Monday, June 28, 2010

How agile is Agility?

What, another whistle-blower story? Yep. Read on.

Agility Defense & Government Services, Inc.
Agility Defense & Government Services, Inc. provides supply chain management, logistics, and commodity services for defense and government customers. It offers third party logistics, prime vendor program, sourcing and purchasing, and performance-based logistics. Agility Defense & Government Services, Inc. was formerly known as PWC Logistics. The company was incorporated in 2006 and is based in Alexandria, Virginia. Agility Defense & Government Services, Inc. operates as a subsidiary of The Public Warehousing Company.
From the Agility company website and press releases:
Since 2003, Agility has developed a world-class commercial logistics business to complement its government contracting portfolio. That development has expanded Agility’s geographic footprint around the world, established our leading position in emerging markets, and added specialized capabilities to help us meet the needs of niche market segments.

Today, Agility’s commercial logistics arm, Global Integrated Logistics (GIL) operates in 120 countries and serves over 50,000 customers. Our operational platform is distinguished by its strength in high-growth emerging markets: China, India, and the rest of Asia; the GCC and the rest of the Middle East; Russia and Eastern Europe; and Latin America. And we offer specialized logistics solutions around Chemicals, Fuels, Fairs & Events, and Project Logistics.

We also have diversified our Defense & Government (DGS) business. Our focus has been on expanding our business with the US government in geographies outside of Kuwait and Iraq, as well as attracting other governments, international organizations, and non-governmental organizations as customers. Finally, we acquired a group of non-Agility branded companies working in the areas of industrial real estate management, aviation and ground handling, and customs modernization and e-government solutions, which are grouped together under Agility Infrastructure.

From modest roots in Kuwait, Agility became an acknowledged global top ten global logistics player. We bring global scope, flexibility, and specialization of services to complex logistics challenges. We take pride in our commitment to personal service. Our customers consistently acknowledge that Agility goes above and beyond.


Agility believes strongly in conducting business with integrity. Our reputation for integrity and fairness is an asset every employee owns.


Integrity: Building trust with customers, communities, suppliers, and one another by doing what is right: keeping our promises, being a good citizen, complying with regulations and laws, and honoring rules of engagement.

Personal Ownership: Taking personal responsibility for the outcome by anticipating needs, being resourceful, and following through until the job is done.

Teamwork: Working across organizational and cultural boundaries to achieve extraordinary performance and deliver personal service to customers.

Excellence: Building a culture based on excellence in thought and in execution to better serve customers.

May 12, 2009 Agility Team Captures $17M Guam Depot Contract
Agility Defense & Government Services (DGS) and Accent Controls Inc. have won a contract to manage the Defense Distribution Depot Guam, Marianas (DDGM), the two companies announced today.

The five-year contract, worth $17 million, was awarded May 1, 2009 by the Defense Distribution Center, New Cumberland, Pa.

Accent Controls Inc. (ACI), based in Riverside, Mo., will be the prime contractor. ACI is certified by the federal government as a minority, woman-owned, disadvantaged small business. It will provide program management and ISO certifications in quality, safety and environmental protection.

Agility DGS, based in Alexandria, Va., will act as a subcontractor, providing warehousing, distribution and management services.

November 17, 2009 Agility Shares Drop Most Since July After Indictment (Update1)
Agility, the Middle East’s biggest storage and logistics company, tumbled the most in four months after being indicted by a U.S. federal grand jury on multiple charges of conspiracy to defraud the United States.

The company, also known as Public Warehousing Co., was suspended from future U.S. government contract awards following the indictment until “such time as a determination has been made about the company’s responsibility as a contractor,” it said. All of the charges concern multi-billion dollar contracts issued by the Department of Defense for feeding American troops in Iraq, Kuwait and Jordan, the U.S. Department of Justice said yesterday.

Agility became the principal food supplier to the U.S. army in Iraq and Kuwait in 2003, the logistics provider said in a statement today. In August the company won a contract with a potential value of $214 million from the U.S. Defense Logistics Agency for warehouse and distribution services in Kuwait and Southeast Asia. Orders from U.S. forces increased the company’s third-quarter profit 15 percent to 40.5 million dinars ($141.9 million), Agility said earlier this month.

The complaint alleges that the “defendants knowingly overcharged the U.S. for locally available fresh fruits and vegetables” purchased by Agility from Sultan Center for Food Products Co., according to a statement on the Department of Justice’s Web site. Agility allegedly didn’t disclose or pass on rebates and discounts it obtained from U.S.-based suppliers, as required by its contracts, the statement said.

About $5 billion of Agility’s annual revenue of $7 billion comes from its global logistics business and from private-sector customers, while the remainder is generated from defense and government contracts, Chairman Tarek Sultan said in July. As much as 70 percent of its defense business is in Iraq.

The “allegations” should have no impact on any of its current contracts with the U.S. government, the company added.

Feb 3, 2010 Agility attempts to vault fraud charges
Agility, a Kuwait-based multi-billion-dollar logistics company spawned by the US invasion of Iraq, is scheduled be arraigned on February 8 on criminal charges of overbilling US taxpayers for food supply contracts in the Iraq war zone that were worth more than US$8.5 billion.

If the lawsuit is successful, the company could owe the US government as much as $1 billion.

