By Adam Zagorin
In the aftermath of America’s nuclear accord with Iran, Tehran is pushing to buy some $25 billion-worth of Boeing aircraft. The United States, however, has not yet granted an export license that would effectively greenlight the controversial sale. Highlighting the abrupt about-face this deal would signify, US authorities on May 26 arrested a wealthy Middle Eastern businessman on charges of trying to transfer airplane parts to Iran. The arrest has been reported in Kuwaiti, but not American, media. It was confirmed to the Project On Government Oversight by a US government official, who said the businessman, apparently taken into custody at San Francisco International Airport, was held and interviewed by the Federal Bureau of Investigation pursuant to a sealed federal indictment. A Justice Department spokesman in the Northern District of California refused to confirm or deny the arrest or offer comment of any kind.
The sanctions-busting suspect turns out to be Fuad Ismael Dashti, a shareholder in, and big beneficiary of, his family’s Kuwait-based network of public and private companies, notably Kuwait and Gulf Link (KGL) and KGL Logistics. Both are US military contractors doing hundreds of millions of dollars-worth of sensitive American defense business in the strategic Persian Gulf. One of Dashti’s brothers serves as KGL’s chairman; another is chairman of KGL Logistics.
A spokesperson for KGL told POGO that the company “understands that the alleged conduct [of Dashti] does not involve KGL or any of its affiliates and that Mr. Fuad Dashti was not acting as a KGL employee or representative.”
DLA, An Agency Run Amok?
Dashti’s arrest does not mark the first time KGL or its employees have faced US law enforcement scrutiny. In fact, three ongoing US court cases—a federal civil suit in Washington, DC, a lawsuit for defamation in Pennsylvania state court, and a criminal matter in federal court in Atlanta—have each cited a variety of as yet unproven allegations directed at KGL and its principal competitor, Agility Logistics, involving sanctions-busting, defamation, fraud, and other matters.
The three cases, reviewed by POGO, also point to a third key player: the Pentagon’s Defense Logistics Agency (DLA). DLA is America’s quartermaster. With some 27,000 employees, it awards and oversees more than $30 billion in contracts for everything from military spare parts to troop transport. As part of that mission, the agency has for years awarded major deals to KGL and to Agility.
Evidence so far introduced in the court cases opens a window on DLA’s previously unknown dealings with KGL and Agility, showing how DLA apparently played favorites and actively abetted KGL’s bid to retain its lucrative US defense contracts in the face of serious allegations of wrongdoing. DLA did this by feeding KGL’s legal counsel details of a federal law enforcement probe into the company’s alleged criminal wrongdoing, according to testimony and court documents, and by leaking the company a flood of restricted material about Agility, KGL’s most important competitor.
KGL has long claimed it severed business ties to Iran and has never violated sanctions, always operating in full compliance with the law.
LEAKED: Sealed Federal Court Documents
This story includes a whistleblower who contacted DLA in 2011 to report allegations that KGL maintained extensive business dealings with Iranian companies sanctioned for their support of the country’s nuclear program. Instead of first forwarding that disclosure to the FBI —which was investigating the company at the time—a senior DLA attorney, Normand Lussier, promptly sent the whistleblower disclosure to a lawyer for a KGL subcontractor, warning him, “As usual, no attribution, please.”
Lussier later testified under oath that he believed the lawyer would pass the information on to KGL, the target of the allegation. (DLA subsequently referred the whistleblower material to the FBI.)
Other emails from Lussier directly to David Hammond, KGL’s counsel at the Washington law firm of Crowell & Moring, included many more leaks of restricted material. Some bore designations that include: “Attorney Client Privilege,” “Law Enforcement Privilege,” “Subject to Privacy Act,” “Do Not Disseminate outside DLA,” “Official Use Only,” “Law Enforcement Sensitive,” and “Procurement Sensitive.” Lussier also allegedly sent KGL sealed federal court documents about pending litigation between the Department of Justice and KGL’s principal competitor, Agility, and reports of confidential DOJ negotiations to settle a criminal case against Agility.
Additional leaks disclosed to Hammond non-public contacts between a key investigative committee of Congress and the FBI. That happened, according to court documents, when Lussier forwarded KGL a description of a meeting between the chief counsel of the House Oversight and Government Reform Committee and “agents assigned to a FBI Public Corruption Task Force” investigating KGL for its alleged ties to Iran. Court records show that the forwarded material reported “information from a source,” presumably about KGL, furnished by the Committee’s chief counsel to FBI agents.
