The settlement agreement, which resolves all legal issues related to allegations the Kuwait-based 3PL overcharged the Department of Defense while supplying food to U.S. military troops, will allow Agility to again pursue new U.S. government contracts.
Agility Public Warehousing Co. K.S.C. (Agility) reached a final settlement in May with the United States government, resolving criminal, civil and administrative cases arising from allegations that it overcharged the U.S. when performing contracts with the Department of Defense (DOD) to supply food for U.S. military troops from 2003 to 2010.
The contracts involved nearly 200,000 invoices to the U.S. government, and were valued at over $8.6 billion, Agility said in a statement.
The Kuwait-based company agreed to pay $95 million to resolve civil fraud claims, to forgo administrative claims against the U.S., in which it was seeking $249 million in additional payments under its military food contracts, and to plead guilty to a criminal misdemeanor offense for theft of government funds, according to the Department of Justice (DOJ).
The misdemeanor offense was in connection with a single invoice valued at $551, and was unrelated to any of the original criminal charges, Agility explained. The offense requires the company to pay a maximum of $551 in restitution, but carries with it no additional criminal fine.
The agreement to settle the criminal portion of the case was completed after Agility signed a separate agreement with the DOJ resolving a pending civil case (United States of America, ex rel, et al. v. the Public Warehousing Company, et al., Case No. 1:05-cv-02968-TWT).
Under the settlement, Agility and the U.S. government agreed to the mutual release of all outstanding contract claims related to the food supply contracts. The DOD’s Defense Logistics Agency (DLA) is releasing a claim of $27.9 million against Agility and is lifting its suspension of Agility, which has been suspended from federal government contracting for the last seven years since being indicted, the DOJ said. In return,Agility released all claims it had been filing since 2006 against the DLA in which it was seeking the $249 million in additional payments mentioned above, alleging that the DLA owed it for its performance under a series of military contracts, which the DLA contested in protracted litigation.
The settlement, which will allow Agility to resume the pursuit of new U.S. government contracts, will resolve all legal issues related to these contracts for its employees, directors, officers and affiliates, the company said. The settlement’s terms are subject to final court approval.
“Agility has a healthy balance sheet and low net debt. The company can meet its obligations under the settlement without jeopardizing its current investments or its future growth,” Agility CEO Tarek Sultan said of the agreement. “By bringing the case to an end, we have the ability to unlock additional value for shareholders.”
“This settlement marks the conclusion of a lengthy investigation that demonstrates the Defense Criminal Investigative Service’s (DCIS) commitment to ensuring that tax dollars spent to support Department of Defense programs and missions are protected from fraud and abuse throughout the procurement process, but especially during overseas combat operations which are the most vulnerable,” said Special Agent in Charge John F. Khin of the DCIS-Southeast Field Office. “This extremely complex investigation required DCIS agents and our partners to tenaciously sort through and piece together an unprecedented volume of information and documents, and persevere through many years of exhaustive work, to bring this case to a resolution.”
The now-resolved civil claims and criminal charges had arisen out of allegations originally raised in a whistleblower suit filed in 2005 against Agility and another Kuwaiti company, The Sultan Center Food Products Company K.S.C. (TSC).
The lawsuit was filed by Kamal Mustafa Al-Sultan under the qui tam, or whistleblower, provisions of the False Claims Act (FCA), which permit private individuals to sue on behalf of the government for false claims and to share in any recovery, the DOJ said. Al-Sultan is receiving $38.35 million as a result of the civil action he filed, U.S. ex rel. Kamal Mustafa Al-Sultan v. Agility Public Warehousing Co., K.S.C. et al., No 1:05-cv-2968-GET (N.D. Ga.).
In its civil complaint, the U.S. alleged that Agility and TSC knowingly overcharged the DOD for locally available produce that Agility bought through TSC, and falsely charged the full amount of TSC’s invoices, despite agreeing that Agility would pay 10 percent less than the billed amount. In addition, the U.S. accused Agility of failing to disclose and pass through rebates and discounts it obtained from U.S.-based suppliers, as required by its contracts.
Following Agility’s criminal indictment by a grand jury on Nov. 16, 2009, the DLA suspended Agility from government contracting, which was subsequently extended to Agility’s more than 300 affiliated entities.
“The claims resolved by the settlements are allegations only, except to the extent the conduct was admitted as part of the defendant’s guilty plea, and there has been no determination of liability,” DOJ said.
Although Agility’s suspension will be lifted, the company will be required to use an independent corporate monitor and maintain an ethics and compliance program.
The criminal and civil cases were investigated by the DCIS, the U.S.Army’s Criminal Investigative Command’s Major Procurement Fraud Unit, the Defense Contract Audit Agency and the Federal Bureau of Investigation.