The Iraq War conduct of the Texas company KBR was again in the spotlight on Thursday as the Justice Department announced it was suing the construction and engineering firm, accusing it of deliberately inflating costs under wartime logistics contracts.
The action came just a week after KBR won the dismissal of a private lawsuit against it for the alleged human trafficking of Nepali migrant workers bound for employment with the company who were later publicly executed in Iraq. The plaintiffs in that case have promised to appeal.
The new case alleged that KBR employees had taken kickbacks to dole out subcontracts to companies in the region, in one case pocketing as much as $1 million.
As a result, in the examples cited by the government, KBR allegedly billed the United States for contracts involving fuel tankers sold at three times their value and lease payments on vehicles the company was no longer using.
In announcing its unsealed complaint against KBR, which is a 2007 spinoff of the oil services giant Halliburton Co., the Justice Department said it was acting on the claims first brought forward by the whistleblower Bud Conyers, a driver from Enid, Okla. who had been a KBR employee in Iraq.
Under the False Claims Act, a 19th century war-profiteering statute, both private individuals and federal authorities may sue for fraud against the government. Whistleblowers may be entitled to up to 30 percent of funds recovered.
Cheryl Eckard, a former employee of the British drug maker GlaxoSmithKline PLC, was awarded $96 million in 2010 after reporting contamination problems at a Puerto Rico manufacturing plant.
The size of any possible payout in this case was not immediately clear.
In announcing its civil complaint, the Justice Department said it was acting both to protect U.S. taxpayers and police the foreign conduct of government contractors.
“We will ensure that contractors do not engage in corrupt practices at the expense of our troops abroad, while profiting at the expense of taxpayers at home,” Stuart F. Delery, head of the department’s civil division, was quoted as saying in a statement.
KBR said the company was still reviewing the matter.
“As this case was just filed, we are unable to comment on the U.S. government’s specific claims at this time,” Rick Goins, a spokesman, said in an email.
The complaint also named the Kuwaiti subcontractors La Nouvelle General Trading & Contracting Co. and First Kuwaiti Trading Co., where representatives could not be reached for comment.
One of the world’s largest construction companies, KBR has repeatedly been accused of falsely overbilling for services rendered under massive defense contracts awarded under the so-called Logistics Civil Augmentation Program, or Logcap. Under the program, the U.S. Army awards multi-year, multi-billion-dollar contracts for the supply of wartime logistical support to U.S. troops.
Of the four such Logcap contracts awarded since 1992, KBR has been awarded part or all of three. The third, valued at over $35 billion, was awarded in 2001 but discontinued in 2007 amid criticism of KBR’s performance in Congress and in Pentagon audits. The Army decided in 2010 to continue using the contract for another 18 months.
The Justice Department in November 2012 dropped a previous False Claims Act case brought over Logcap III, prompting the company to say it had acted “with professionalism and in full compliance” with the law and the terms of the contract.
However, the Justice Department brought a separate, $150 million False Claims Act case against KBR that month, accusing the company of inflating the costs of government trailers used to house soldiers in Iraq in 2003. That case remains pending.
In Texas, KBR has been facing yet another federal false claims case since 2010, which alleges that KBR employees took kickbacks from companies including Panalpina Inc. to award subcontracts for the transportation of military equipment and supplies in Iraq and Afghanistan.
The kickbacks allegedly consisted of meals, drinks, sports tickets, golfing trips and other inducements.
In Thursday’s announcement, the Justice Department said it had already won convictions of three KBR subcontract managers who had admitted to taking kickbacks or making false statements in the latest complaint.
Anthony J. Martin, Jeff Alex Mazon and Stephen Lowell Seamans all pleaded guilty between 2005 and 2007, the department said.
False claims lawsuits are often brought by whistleblowers, known as “relators,” seeking to collect a share of any money awarded to government as a result. The cases are first filed under seal, allowing the Justice Department to decide in secret whether it wants to join the plaintiff’s suit.
Court records indicate that the department elected in May last year to join the suit brought by Conyers, the former employee from Oklahoma, in December 2006. A federal magistrate in Rock Island, Ill. granted the government’s motion to unseal the case on Wednesday.
After the case was filed, Conyers was prohibited from speaking publicly about the matter due to the government seal. But in interviews he gave prior to filing the case, Conyers described making a grisly discovery in the desert near Baghdad’s airport in the summer of 2003, according to Vanity Fair.
A refrigerated trailer used by a U.S. Army mortuary unit had broken down and, with 15 Iraqi cadavers inside, had sat neglected for two weeks as outside temperatures neared 120 degrees Fahrenheit.
“There were body parts on the floor: eyes, fingers. The goo started seeping toward us. Boom! We shut the doors again,” Conyers was quoted as saying.
A month later, Conyers said that, without having been cleaned, the trailer was being used to transport ice served in drinks to American troops. Rotting human tissue could still be seen inside, he said.
Conyers was initially represented by the False Claims Act attorney Alan Grayson, who left the case after winning a seat in the House of Representatives in 2009.
Philip Hilder, a Houston attorney for Conyers, referred questions to his Washington-area co-counsel Cliff Holmes and Victor A. Kubli, who could not be reached.
As part of the company’s oil services business, KBR’s former CEO Albert “Jack” Stanley was sentenced in 2012 to two and a half years in prison for bribing Nigerian officials to win $6 billion in natural gas contracts.
The company in 2009 also pleaded guilty to related charges under the Foreign Corrupt Practices Act, agreeing to pay a $402 million criminal fine. Along with its former parent company, Halliburton, it also settled with the Securities and Exchange Commission for $177 million in disgorgement, which is the surrender of illicit profits.
Douglas Gillison
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