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Agility Unit Sues U.S. to Lift Freeze on Military Contracts

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Dec. 7 (Bloomberg) -- A unit of Agility, the Kuwaiti storage and logistics provider, sued to lift a freeze on government contracts imposed after the company was accused of defrauding the U.S.

Agility Defense & Government Logistics Services called the freeze “capricious” in a filing in federal court in Alabama. The Defense Logistics Agency, or DLA, an arm of the U.S. Department of Defense, suspended the unit from new contracts 10 days after Agility was indicted in November 2009.

Agility, which supplied food to U.S. forces in Iraq, paid premium prices for goods to inflate its profits, according to the indictment. Agility, formerly known in Kuwait as Public Warehousing Co., pleaded not guilty in August to the allegations in federal court in Atlanta.

DLA acknowledged that Alabama-based Agility Defense & Government, or DGS, faced “no allegations” of wrongdoing, the company said in the complaint. DGS’s business “has collapsed” since the indictment and its workforce has shrunk to fewer than 50 employees from about 1,200, according to the complaint.

DLA’s “shifting, inconsistent and unsubstantiated rationales for suspension render its continued suspension of DGS and Agility International arbitrary and capricious,” the company said. The claims of unfairness were brought under the Administrative Procedures Act.

DGS Offer

To satisfy the defense agency, DGS offered to restructure and end its affiliation with Agility, according to the complaint.

Mimi Schirmacher, a spokeswoman for the DLA, said the agency doesn’t comment on pending litigation.

The criminal case in Atlanta continues. During Agility’s arraignment in July, U.S. District Judge Thomas Thrash said new witnesses could be subpoenaed to “investigate new potential charges.”

Richard Deane Jr., a Jones Day partner and former U.S. attorney in Atlanta who represents Agility, declined to comment on the criminal case. Jim Cox, a DGS spokesman, didn’t immediately return a call for comment.

The case is Agility Defense & Government Services Inc. v. U.S. Department of Defense, 11-cv-04111, U.S. District Court, Northern District of Alabama.

To contact the reporter on this story: Laurence Viele Davidson in Atlanta at lviele@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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