenty of fraud going on in staffing and other areas.
    During one of the many internal fraud cases (ie only those where the company lost out) it was discovered that managers were cutting employees salaries and paying fired employees long after they had left as part of a pay scam where millions were stolen from the company. No employee was ever re-imbursed though for stolen wages.
    I’d so love to write about real fraud next, who knows???

    [Reply]

    Sal Reply:

    And we would be very much interested in hearing it straight from the horse’s mouth! Thank you Carl for your great comments!

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  18. A.Asghar says:

    After working for more than 30 years in one of the best airlines, I was strongly asked by the friends at one of the subsidary of Agility, National Aviation Services (NAS)to join this company as it belonged to mighty PWC. I was reluctant to join but was assured of a permanent job in the company. However after 3 years, I was terminated from my job without giving me any reasons. I brought 32 years of airlines experience to this group and worked on the highest positions in the airline I worked but PWC management let me on road hence till today I struggle to survive with my family in Dubai.

    After reading a lot on current situation of Agility, the mother compnay of NAS, I would ask the owners to investigate my issue and in future they should not pull the experience people from other companies if they have to throw them out because of their own mismanagement.

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  19. Sharan Johal says:

    This girl don’t deserve to have a sugar daddy. SHE IS WACK!

    [Reply]

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