By: James W. Kraus
On December 10, 2012, DOJ announced that British contractor APTx Vehicle Systems Limited had entered into an agreement to plead guilty to conspiracy to defraud the United States, the Coalition Provisional Authority that governed Iraq from April 2003 to June 2004, the government of Iraq and JP Morgan Chase Bank.
The case centers on a fraudulent scheme involving an August 2004 contract valued at over $8.4 million for the procurement of 51 vehicles for the Iraqi Police Authority. The criminal information, to which APTx agreed to plead guilty as part of the deal, further charges that in May and June of 2005, APTx submitted shipping documents to JP Morgan, who had issued letters of credit for payment under the contract, so that APTx could draw down on the letters of credit. However, the shipping documents asserted that all 51 vehicles were produced and ready to ship to Iraq when, in fact, none of the vehicles had been built, none of the vehicles were legally owned or held by APTx and none of the vehicles were in the process of transport to Iraq. The fraudulent shipping documents also listed a company as the freight carrier that APTx knew was not a shipping company and named a fictitious company as the freight forwarder.
Benjamin Kafka, a representative for APTx in the United States, was charged in 2009, with one count of misprision of a felony in connection with his role in the conspiracy. The government alleged that Kafka allowed APTx to use his corporate name and identity as the freight carrier and freight forwarder on the fraudulent shipping documents presented to JP Morgan.
As part of the plea agreement filed with the information, APTx agreed to pay a criminal fine of $1 million. A civil settlement agreement resolving a related action filed under the False Claims Act was also announced.