The opinion, in response to a judge's query, held that the federal False Claims Act applies to contracts issued by the authority, which ran Iraq from shortly after the 2003 invasion that ended the rule of President Saddam Hussein until it ceded power to an interim government last June.

Although much of the money the Coalition Privisional Authority (CPA) used was seized from Saddam's government, US government or military workers distributed it on behalf of the CPA. That makes fraud against the CPA equivalent to fraud against the United States, Justice Department lawyers said in a court brief.

The brief came in response to US District Judge TS Ellis III, who is hearing a fraud lawsuit against the security firm Custer Battles LLC. Two former employees are suing Custer Battles, saying the firm cheated the CPA out of about $50 million. The company denies wrongdoing.

Custer Battles has argued it cannot be sued in the United States for actions involving the use of money seized in Iraq. Lawyers for both Custer Battles and its former employees said US officials originally declined to take the case against Custer Battles for the same reason.

Anti-corruption tool

The Justice Department brief offered no opinion on whether Custer Battles defrauded the CPA. It said, however, that the False Claims Act is an important tool for "rooting out any fraud that might have occurred during the occupation of Iraq".

The brief involves billed work
that was never executed in Iraq

A lawyer for Custer Battles, John Boese, said on Friday he believes the False Claims Act applies only to contracts that use money from the US Treasury.

Boese said the Justice Department was "attempting in this brief to extend the False Claims Act far beyond its intent and purpose".

The former employees, Robert Isakson and William Baldwin, sued under a federal law that allows citizens to sue on the government's behalf if they suspect fraud in federal contracting. Should they win, those who bring the lawsuit can get up to 30% of the money recovered from the contractor.

Isakson and Baldwin say they were threatened and fired when they objected to Custer Battles' business practices.

The lawsuit says Custer Battles billed the CPA for work that was never done, employees who were never hired and equipment which never arrived.