David L. Douglass, Partner, Shook, Hardy & Bacon LLP, Washington, D.C.

2. Contracting Risks In Emergent Situations: The Custer Battles Case Study David L. Douglass, Partner, Shook, Hardy & Bacon LLP, Washington, D.C. J. William Eshelman, Partner, Tighe Patton Armstrong & Teasdale, Washington, D.C. Robert T. Rhoad, Partner, Porter Wright Morris & Arthur, LLP, Washington D.C. Date July 27, 2007 Time 10:45 am (session one) 1 pm (session two)

3. The Custer Battles Story

4. The Custer Battles Story • “Duty, Honor, Country” • Scott Custer • Army Ranger • Post Conflict Ethnic Dispute Resolution Scholar • Non-Profit Humanitarian Relief Organization Founder • Mike Battles • West Point • Army Ranger • CIA • Congressional Candidate

5. The Custer Battles Story • Explosive Growth • 2003 • From A Handful Of Domestic Contracts To 40+ International Contracts • From 5 Domestic Employees To Over 1,500 International Employees And Subcontractors • From One Office To Multiple International Offices With Management, Operational And Legal Needs

6. And then, the sound no one wants to hear …

12. The Custer Battles Story • “War Profiteers?” • Whistleblowers • Allegations • Motivations • Government Investigation of Allegations and Non-Intervention • Litigation, Media Campaign, and Congressional Campaign • One Thing To Proclaim; Another To Prove • What Relators Said • What The Facts Established

13. The Result? • Custer Battles Prevails

14. The Custer Battles Story • Or do they? • Suspension • Attorneys’ Fees And Expenses • Financial Ruin Of Company/Jobs Lost • Reputational Damage

15. The Custer Battles Story • In sum, • the “Custer Battles Story” tells how two decorated Army veterans with entrepreneurial spirit, smarts and know-how created a robust company of hundreds of employees and subcontractors serving the emergent wartime needs of the CPA. • What it teaches is how those who take risk and succeed under unimaginable circumstances can be undone by the unsupported allegations of “whistleblowers” who proceed with a case on behalf of the Government despite the fact that the Government itself has elected not to pursue it.

16. Lessons Learned • Why study the Custer Battles experience?

17. Lessons Learned: Enforcement Climate • Fraud Task Forces • National Procurement Task Force • Hurricane Katrina Fraud Task Force • Agency Inspectors General • Congress • Whistleblowers • Qui tam actions • Cooperation with government can lead to criminal investigations

18. Lessons Learned: Contracting Under Emergent Conditions • Custom vs. legal requirements • Contract compliance • Documentation • Multiple Governmental Authorities • Foreign • Domestic • Federal, State, local • Multiple Agency involvement • Foreign Corrupt Practices Act Risks

19. Lessons Learned: Legal Risks • Contracting is Prospective; Accountability is Retrospective. • Prospective • Speed • Ability Speed not cost was the deciding fact in the selection of Custer Battles. “All [I] wanted was an assurance Custer Battles could handle the contract. Frank Hatfield, Senior U.S. Airport Official in Iraq. • Retrospective • Accountability • Documentation

21. Lessons Learned: The Contracting Officer • Authority • Knowledge/Expertise • Turnover

22. Lessons Learned: The Fog of War • What Rules Apply? The tale of the three little contracting officers: • First little contracting officer: “The CB Contract was subject to the FAR.” • Second little contracting officer: “The FAR did not apply to the CB contract.” • Third little contracting officer: “The CB contract certainly was subject to the FAR.”

23. Lessons Learned: Business Risks • Disruption • Damages • FCA: Treble Damages, penalties and attorneys fees • Goodwill

24. Risk Management • Preventative Measures • Document • Clarify • Confirm source of funds and identity of your contracting partner • Advice of counsel • Compliance Programs • Remember, in the government’s view profit = fraud.