Asked about this apparent misconduct, a spokesperson for DLA cited the ongoing litigation, offering no comment.
Also asked for comment, Hammond responded:
“Mr. Lussier, then a DLA Deputy General Counsel, testified that he believed at the time that none of the documents contained confidential information and/or that he had full authority…to transmit those documents.”
Lussier may well have had the support of his superiors who gave him “full authority,” but it’s unclear how he could have misunderstood the restrictive labels clearly visible on many of the leaked records. Lussier had no comment.
“Bordering On The Frivolous”
Evidence in court cases reviewed by POGO includes excerpts from nearly 3,000 pages of internal DLA records, and parts of roughly 40 hours of testimony given by Lussier when deposed by Agility and KGL.
The circumstances of this testimony were unusual. Some of the very individuals Lussier was testifying about were present during the depositions. For example, among the DLA lawyers in the room was Daniel Poling, who had directly assisted KGL in its lawsuit against Agility and had helped Lussier in his dealings with KGL. Also present was Hammond who, as KGL’s counsel, frequently objected to questions Lussier was asked, even as Lussier then testified about the restricted material he provided to Hammond or that Hammond in some cases appeared to solicit from him.
Justice Department attorneys were also present. At one point, the proceedings were suspended to allow Lussier to get legal advice after he was warned that he might wish to invoke the Fifth Amendment, which allows witnesses to refuse to give testimony that might incriminate them. A transcript shows that a Justice Department attorney concurred in the suspension of the deposition for that reason.
Lussier retired from DLA last October, a few months after his testimony began.
Meanwhile, court documents indicate that additional DLA lawyers are now being called to testify, including then-DLA General Counsel Fred Pribble, who had been Lussier’s boss. Pribble retired in May 2016. All have been named in testimony and internal DLA documents as significantly involved in the agency’s dealings with KGL.
The roughly 220–strong Office of General Council (OGC) is DLA’s legal nerve-center. However, the lengths to which some of its top lawyers went to furnish restricted information to KGL or otherwise assist the company raise troubling questions.
Just as troubling is that DLA, as an institution, not only appeared to allow leaking but to officially sanction such conduct. DLA’s Chief Trial Attorney, Daniel Poling, claimed in a statement filed in the Pennsylvania case that DLA and KGL had a “common interest” in working together. Much of that work involved leaking. In asserting the “common interest” doctrine, a legal protection much like the attorney-client privilege, DLA was attempting to withhold from the court various internal records, some of which documented its own leaks.
But DLA’s “common interest” claim failed in court. A judge categorically rejected the agency’s argument, describing it as, “bordering on the frivolous.”
Given that ruling, which was not appealed, DLA’s use of “common interest” to try to withhold some of the evidence of its leaking calls into question the judgement of senior officials in the agency’s Office of General Counsel. According to a former insider at OGC, Poling could not have made the “common interest” argument without the knowledge and approval of his superiors.
Lawsuits From Hell
As it turns out, the whistleblower who alleged that KGL violated Iran sanctions had used a pseudonym and emailed DLA from an internet address associated with Agility, KGL’s competitor.
After the whistleblower report reached KGL (via Lussier), the company filed a defamation lawsuit against Agility, arguing that the Iran accusation was false, that the report included doctored material, and that the report had come not from a bona fide whistleblower but from someone affiliated with Agility as part of a smear campaign.
Agility struck back with its own lawsuit against DLA, also reviewed by POGO. That action, filed in federal court in Washington, DC, sought internal DLA records and testimony documenting the agency’s collaboration with KGL. DLA complied, but has since acknowledged that it cannot find or may have destroyed many of its own records. In lieu of the missing records, Agility in early May 2016 asked a federal judge to require Pribble, DLA’s just-retired general counsel, and other key DLA lawyers to testify.
Agility has also charged that:
“DLA employees…[were] actively attempting to thwart any inquiry or [federal] investigation into allegations of ties between one of its major contractors and Iranian entities sanctioned for their support of Iran’s nuclear program.”
On Capitol Hill, meanwhile, reports of KGL’s alleged ties to Iran first circulated as many as five years ago. At the time, prominent lawmakers addressed their concerns about the matter to the Pentagon. Even though an FBI probe into KGL was still underway, a senior Pentagon official announced in 2011 that there was “no indication that KGL…has violated U.S. law.” That senior official, Ashton Carter, is currently Secretary of Defense.
KGL has long denied that it ever violated sanctions, and says it has always complied, fully and completely, with US law.
