A civil lawsuit involving KGL in Pennsylvania has brought to light accusations that could bear directly on the alleged fraud and money laundering scheme in Kuwait. The lawsuit, brought by KGL, charges the firm’s principal competitor, Agility Public Warehousing Co., with defaming KGL’s reputation by falsely claiming it had ties to Iran.
Saed Dashti and Marsha Lazareva (Source: Instagram)
Testimony in the Pennsylvania case—which is ongoing—includes declarations sworn in 2013 by a pair of former executives of KGL Investments, as part of Agility’s defense. Both said Dashti and Lazareva misinformed investors about KGLI’s financial condition, and one of the executives reported they had made repeated trips to Russia, Iran, and Syria in an apparent attempt to shore up KGLI’s faltering finances.
The two former KGLI executives testified that Dashti and Lazareva occupied offices on the same floors and hallways at KGL’s headquarters in Kuwait along with other subsidiaries.
One of the executives who testified, Ahmed Mabrouk, is an American citizen currently employed in the US financial industry. Court records identify him as former KGLI Vice-President Investments, a job where he testified he spent 18 months in 2008 and 2009 (a period covered by the 2017 criminal indictment) helping to analyze KGLI’s so-called “Port Fund,” an entity that invested in marine facilities around the Middle East and elsewhere. Under oath, Mabrouk said:
“Ms. Lazareva described to me the Islamic Republic of Iran Shipping Lines (IRISL) as KGL’s vehicle to Iran and she further told me that IRISL made a lot of money for KGL. When I was employed at KGLI, I observed Ms. Lazareva in her office reviewing documents related to IRISL, which bore the logo of IRISL, as well as the Iranian emblem.”
The declaration of Mabrouk, who could not be reached for comment, did not include documentary or other evidence to support his statement.
The United States, European Union (EU), and United Nations (UN) have all imposed sanctions on IRISL, Iran’s state-owned shipping company and a former joint-venture partner with KGL. Referring to US sanctions, applied in 2008, then-Treasury Under Secretary for Terrorism and Financial Intelligence Stuart Levey explained:
“Not only does IRISL facilitate the transport of cargo for U.N. designated proliferators, it also falsifies documents and uses deceptive schemes to shroud its involvement in illicit commerce. IRISL’s actions are part of a broader pattern of deception and fabrication that Iran uses to advance its nuclear and missile programs.”
In his declaration, Mabrouk said, “I reviewed KGLI’s internal financial statements and observed that KGLI consistently had a negative cash flow.” Mabrouk also testified that he looked at “…financial statements that had been provided to investors. The financial statements provided to investors consistently, and in bad faith, misrepresented financial data regarding KGLI and its portfolio companies’ actual financial condition.”
Concern about KGLI’s financial condition, according to Mabrouk, caused KGLI’s banks to stop lending it money, creating a cash squeeze. And that led to “fundraising” trips by Dashti and Lazareva, he said:
“I understood that Ms. Lazareva and Saeeed (sic) Dashti took a number of trips on private planes to, among other places, Iran, Syria and Russia. Following each trip, I observed in KGLI’s internal financial statements an influx of funds into KGLI’s accounts. Ms. Lazareva told me and others at KGLI that these trips were for ‘fundraising;’ however, to my knowledge, such fundraising was not tied to any formalized investment process.”
Mabrouk did not say what, if anything, KGL Investments did in exchange for the money it allegedly received, or that he knew specifically that inflows had come from Iran, Syria, and Russia, even though he said the pair had travelled there.
Mabrouk did specify that Lazareva at one point asked him to travel to Syria to “review a potential investment in a port,” but he refused because that country was under US sanctions. Because Mabrouk also holds an Egyptian passport, he said Lazareva told him to use that travel document instead of an American passport. When he refused a second time, it set off a chain of events which, he said, led to his departure from the company.
Another KGLI executive also offered testimony in the same Pennsylvania court case. Wael Salam, an American citizen who worked for KGLI both in Kuwait and in Atlanta, said he was the firm’s Chief Investment Officer. He said both Dashti and Lazareva were directly and deeply involved in decision-making at the firm. He also reported that KGL funded KGLI with money from its subsidiaries as well as seeking contributions from outside investors.
Salam said that, from his perspective as an insider at the company, making profits did not appear to be KGLI’s principal goal, at least given its decision to sink its money and assets from its “Port Fund” into a variety of failing or near-bankrupt facilities in Egypt, Pakistan, and other countries.
Four years before the criminal indictments in Kuwait, Salam testified that he wanted to leave KGLI “…because I believed it was engaging in illicit activities … Specifically, it appeared to me that KGLI was engaged in money laundering, and presenting false financial information to investors.” His statements also show that Salam was trying to raise money to start his own investment fund after he left KGLI, which the company cited as one of the grounds for his dismissal. He could not be reached for comment.
Salam said Lazareva asked him on multiple occasions to visit Iran, sometimes without explanation and at other times to evaluate a port investment. When he refused because Iran was under US sanctions, she suggested that he, too, use his Egyptian passport. He again refused to go and, following a series of disputes and alleged high-pressure tactics by the company, was fired.
A KGL representative declined to comment to POGO on the testimony of Mabrouk or Salam.
