An overseas supplier of food and water to U.S. troops in the deserts of Afghanistan on Monday pleaded guilty in what a federal prosecutor in Philadelphia called a case of "war profiteering," and paid $389 million in fines, damages, and penalties.
From July 2005 until April 2009, Supreme Foodservice GmbH and an affiliated company in the United Arab Emirates overcharged the U.S. military by $48 million for water and fresh fruit and vegetables delivered to bases in Afghanistan, according to charges by the U.S. attorney for the Eastern District of Pennsylvania.
The scheme, overseen by Supreme's billionaire majority owner, Stephen Orenstein, who is an American, and other executives, worked through a third affiliated company, called Jamal Ahli Foods Co. L.L.C.
Jamal Ahli Foods was established solely to add an extra layer of profit - averaging 32 percent on top of the profit built into the military contract - on the supplies sold by Supreme, according to a court filing.
"We regard their crimes as the worst sort of war profiteering," Bea Witzleben, the assistant U.S. attorney who prosecuted the case, told U.S. District Judge Gene E.K. Pratter during Monday's hearing.
Orenstein, whose father founded Supreme in 1957, is based in Dubai and out of reach of federal prosecutors because the U.A.E. does not have an extradition treaty with the United States. That made it impossible for Orenstein to stand trial and face possible jail time, Witzleben said in court.
Orenstein owns 75 percent of Supreme and oversees day-to-day operations.
Instead, representing Supreme in the courtroom was Emma Sharma, the company's ethics and compliance officer since 2011. "We recognize that today is a sad day in our corporate history," Sharma told the judge.
Several times during the hearing, which happened on the day American troops closed their operational command in Afghanistan, Pratter expressed frustration that the "primary actors" behind Supreme were not present.
"This is about soldiers in the desert being charged outrageous amounts of money for water. All for money. Pretty low," Pratter said.
In addition to the $389 million in fines and penalties, Supreme will be on probation for five years and its owners will be prohibited from doing business with the federal government during that period. Pratter amended the probation to require Supreme to hold an annual event during each of those five years to honor veterans or their families.
The case was prosecuted in Philadelphia because the Defense Logistics Agency-Troop Support, formerly known as the Defense Supply Center Philadelphia, which administers contracts to supply the armed services with food, water, and other essentials, is in the city.
The $389 million included $101 million to settle a whistle-blower lawsuit. The whistle-blower, Michael Epp, a German citizen who worked for Supreme in Dubai, will receive $16.6 million of the $101 million.