“An Inside Source”
An email dated October 30, 2010, pops up in DLA’s disclosures that seems to show an extraordinarily close relationship between Lussier and Hammond, the KGL lawyer.
“…I did not want them to think we have an inside source” at DLA, wrote Hammond. In the email, he explained to a colleague plans for prospective meetings at DLA, and precautions he said he took to conceal his channel to Lussier.
Lussier, whose title was Associate General Counsel for Contract Integrity and who spent most of his career at DLA, resigned a few months after he began testifying last June. But his exit did not allow him to avoid a series of lengthy additional depositions, the last of which was in April 2016. (Not all of Lussier’s testimony has been filed publicly, or seen by POGO.)
According to evidence introduced in court, DLA’s Office of General Counsel often emailed and telephoned with KGL’s lawyers at Crowell & Moring. For example, court documents indicate that between April 25, 2011, and October 18, 2013, DLA attorneys as well as an agency official with the title “Legal Administrator and Chief of Operations” exchanged scores of emails with KGL’s lawyers.
“Ok, I’ll Try To Run It Down’’
Testimony and DLA internal documents paint Lussier and some of his agency colleagues as virtual errand boys for KGL, seemingly eager to perform almost any task for the large Kuwaiti contractor.
To take a single example, on July 13, 2011, KGL’s lawyer Hammond sent Lussier an email about the whistleblower who asserted that his client had ties to Iran:
“We would like a copy of the envelope in which the [whistleblower] letter was delivered to DLA (including the tracking number on the registered mail sticker) and a copy of the email used to send the same by electronic mail. Thanks,” the email reads in part.
As it later turned out, the whistleblower had communicated with DLA by email, and there was no envelope or tracking number to turn over.
A court later ruled that the whistleblower’s identity was protected under law.
Official Statements Withdrawn
At one point, Hammond decided to solicit sworn statements from two DLA officials in support of KGL’s defamation lawsuit against Agility. One statement came from Lussier, the law firm’s “inside source,” and another from a DLA contracting officer. The statements of both officials went to the heart of KGL’s lawsuit, purporting to substantiate the harm KGL suffered as a result of the whistleblower’s complaint about KGL’s ties to Iran.
But there was a problem.
Both statements were initially drafted by Hammond in consultation with Lussier and the other DLA official. Before Lussier corrected and signed his statement, it was reviewed by Poling, the agency’s Chief Trial Attorney, who apparently offered no objection, court records show.
Then, in a July 9, 2015, letter, James Coyne— who has since been named DLA’s new general counsel—informed KGL that both statements the officials had signed for submission in court contained “material errors.” Coyne wrote that neither statement could be “…used or considered for any purpose.” He specified that both should be “withdrawn.”
Hammond commented that, “DLA never identified any allegedly inaccurate statement,” adding that, “Mr. Lussier testified that his declaration remains materially true….”
Asked under oath why he had signed an inaccurate declaration, Lussier testified it was “a mistake” that did not fully reflect what “actually happened.”
Lying To Law Enforcement?
As Lussier’s leaking expanded, he apparently tried to get sensitive information out of the FBI. As he later testified, that was to help KGL, whose Washington lawyer had asked for another favor.
According to testimony and court documents, KGL’s lawyers were concerned at the time about the ongoing federal probe into their client’s alleged ties to Iran. Once again, Lussier was prepared to help. In his testimony, Lussier described how he asked a colleague to get in touch with the FBI and the Defense Criminal Investigative Service (DCIS) to find out what was going on. Lussier did this, he testified, at the specific request of Hammond.
According to Lussier, when he asked a DLA colleague to contact law enforcement it was to get ahold of “three or four white binders,” purportedly a collection of internal KGL records showing its ties to Iran.
Lussier testified that he told his colleague to explain to law enforcement that DLA needed the binders so the agency could determine whether KGL was a “responsible contractor”—and not doing business with Iran—a finding DLA needed to make in order to issue another large contract to the company.
But Lussier concedes in his testimony that the explanation was false. The real purpose: to obtain the binders so they could be handed over to KGL, target of the federal probe.
Lussier was asked: “That’s not the real reason you and [another DLA lawyer] were looking for the three to four white binders, is it, sir?”
Question: “The real reason is because of a request Mr. Hammond had made, correct?”
DLA’s apparently false explanation to law enforcement proved unsuccessful: the agency never succeeded in getting ahold of the binders, court records indicate.
In the end, Lussier reported the result to Hammond, explaining in part: “we are not going to push anymore least [sic] we get ourselves in trouble.”
