How a burger-shack owner allegedly toppled a government and evaded taxes on $7 billion in U.S. military contracts

By Lukas I. Alpert

Douglas Edelman has been charged with hiding $350 million in income, some of which he allegedly spent on yachts and an Austrian chalet

In the 1990s, Douglas Edelman moved from California to the capital of Kyrgyzstan to open a beer and burger bar.

That sense of adventure would lead him to landing one of the biggest contracts during the American war in Afghanistan - a $7 billion deal that would result in the collapse of the Kyrgyz government amid riots over corruption.

Now prosecutors say Edelman lied to the U.S. government about his ties to a jet-fuel company that serviced the lion's share of the military's flights over Afghanistan. He evaded taxes for decades on more than $350 million in profit, prosecutors say.

Investigators say Edelman and his wife, Delphine Le Dain, used the money to buy multiple yachts, a ski chalet in Austria, a multimillion-pound town house in London's tony Kensington neighborhood and a house in Spain.

On Wednesday, Edelman, 72, was arrested on the Spanish resort island Ibiza, from which prosecutors in Washington, D.C., say they will pursue extradition. Both Edelman and Le Dain, 58, are charged with conspiring to defraud the United States and 15 counts of tax evasion. Edelman is also charged with two counts of making false statements and 12 counts of willfully violating foreign-bank-account reporting obligations. Edelman faces up to 25 years in prison, and Le Dain faces 10 years.

It was not immediately clear whether either had retained attorneys, and neither Edelman nor Le Dain could be reached for comment immediately.

According to court documents, as the U.S. ramped up air operations over Afghanistan - whose Taliban government provided sanctuary to al Qaeda - in response to the Sept. 11, 2001, terror attacks, Edelman parlayed his contacts in Kyrgyzstan - gained while running the American Bar and Grill in the capital city, Bishkek - to launch a pair of jet-fuel-supply businesses in 2003 from the tiny Manas air base.

That facility would soon become one of the key staging and supply bases for U.S. operations in Afghanistan.

Over the next seven years, Edelman's companies, called Mina Corp. and Red Star Enterprises, would land contracts worth $7 billion to supply jet fuel to the U.S. military for Afghanistan and Middle East flights.

Prosecutors say that during that time, Edelman, who is a U.S. citizen, never filed a tax return in the U.S. as required by law.

Then in 2010, widespread riots over corruption and the strongarm rule of Kyrgyzstan's then-president, Kurmanbek Bakiyev, led to the collapse of the Central Asian country's government. Bakiyev fled the country and was later charged by the new government with taking hundreds of millions of dollars in illegal kickbacks from deals related to the operation of the Manas air base, including the fuel contracts Edelman had secured.

The new government, under pressure from Moscow, agreed to shut the air base down, and the U.S. military ceased flights from there when its lease expired in 2014.

Following Bakiyev's overthrow, the U.S. Congress convened hearings into corruption among its suppliers at the air base. Prosecutors say Edelman, knowing he was under scrutiny and aware he had failed to pay taxes on the money he received from the U.S. government, began taking steps to cover up his ties to Mina Corp. and Red Star Enterprises.

According to court filings, Edelman created phony paperwork showing that his wife, a French citizen who didn't have the U.S. tax obligations he had, was the founder and beneficial owner of the company, rather than himself.

Prosecutors say Edelman and his wife kept that lie up for years with the Internal Revenue Service and with banking officials all over the world, as they moved the profits from the fuel companies into trusts and other businesses.

Among the companies Edelman later launched was an internet service provider for soldiers and U.S. contractors in Afghanistan, a music television franchise in Eastern Europe, and a fuel infrastructure project in Mexico.

From 2003 through 2020, prosecutors say Edelman either filed no tax returns or claimed little to no income from consulting work, always leaving off the money earned from the government contracts.

In 2020, Edelman sold his stake in Mina and Red Star to a Kyrgyz partner for $40 million but claimed to have earned only $400,000 in consulting fees on his tax returns that year, prosecutors said.

-Lukas I. Alpert

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-05-24 1318ET

Copyright (c) 2024 Dow Jones & Company, Inc.