WASHINGTON — A federal judge has thrown out a second multimillion-dollar fraud case against Custer Battles LLC, a defense contractor with Rhode Island roots that whistleblowers had accused of war profiteering in Iraq.

U.S. District Court Judge T.S. Ellis III dismissed a civil case in which whistleblowers once affiliated with the company charged that former Rhode Islander Michael J. Battles and his partner, Scott Custer, defrauded the government on a $16.5-million contract for security at Baghdad International Airport, following the U.S. invasion of Iraq in 2003.

In an opinion filed yesterday, Ellis said the “undisputed facts manifestly demonstrate” that the whistleblowers had failed to show that Custer and Battles had lied about a key aspect of its contractual promises — the number of workers to be hired for the job.

Custer said in a news release from his lawyers that the company had always done “its best to perform its contracts in Iraq under unimaginably difficult conditions.”

The ruling completed a sharp reversal of fortune for the whistleblowers, who had portrayed the Custer Battles case as emblematic of an abuse-ridden wartime contracting system. Last March, after the first jury trial on Iraq war profiteering charges, former Army officers Custer and Battles were assessed damages and penalties of $10 million in connection with a rush contract to replace Iraq’s currency system. The accusers then readied for a second trial in which they would allege double billing and other abuses of the Baghdad airport contract.

But Ellis overturned the jury-trial verdict in August in a ruling that hinged on the question of whether the U.S. government was the entity defrauded.

Then in yesterday’s ruling, Ellis refused to let the airport allegations go to trial.

Alan Grayson, the lawyer for the whistleblowers, said Ellis had “turned a blind eye” on evidence of fraud that should have gone to a jury. He said the whistleblowers will appeal.

jmulligan@belo-dc.com