Agility DGS Loses U.S. Military Contract As Fallout From Criminal Case Continues

Last Updated Apr 20, 2010 10:54 AM EDT

Since its liberation from the Iraqis in 1991, Kuwait has become a major base of operations for the U.S. military. The emirate was a major support facility for the invasion of Iraq 2003 and remained the supply point for U.S. troops in that country after the overthrow of Saddam.

The Kuwaiti company Agility DGS (AGLTY:KW) ran these supply operations for years; U.S. government contracts account for about half its $XXX annual revenues. Now the company is in big trouble.

In 2009 Agility was indicted for fraud for overcharging on certain products provided to them. The case is still being contested. If Agility loses, it could end up paying large fines or be banned from contracting with the U.S. government. Then, just last week the case was expanded to include two of the company's subsidiaries. Trading of Agility shares were temporarily halted on the Kuwaiti stock exchange, of which it is a major component, as it readjusted its financial statement.

Now it has been announced that in six months the company will lose its major contract to support the U.S. troops in Iraq. The Pentagon has awarded a contract worth more than $2 billion to Dubai-based ANHAM FZCO to provide "full-line food and non-food distribution and support to Department of Defense customers in Kuwait, Iraq and Jordan."

That is a lot of money and work to make up for any company. However the court case is settled, Agility's punishment has been swift and severe.

Flickr photo: photohome

  • Matthew Potter

    Matthew Potter is a resident of Huntsville, Ala., where he works supporting U.S. Army aviation programs. After serving in the U.S. Navy, he began work as a defense contractor in Washington D.C. specializing in program management and budget development and execution. In the last 15 years Matthew has worked for several companies, large and small, involved in all aspects of government contracting and procurement. He holds two degrees in history as well as studying at the Defense Acquisition University. He has written for Seeking Alpha and at his own website, DefenseProcurementNews.com.