Confidential Criminal Settlement Talks
In 2009, the Department of Justice had indicted Agility on criminal fraud charges for alleged gross overcharging on Army food contracts. Agility denied the accusations, but the indictment nevertheless led to a suspension of Agility’s right to bid on any new DLA business, although its existing contracts with the agency remained in force.
A lawyer for Agility offered no comment.
One of the chief potential beneficiaries of Agility’s suspension: KGL, which stood to pick up new contracts that Agility could no longer bid on.
To restore its ability to compete for potentially billions of dollars in new business, in April 2010 Agility entered into settlement talks with the Department of Justice aimed at resolving the criminal fraud charges against it.
According to two sources personally familiar with the matter, the parties reached a tentative deal that would have lifted the suspension—if Agility agreed to plead guilty to one charge of the multi-count fraud indictment and pay hundreds of millions of dollars to the United States. But the settlement fell apart before it could be finalized, and Agility continues to contest the charges against it, still pending in federal court.
In another example of Lussier appearing to help KGL against its competitor, Lussier leaked 23 internal DLA records to KGL on a single day in 2012—the same day KGL filed its defamation lawsuit against Agility. The leaked information included “confidential settlement communications between Agility and the government in connection with criminal litigation…and sealed documents from previous litigation between Agility and DLA….”
“David, Please Hold Close”
In an earlier March 26, 2012, email chain between Lussier and Hammond, a warning reads: “Do not disseminate without the approval of the DLA Office of General Counsel.”
Included on the chain is DLA General Counsel Pribble, who asks a subordinate to analyze a court ruling involving Agility.
Lussier quickly forwarded the internal analysis to Hammond, with another warning:
“The Badder The Better”
What motivated Normand Lussier, with apparent support from DLA colleagues and superiors, to do so many favors for KGL, a controversial foreign contractor?
The first and most obvious possibility is that DLA personnel might have been paid, offered jobs, or other financial inducements. But when Lussier was asked about this, he denied it under oath, and there is no evidence that he or anyone else at the agency received financial compensation.
A second possibility is that DLA sorely needed to find a contractor able to perform logistics in and around the Persian Gulf, a zone of great strategic importance to the US military. With Agility suspended from bidding on new work, KGL was one of few alternatives, and perhaps the only alternative. According to court documents and testimony, DLA reached the conclusion that KGL was the only company capable of carrying out certain crucial duties needed to support American troops in the region.
One acquaintance described Lussier as a crusader on behalf of the American taxpayer, trying to make sure that what he considered “bad companies” would not be allowed to maintain contracts with the US government. Whatever the explanation, there is no doubt Lussier harbored a strong dislike for Agility, KGL’s competitor.
In one deposition, Lussier was asked, “You would be in favor of something bad happening to Agility, correct?”
A: “Yes, sir.”
The court cases reviewed by POGO cannot provide all the answers but do raise questions that demand a reply:
What is behind the arrest of Fuad Ismael Dashti, a key KGL shareholder and member of the firm’s controlling family? And how might Dashti’s arrest be related—if it is—to DLA’s apparent pattern of collaboration with KGL and its legal counsel? If DLA’s leaking to KGL should turn out to be improper or illegal, who should be held accountable? And if this was the way DLA habitually did business, as DLA’s own court filings seem to suggest, then how many other contractors may have benefited?
Meanwhile, in a ceremony at Fort Belvoir, where DLA is headquartered, General Counsel Fred Pribble recently received three awards and a personalized DLA flag at an accolade-heavy retirement ceremony.
DLA’s leaking could of course violate a variety of whistleblower and contracting laws or regulations. At the very least, there is an appearance of slipshod, even unethical conduct.
The Federal Acquisition Regulation, which governs federal contracting, is explicit on how the government should do business:
“Government business shall be conducted in a manner above reproach and…with complete impartiality and preferential treatment for none… The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest… While many Federal laws and regulations place restrictions on the actions of Government personnel, their official conduct must…be such that they would have no reluctance to make full public disclosure of their actions.”
Yet the DLA’s general counsel’s office did just the opposite, officially opposing public disclosure of its actions, including some of its leaking, citing a legal principle rejected in this specific matter as “bordering on the frivolous.” Today, even with the release of thousands of pages of internal DLA emails and documents, the full scope of what the agency did and its ultimate motive remains difficult to grasp.
Given the recent arrest of a significant KGL shareholder for allegedly violating Iran sanctions, and the pattern of apparent DLA misconduct demonstrated in court documents, there seems little alternative but for Congress, the Department of Justice, and the Department of Defense Office of Inspector General to investigate.