Agility, originally known as Public Warehousing Corporation (PWC), boasts that it once supplied one million meals a day to US soldiers and contractors in the Middle East. The company's Mercedes trucks hauled delicacies ranging from ice cream to lobster tails to feed soldiers living on military bases scattered throughout Iraq.

Today, it has contracts to provide food to the US Agency for International Development (USAID) in Djibouti in the Horn of Africa and - until about a month ago - was supposed to ramp up food delivery to the troops newly posted in southern Afghanistan.

In a lawsuit filed on November 18, 2005, Kamal Mustafa Al-Sultan accuses Agility of cheating him of a share of profits from the lucrative contract because he refused to go along with alleged corruption. A former business partner of PWC/Agility, Sultan is a cousin of the company founder and CEO, Tarek Abdul Aziz Sultan Al-Essa.

After conducting a grand jury investigation, the US Department of Justice (DoJ) joined Kamal Sultan and filed criminal charges against PWC/Agility on November 9, 2009, immediately boosting the original lawsuit's chances of success.

"We will not tolerate fraudulent practices from those tasked with providing the highest quality support to the men and women who serve in our armed forces," said Tony West, assistant attorney general for the District Court for the Northern District of Georgia, in a press release.

PWC was part of the Sultan family's business empire, which is grounded in high-end supermarkets and mega-stores across the Middle East. Starting in the late 1990s, Tarek Sultan teamed up with ex-US soldiers to bid on lucrative US government projects.

PWC's first major contract, initially advertised in May 2002, was for a US Defence supply center called Prime Vendor Subsistence to supply food to US military bases in the Middle East in anticipation of the invasion of Iraq. (Halliburton/KBR cooks and serves the food, but it does not supply it.)

At the time, Tarek Sultan had no experience in food supply, nor did he have a personal track record with the US military - a requirement for bidding on the contract. However, KMSCO, run by his cousin, Kamal Sultan, had multi-million-dollar US military contracts dating back to 1996 for "life support, food supplements, and ice".

In May 2003, PWC won the initial Prime Vendor contract. Soon after that, Kamal Sultan alleges, PWC officials asked him to take part in a scheme to defraud the military. When Kamal refused, Tarek Sultan dropped KMSCO from the contract, thus depriving Kamal Sultan of his expected 30% profit share.

The company has powerful supporters in the US military. Its brochures quote General David Petraeus, now the head of US Central Command: "Agility has performed a miracle across Iraq."

Some see less a miracle and more profiteering. Rory Mayberry, a Halliburton/KBR food production manager for a dining facility at Camp Anaconda, testified before Congress in June 2005:
"For example, tomatoes cost about $5 a box locally, but the PWC price was $13 to $15 per box. The local price for a 15-pound box of bacon was $12, compared to PWC's price of $80 per box. ... PWC charged a lot for transportation because they brought the food from Philadelphia."
Connections with the Kuwaiti government was a factor in Agility's operations, according Saad Salem Al-Qattan, a Kuwaiti businessman who owns Al-Rakeb Co Petroleum Electricity & Construction Services (RAPICO), which is involved in a land dispute with PWC/Agility. "They get options, privileges, that no one else can get, because they used to be part of the [Kuwaiti] government," he said.

June 27, 2010 Kuwait’s Agility Slumps to Lowest Since 2003 on Fraud Charges
Agility retreated to the lowest level since 2003 after U.S. federal prosecutors said the Middle East’s largest storage and logistics company may still be overbilling the American government for military supplies.

“We feel very strongly and have evidence that the fraud has continued,” Assistant U.S. Attorney Barbara Nelan told Magistrate Judge Alan Baverman at a pretrial hearing in a criminal case against Agility on June 25 in Atlanta.

Agility is accused of overcharging the U.S. government on a multi-billion dollar contract to supply food for troops in Kuwait and Iraq. The company is “war-profiting,” Nelan said. The contract with Agility, formerly known as Public Warehousing Co., runs until December, Nelan said.

In a filing earlier last week, prosecutors accused the company of being a “fugitive from American justice” that is trying to evade a trial on charges of overbilling on military supplies.

Agility claims it has not been properly served in the case.

Meanwhile, back over at the Agility website: A Dialogue with the Chairman on Agility’s Direction for 2010
We are aware that 2010 is a pivotal year for Agility because of the US troop drawdown in Iraq and subsequent phasing-out of some of our large government contracts. This year is the final option year for US government contracts that have historically contributed 25%-35% of Agility’s annual revenue.

Although Agility anticipated and planned for the inevitable troop drawdown in Iraq, there are two additional, unplanned challenges that the company has also had to contend with in the last year.

• The first is the global recession that jolted the world at the end of 2008, along with the slower-than-expected recovery from that recession. The global slowdown has an ongoing impact on our Global Integrated Logistics (GIL) business.

• The second is the legal proceedings by the US government which led to the suspension on winning new government business. This has had a deep impact on our Defense & Government Services (DGS) business.

Together, these three challenges have created a changed financial landscape for Agility in the near-term. I want to explain our financial position today and, more importantly, our plans going forward.

• The Defense & Government (DGS) business has been set back by the combination of the troop drawdown and the legal case with the US government. If the company is able to settle the dispute, then DGS will focus on aggressively rebuilding its business, reinvigorating business development and customer outreach. If we cannot reach a mutually-agreeable settlement, then we would need to assess all strategic options for the DGS business. For now, the situation is fluid and no decision has been made, but we have contingency plans in place.

There's much more on this floating around the web.

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