Dubai-based defence group fined $389m after overcharging for US troops’ food and water

Supreme Foodservice GmbH, together with Supreme Foodservice FZE in Dubai, pleaded guilty to using a Sharjah-based company under its control to overcharge for food and bottled water.

The court case centred on food and bottled water supplied to US troops in Afghanistan. Justin Sullivan / Getty Images

A defence contractor operating from Dubai has agreed to pay $389 million after admitting overcharging the US military in Afghanistan for providing food and water to troops.

The Swiss-based logistics company Supreme Foodservice GmbH, together with Supreme Foodservice FZE in Dubai, pleaded guilty on Monday in a court in Pennsylvania to using a Sharjah-based company under its control to overcharge for food and bottled water to the tune of $48m.

The court heard how the companies fraudulently inflated the price for food and bottled water between 2005 and 2009.

They used Sharjah-based Jamal Ahli Foods Co LLC (Jafco), a company under the control of Supreme Foodservice FZE, as a middleman to mark up food prices.

The companies used Jafco to mark up the price of non-alcoholic beer by 125 per cent and milk and juice products by 55 per cent, according to court documents.

The companies and their owners “made concentrated efforts to conceal Supreme’s true relationship with Jafco, and to make Jafco appear to be an independent company”, the US department of justice said in a statement on Monday.

“They also took steps to make Jafco’s markup on [local market-ready goods] look legitimate, and persisted in the fraudulent markups even in the face of questions from the [US government].”

Both companies pleaded guilty to major fraud against the United States, each agreeing to pay $96m in fines, as well as joint payments of $48m in restitution and $10m in criminal forfeiture.

The two companies jointly paid $38.3m directly to the US Defence Logistics Agency – Troop Support as a refund for separate overpayments on bottled water.

The fraud came to light after a separate 2010 law suit filed by whistleblower Michael Epp, a former Supreme employee in Dubai,

He alleged that the Supreme group had violated the US’s False Claims Act by knowingly overcharging for supplying food and water under the SPV contract.

The Supreme group also agreed on Monday to pay $101m to settle the civil law suit.

Supreme Foodservice GmbH entered into a contract with the US Defence Logistics Agency – Troop Support (then known as Defense Supply Centre of Philadelphia) in June 2005 to supply food and water and bottled water to US troops serving in Afghanistan. The total contract was worth $8.8 billion between December 2005 and December last year, according to court documents.

“The civil resolutions and agreements reflect the justice department’s continuing efforts to hold accountable contractors that have engaged in war profiteering,” said the acting assistant attorney general Joyce Branda for the justice department’s civil division. “The department will pursue contractors that knowingly seek taxpayer funds to which they are not entitled.”

Supreme Group said it accepted full responsibility in a statement while expressing deep regret for past actions.

“We recognise that to re-earn trust, we must always act with integrity,” said Supreme Group USA’s general counsel Emma Sharma on Monday. “That’s where our focus is, and that’s where our focus will continue to be.”

No one from Supreme’s Dubai office was available for comment.

Supreme group’s Dubai-based subsidiary Supreme Logistics FZE also agreed to pay $25m to resolve alleged false billings in connection with shipping contracts between Scott Air Force Base in Illinois and various shipping carriers to transport food to US troops in Afghanistan.

Yet another group subsidiary, Supreme Site Services GmbH, also agreed to pay $20m to settle allegations that it overcharged for fuel purchased by the US Defence Logistics Agency for Kandahar airfield in Afghanistan under a Nato basic ordering agreement.

Follow The National's Business section on Twitter

.