Move over, Halliburton: Sara Lee, Perdue targeted over Iraq contracts
Published: Wednesday October 17, 2007
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$2.3 million for lobster tails

Justice Department and Pentagon investigators are probing whether Perdue, Sara Lee and ConAgra Foods overcharged the military in sweetened Iraq deals that the companies worked out with the help of former US military procurement officials they hired as consultants or executives.

The story was reported first in the Wall Street Journal Wednesday.

The Journal notes that the prices the firms charged the Pentagon were not extraordinarily high by normal standards. But as wholesale prices, the deals appeared questionable and ran into the hundreds of millions of dollars. The inquiry seeks to ascertain whether the firms charged the US Army's primary food contractor in Kuwait marked up prices and whether the Kuwaiti firm, Public Warehousing, received kickbacks from the suppliers.

"Public Warehousing's dealings are the subject of 'a very large and active investigation into criminal and civil fraud involving amounts in the hundreds of millions of dollars,' Justice Department lawyer Brian Mizoguchi told a judge in Federal Claims Court in Washington, D.C., on June 12," according to the Journal. "Public Warehousing, which receives more than $1 billion annually to feed troops in Iraq and Kuwait, denies wrongdoing."

Investigators are also focused on the role Army officials played in picking the US companies that fed the Army's distribution arm.

Military contracts typically pay the cost of the goods they receive plus a profit margin, the article says, thereby having an explicit means to determine whether they are being overcharged.

"Details of the Kuwait transactions and the federal probe are spelled out in hundreds of pages of court documents, emails, spreadsheets and military files seen by The Wall Street Journal," the paper said. "Among other things, the records show that Sara Lee paid 5% of the purchase price back to Public Warehousing for meat and bakery orders to feed U.S. troops in Iraq and Kuwait. The agreement was negotiated by a Sara Lee executive in charge of military sales, Paul Simmons, who formerly served as a chief warrant officer for the Army. Mr. Simmons declined to comment."

One figure in the probe is David Staples, a Sara Lee sausage executive-cum-Army procurement official. His posting appears to illustrate the seemingly transparent wall between the private and public sector.

In an interview with the Journal, Staples denied the claims.

"We follow standard business practices," he said.

Remarked a spokesman for Sara Lee: "Sara Lee was subpoenaed, and has cooperated fully with the Department of Defense's investigation."

According to the piece, procurement officials shut out Tyson Foods out of the bidding, favoring other firms to supply the Army's distributor. In an April 2007 letter to the Pentagon, a Tyson lawyer complained that firms employing former military personnel were receiving preferential treatment.

In all, the Army pays roughly $3.0 million a month for beef steaks, $2.7 million for chicken wings, $2.4 million for lobster tails and $744,000 for egg rolls.