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Supreme Owner Made A Billionaire Feeding U.s. War Machine

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http://www.bloomberg.com/news/2013-10-06/supreme-owner-made-a-billionaire-feeding-u-s-war-machine.html

Chemical warfare and car bombings are just a few of the hazards working in war-torn countries such as Iraq and Syria. For Supreme Group BV, it’s the cost of doing business.

Dubai-based Supreme delivers fuel and food -- 100,000 meals a day -- to troops stationed in some of the most inhospitable parts of the world, including Liberia, Mali and Sudan. The perilous business, where contractors dodge bullets fired by the Taliban and explosives set by insurgents, has made the company’s majority owner, Stephen Orenstein, a billionaire.

..

Orenstein’s biggest business has been supplying military personnel in Afghanistan. Since the start of the war there in 2001, Supreme’s revenue has increased more than 50-fold to $5.5 billion in 2011. According to Supreme’s chief financial officer, Mike Thorne, more than 90 percent of the company’s revenue is derived from its Afghanistan operations.

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‘Fair, Reasonable’

Accusations of Supreme overcharging the DLA first surfaced in a March 2011 audit report by then-Pentagon Inspector General Gordon Heddell.

According to the report, the DLA overpaid Supreme $124.3 million for transportation and corrugated-packing boxes. In addition, Pentagon personnel had no assurance that billings for another $103 million in boxes were accurate or “even chargeable to the contract,” the report said.

The company was also paid about $455 million for airlifting fresh fruits and vegetables from storage areas in the U.A.E. to Afghanistan, without the DLA ensuring the prices were “fair and reasonable,” according to the audit.

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Profit Margins

For all the danger, Supreme’s business is a profitable one when the world’s at war. According to its annual reports, Supreme had net income margins that ranged from 15 percent to 23 percent between 2008 and 2011.

“That’s a fairly large profit margin when it comes to federal government contracts,” said Amey. “Most contractors claim that their profit margins are zero to 5 percent.”

Orenstein confirmed that Supreme’s food distribution fee to the U.S. military in 2010 was “in the range of 18 to 21 percent” and could go as high as 50 percent, according to a transcript of testimony he gave in a 2010 lawsuit.

He also testified that it was “very common that the percentage of total revenue, the service fee percentage, exceeded 75 percent,” when the distribution of food and other supplies flown into Afghanistan by airplanes and helicopters accelerated in 2006.

Another successful company proving once more that without the govt the free market is extremely profitable.

Surely the US military could do this for less especially as a around a 20% profit margin wouldn't be needed?

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