More Ties to Iran
The Pennsylvania court case recently provided additional information about KGL’s relationship with Iran, a controversy that stretches back into the Obama Administration. As evidence emerged indicating possible sanctions violations by KGL in its joint ownership of ships with IRISL, Ashton Carter, then Under Secretary of Defense for Acquisition, Technology and Logistics and later Secretary of Defense, wrote to US lawmakers who had inquired about the situation.
In letters to Senators Claire McCaskill, Robert Menendez, Mark Kirk, Robert Bennett, and others in 2011, Carter wrote that DoD could find “no substantial information” that KGL had continuing ties to Iran that would prevent it from holding US military contracts. By that time, the company had publicly announced its decision to end all business dealings with Iran in compliance with US law.
Since then, however, as part of legal discovery in the Pennsylvania court case, KGL has divulged emails and documents, and offered testimony from one of its former executives that appear to show it did have business with IRISL—at a time when Under Secretary Carter was telling Congress just the opposite. At least that is the argument set forth in an extensively documented summary of KGL’s own internal records filed by KGL’s adversary in the Pennsylvania case. Among other things, the summary cites those KGL records showing that its joint venture with IRISL made “at least 63 financial transactions” with the Iranian shipper after US sanctions had been imposed. In another example from the summary, a former KGL executive, Allan Rosenberg, gave the court a statement describing how he set up a “ghost structure” email system that resulted in the concealment of KGL’s continuing business with the Iranian-owned company.
A KGL spokesperson declined to comment on the summary or on Rosenberg’s statement.
Airplane Parts for Iran?
In May last year, Fuad Dashti, a brother of the recently indicted Saed Dashti—both members of the wealthy Kuwaiti family that controls KGL—was arrested at San Francisco International Airport. He was charged with involvement in illegally selling aircraft parts to Iran, according to a senior US official, and brought to Washington, DC, apparently for questioning by the FBI. One official at the time described him as, “singing like a bird” while in US custody. Fuad Dashti has since been allowed to leave the United States and was photographed some months ago in Doha, Qatar. At the time of his arrest, a KGL spokesman told POGO that “the alleged conduct [of Fuad Dashti] does not involve KGL or any of its affiliates and that Mr. Fuad Dashti was not acting as a KGL employee or representative.”
However, Fuad Dashti maintains ongoing financial ties to KGL, and has been listed as a top executive and part owner of National Cleaning Company, which is partly owned by KGL. According to the recent indictment in Kuwait, Saed Dashti also owns a share of National Cleaning, though it is unclear whether misappropriated funds were diverted to the company. There was no reply to POGO’s repeated attempts to reach Fuad Dashti, including a message left at a California house where he is listed as owner.
Key Questions Remain
The criminal indictment of KGL’s chairman adds to a growing roster of unresolved issues swirling around the company and its role as a contractor with hundreds of millions of dollars in business with the US military. Questions surrounding the company’s possible financial ties to Iran, and even Syria and Russia, raise national security concerns at a time when those countries are actively engaged in confronting American interests.
America’s federal acquisition regulations require ethical conduct from companies and their leaders. The large body of evidence in Kuwait’s extensively documented fraud and money laundering case raises doubts whether that requirement is being met.
So, too, does the arrest of Fuad Dashti, long a key figure in KGL’s controlling dynasty, on charges of commercial dealings with Iran. Yet the US government has made virtually no public statements about the matter. The fact that KGL, as long ago as 2011 and perhaps earlier, has been the focus of a probe led by the FBI into its ties with Iran only adds to the doubts. Again, no result of that investigation has ever been made public. And the same is true of the US official response to a well-documented pattern of leaks to KGL’s Washington lawyers by the Defense Logistics Agency. Senior US officials have told POGO that the DoD’s Office of General Counsel and its Defense Criminal Investigative Service have looked at or been made aware of the matter. Yet neither has made a public statement about the issues.
Indeed, years of requests for information about KGL from agencies ranging from DoD to the Treasury’s Office of Foreign Assets Control have been met with incomplete answers and, on occasion, with apparently inaccurate information. Given that result, Congress needs to clear up what is going on with KGL and its huge government contracts, because federal agencies appear unable or unwilling to shed light on the issue, or credibly resolve it.
Given the new criminal charges lodged against KGL’s chairman, the American public needs to know whether the company is a responsible and deserving recipient of US taxpayer funds. To find out, Congress should look into what the FBI and other agencies have learned after years of investigating the company’s conduct, and inform the public of what it learns.
Of course KGL is not the only logistics contractor the US military could rely on. Its principal competitor, and one of the largest single US contractors in the Iraq war, is Agility Public Warehousing Company. Yet Agility, too, has faced its share legal problems: the Department of Justice recently settled criminal, civil, and administrative charges against it. In the criminal case, which began in 2009, DOJ sought hundreds of millions of dollars in compensation for alleged overcharging. In the end, Agility was only required to “pay a maximum of $551…in restitution.” In the civil case, the company agreed to pay $95 million, ending its suspension and allowing it to bid once again on US government contracts.
Taken together, Agility’s recently resolved legal problems and the new criminal charges against KGL’s chairman highlight the need for Congress and the Defense Department to reevaluate a contracting framework that has made America’s military the captive of two giant companies in one of the most strategic parts of the globe, an area where US forces cannot operate without extensive logistical support. As an alternative to this dysfunctional system, Congress and the Defense Department should examine how to foster more competition by explicitly encouraging the Pentagon to make deals with a wider variety of market participants.”