By Matthew Bigg
ATLANTA (Reuters) - A U.S. court has ruled against Kuwaiti logistics company Agility on a key point of law, dealing a blow to the company's fight against charges it defrauded the U.S. Army in multibillion-dollar contracts.
Agility was the largest supplier to the U.S. Army in the Middle East during the war in Iraq and the case is politically sensitive in both Washington and Kuwait.
The court said prosecutors correctly served Agility with an indictment in 2009 when it accused the company of overcharging the Army over 41 months on $8.5 billion in supply contracts first signed at the start of the Gulf War in 2003.
Agility argued the suit was invalid because prosecutors only served it on the company's U.S. subsidiary and not the Kuwait-based parent company, Public Warehousing Company K.S.C. a.k.a. Agility.
"PWC has not shown any reason for Agility Holdings to exist other than to conduct PWC's business in the United States," said the ruling by U.S. District Judge Thomas Thrash issued on Monday.
"The Government has shown a sufficient interrelationship between PWC and Agility Holdings to hold that service of the summons on Agility Holdings ... was sufficient to effect service on the foreign parent corporation."
The ruling appears to remove a significant obstacle to a criminal trial after more than a year of legal wrangling.
Agility said on Tuesday it was "disappointed" with the court's decision, but did not say whether it would appeal.
"The company continues to believe this case involves a civil contract dispute and should not be a criminal matter," it said.
"Agility remains committed to trying to resolve the dispute through dialogue with the Justice Department but is prepared to defend itself vigorously if that dialogue is not fruitful."
The government filed a civil suit in January in addition to the criminal indictment.
Thrash also ruled that Agility was not a fugitive from justice as prosecutors claimed. The designation if upheld would have considerably weakened the company's legal position and potentially exposed it to new penalties.
The case is United States of America v. The Public Warehousing Company, K.S.C., a/k/a Agility, U.S. District Court, Northern District of Georgia, Atlanta Division, No. 1:09-CR-0490-AJB-TWT.
(Editing by Andre Grenon)