War in Iraq Affords Opportunity for Another "Local Boy" to Get His Name in the Paper

The Wall Street Journal reported on its front page Thursday that a Houston businessman named Samir Itani is a “key figure” in what appears to be a wide-ranging federal investigation of fraud, kickbacks and price-gouging by contractors supplying food to the U.S. military in Iraq.

Mr. Itani---doesn’t ring a bell, does it?---is described by the WSJ as a Lebanese American who runs privately held American Grocers Inc. According to the Journal, Itani

has worked closely with a pair of Kuwaiti companies that lie at the heart of the U.S. government’s fraud inquiry. American Grocers supplied them with peanut butter and other food items, according to court records and corporate spread sheets. Investigators suspect the goods were overpriced.

The two Kuwaiti companies, Sultan Center and Public Warehousing Co. (the latter being the main contractor for providing food to American troops), appear to be intertwined, the Journal says, with “members of Kuwait’s powerful Sultan merchant family … among the largest stockholders in both.”

Sultan Center acted as middleman in supplying Public Warehousing with pepperoni, calzone, potato wedges and other American products made by Con-Agra Foods and other U.S. firms, which originally shipped the products to American Grocers. It’s unclear why American Grocers couldn’t ship the food directly to Public Warehousing, instead of adding Sultan Center as a middleman.

It’s also unclear why American Grocers was a necessary link in the food chain, at least according to the scenario the FBI has outlined. Itani was indicted in July by a federal grand jury in Houston on 46 counts of conspiracy to defraud the government, an event that rated just five paragraphs in the daily newspaper (Itani appears not to have generated much in the way of publicity prior to his indictment). The indictment alleges that American Grocers gained about $2 million from the false claims. In a lengthy news release following the grand jury action, the FBI summarized one part of the scheme:

Itani allegedly instructed an American Grocers employee to bill [Public Warehousing Co.] for the cost of trucking food products to its warehouse, when in fact American Grocers did not incur such costs. American Grocers directed its suppliers, according to the indictment, to ship products directly to PWC, bypassing American Grocers’ warehouse in the supply chain. At Itani's instruction ... the employee billed PWC for the bogus trucking costs by inserting the costs into invoices that American Grocers presented for payment to PWC. PWC paid the invoices, and pursuant to its government contract, billed the government for the moneys it paid to American Grocers, which included the bogus trucking costs. The government then reimbursed PWC for the bogus trucking costs PWC paid to American Grocers.

Peanut butter, calzone, Houston warehouse, fraudulent invoices, Sultan merchant family ... war in Iraq. Yes, we've lost our appetite now.*

*An indictment, of course, is not a finding of guilt. (Hey, we really believe that!)