WASHINGTON -- Federal agents are investigating whether several large food companies charged the government excessively high prices for supplies to U.S. troops in Iraq and Kuwait, administration officials said yesterday.
Widening their previously disclosed inquiries into contract fraud and corruption in Kuwait and Iraq, investigators from the Justice and Defense departments are examining deals that the Sara Lee Corp., ConAgra Foods and other U.S. companies made to supply the military, officials said.
The inquiry centers on whether the companies overcharged the Army's principal food supplier for the war zones, a Kuwait-based firm called the Public Warehousing Co. Investigators are also reviewing whether Public Warehousing improperly took payments from the food companies.
Public Warehousing, which supplies enormous amounts of fruit, vegetables and meat for more than 160,000 troops in combat zones, said in a statement that it has done nothing wrong and is cooperating with the investigation.
But a Justice Department lawyer, Brian A. Mizoguchi, told a Federal Claims Court judge in Washington on June 12 that Public Warehousing's business arrangements were the target of "a very large and active investigation into criminal fraud involving amounts in the hundreds of millions of dollars."
"It relates directly to the contracts," Mizoguchi said, "because it relates to the pricing and costs under those contracts." Public Warehousing receives more than $1 billion a year to feed troops in Iraq and Kuwait.
The investigation, which was reported yesterday in The Wall Street Journal, is also focusing on Army officials who picked the food companies that are Public Warehousing's suppliers.
Procurement specialists said that once vendors such as Public Warehousing receive guidance from the Army Center of Excellence Subsistence, at Fort Lee, Va., on what should be on the menu in chow halls, the vendors seek suppliers for that food. In some cases, the Army had designated specific companies to provide certain food, such as beef or chicken, which has drawn protests from rival companies.
For example, Tyson Foods, the nation's largest meat company, has complained to the Pentagon that some food companies have hired former military procurement officials to use their contacts to help win lucrative government contracts.
Timothy L. Hale, a spokesman at Fort Lee, said the Army agency had not been told it was under investigation. He referred questions to the Justice Department.
In a statement, Public Warehousing said its service has been "timely, reliable and cost-effective." The company's position is that what investigators are looking at as improper payments were actually discounts received for paying its suppliers ahead of schedule, a widely accepted practice in the food industry.
In court papers, Public Warehousing cited an e-mail message in October 2006 from a military contracting officer telling the company that the practice of discounts was appropriate.
Public Warehousing attributed its high prices partly to the costs associated with storing, handling and transporting supplies to multiple locations in a war zone. The company said more than 30 of its employees had been killed and 200 wounded in the war zones.