A judge has relied on a legal technicality to set aside the March conviction in the first corporate fraud case to emerge from Iraq. The fraud has cost US taxpayers millions of dollars.

What signal does this send other US contractors in Iraq accused of exploiting the chaos following the Iraqi invasion to steal hundreds of millions of dollars?

The case involves the contractor Custer Battles. Not the sort of name you would forget.

Custer Battles was the first US contractor to have been found guilty of defrauding the US Government in Iraq. The company, established by former Rhode Island Republican politico and ex-CIA employee Mike Battles and ex-army officer Scott Custer, had been found guilty of defrauding the United States by sending out obscenely inflated invoices from shell companies to overcharge the coalition authority.

You can read more about that case in this Corpwatch report here.

Some of the more sensational allegations involve it charging the Coalition Provisional Authority for services not rendered (like sending them the bill for screening civilian air passengers when violence had halted commercial air traffic), getting paid to supply trucks that didn't run and circumventing an official ban on its services through the use of phony shell companies.

For more on that, check this report from Rhode Island's Providence Journal.

The problem with this case was that it was filed under Federal False Claims Act, which allows insiders to bring suit on behalf of the government and share in damages awarded. The argument against the March ruling was whether bills sent to the Coalition Provisional Authority were the same as bills sent to the US Government.

Enter Judge T. S. Ellis III, of the Federal District Court in Alexandria, Virginia.

The judge decided that the coalition authority was an international entity which meant that bills presented to American officials then detailed to the authority were not subject to the False Claims Act, reports The New York Times.

Put simply, the judge ruled that the plaintiffs had failed to prove that the claims had been presented to the United States. Forget the fact that the coalition authority was set up and funded by the US to run Iraq and run by US employees

All this sends a signal to the other contractors in Iraq who are raking it in, exploiting the corruption that's permeating through Iraq and the country's endemic inability to keep its books straight.

Throwing out fraud charges on a legal technicality only makes it worse and adds to the appalling mess created by a war that doesn't end.