“While Americans worked to rebuild Iraq, many were attacked by a terrorist group that we allege has been funded in part by the defendants’ corrupt sales practices,” said Josh Branson, a Kellogg Hansen partner.
A spokeswoman for Pfizer, Allyanna Anglim, said the company “categorically denies any wrongdoing. Our mission is to provide medicines to patients to help better their lives.”
Johnson & Johnson declined to comment.
Jennifer Friedman, a spokeswoman for General Electric, said the company “became aware of the complaint today and we are thoroughly reviewing the allegations.”
The central argument of the lawsuit is that the companies must have known that the Iraqi health ministry had become a de facto terrorist organization, and the American firms should have at least insisted that contracts be structured to guard against diversion and corruption. It is illegal under United States law to knowingly fund terror groups; the Mahdi Army and other Sadrist militias are not designated as terror organizations by the State Department, but they are linked to Hezbollah, which is.
The lawsuit says that the companies underwrote the Mahdi Army in two ways. Contracts mandated discounts, but instead of lowering the price, the companies provided “free goods” often equal to about 10 percent of the total order, allowing ministry officials to sell the extras on the black market or distribute them to fighters.
The companies were also required to hire intermediaries to register their companies, get approval for the use of their products in Iraq and negotiate contracts. The lawsuit says the payments to intermediaries were thinly-disguised bribes.
After the 2003 overthrow of Saddam Hussein, the procurement budget for Iraq’s health ministry soared to more than $1 billion in 2004 from about $16 million, in part because of an infusion of aid from the United States.
As the United States devolved power back to Iraqis n 2004, some government ministries were taken over by political factions. The health ministry was among the first to go, with Mr. Sadr’s movement taking charge. Very quickly, the ministry’s technocratic leaders and many secular doctors were purged.
Mr. Sadr’s militia was sometimes referred to as the “Pill Army” because its fighters were often paid with prescription medicines and used hospitals as staging areas and ambulances to launch attacks. The Iraqi health ministry’s headquarters and hospitals were festooned at the time with pictures of Mr. Sadr alongside slogans declaring “Death to America.”
Some hospitals in Baghdad became staging areas for death squads, from where Mahdi Army forces launched mortars against American troops. Sunni patients were often summarily shot. A State Department cable from 2006 quoted a top Iraqi politician as describing the health ministry as “The Ministry of Weapons Transportation.”
That the companies knew their business practices were inappropriate and perhaps illegal, the lawsuit said, was suggested by settlements each reached on charges that they had used identical tactics and even some of the same intermediaries before the war as part of an oil-for-food program sponsored by the United Nations that was found to be riddled with fraud.
General Electric, Johnson & Johnson and Pfizer are likely to argue that they were simply selling to a government that the United States was spending billions of dollars to support, and that cutting off Iraq’s health ministry from lifesaving products would have been counterproductive to American goals.
About 100 former military personnel or their family members are plaintiffs in the lawsuit.
“It’s unconscionable to have U.S. companies give money to terrorists who then kill U.S. troops,” said one of the plaintiffs, Ami Neiberger-Miller. Her brother, Specialist Chris Neiberger, a 22-year-old tank gunner, was killed in 2007 in Baghdad when his Humvee was blown up by a device that Ms. Neiberger-Miller later learned was linked to the Mahdi Army.