[JURIST] A new federal lawsuit has been filed against banned American military contractor Custer Battles [corporate website] and two former Pentagon officials alleging that the defendants tried to bypass a suspension order against the contractor by setting up shell companies to continue gaining rebuilding contracts in Iraq. The lawsuit, a copy of which was obtained by AP, names former acting Navy Secretary Hansford T. Johnson [official profile] and former acting Navy Undersecretary Douglas Combs as co-conspirators in the scheme. The suit was brought by two whistleblowers, including Robert Isakson, a former employee of the contractor who won [JURIST report] a previous suit against Custer Battles in March based on allegations that the firm overcharged the US Coalition Provisional Authority [official website] by nearly $50 million.

Custer Battles was barred from doing business in 2004 after charging the US government for contracting work in Iraq that was never actually completed. The new lawsuit also alleges that the shell companies created by Custer Battles sold weapons on the black market in Iraq, which were likely purchased by Iraqi insurgents for use against US soldiers. The two whistleblowers were able to file the suit on behalf of the US government under the federal False Claims Act [text] which also entitles them to a portion of damages awarded if the case is successful. AP has more.