Supreme Group to pay $434 million in damages and fines for ‘war profiteering’

Paul Snell is managing editor at Supply Management
19 December 2014

A supplier of food and water to coalition troops in Iraq and Afghanistan has agreed a settlement of more than $434 million (£278 million) in damages and fines following a court ruling in the US.

According to the Department of Justice, Supreme Foodservice inflated the price for goods it provided such as fresh fruit, vegetables and bottled water, costing the government an estimated $48 million (£30.7 million).

Supreme Foodservice GmbH and Supreme Foodservice FZE, both part of Supreme Group, pleaded guilty to charges of fraud, wire fraud and conspiracy to commit fraud at the US district court in the Eastern district of Pennsylvania and were ordered to pay $288.3 million (£184 million) in fines and restitutions.

It was alleged Supreme used a local company it controlled, Jamal Ahli Foods Co, to mark up prices to conceal the true price Supreme was paying for the products. In one instance the mark up charged on non-alcoholic beer was increased from 25 per cent to 125 per cent.

“These companies chose to commit their fraud in connection with a contract to supply food and water to our nation’s fighting men and women serving in Afghanistan. That kind of conduct is repugnant, and we will use every available resource to punish such illegal war profiteering,” said US attorney Zane David Memeger.

In addition, Supreme Group will have to pay a further $146 million (£93 million) as part of a civil case, with $101 million ($64.2 million) in damages under the False Claims Act, $20 million (£12.7 million) to settle allegations of over-billing for fuel, and a further $25 million (£16 million) related to alleged false billing on shipping contracts.

“We believe this is the largest fraud recovery against any contractor relating to the Afghanistan and Iraq wars, the largest recovery in a military procurement case initiated by a qui tam whistleblower, and one of the largest fraud recoveries against any defense contractor," said Frederick Morgan, lawyer for the whistleblower Michael Epp.

Epp, a supply chain manager who worked for Supreme in Dubai, provided government investigators with thousands of emails and documents. He will receive $16.6 million (£10.6 million) as result of the settlement under whistleblowing provisions.

In a statement, Emma Sharma, general counsel for Supreme Group USA, said: “We accept full responsibility for and deeply regret our past actions. We have implemented new compliance mechanisms and strengthened our internal processes. We now have some of the most rigorous controls in the industry. We recognise that to re-earn trust, we must always act with integrity. That’s where our focus is and that’s where our focus will continue to be.”

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