The United States Department of Justice (DOJ) filed a False Claims Act suit against defense contractors Kellogg, Brown & Root Services Inc. (KBR) and First Kuwaiti Trading Company in relation to fraud in Iraq. KBR is based in Houston, Texas and First Kuwaiti, a KBR subcontractor, is located in Kuwait.
According to the DOJ, KBR and subcontractor First Kuwaiti submitted fraudulent and inflated reimbursement claims to the government for the delivery and installation of military troops’ housing trailers in Iraq. Additionally, both companies submitted fraudulent bills for the purchase of cranes, trucks and other equipment in Iraq.
KBR is the United States Army’s primary contractor for logistical support in Iraq. On Dec. 14, 2001, the Army granted KBR a contract with the military, known as a LOGCAP III contract. Under the LOGCAP III contract, KBR’s job was to provide logistical support to the U.S. military whenever it was needed. This kind of support service was to include things like transportation, food services, military facility management, military facility maintenance and all living accommodations for United States and Allied forces. Since receiving the LOGCAP III contract in 2001, the United States government has paid KBR billions of dollars for their logistical support services.
The specific False Claims Act violations arise from the Bed Down Mission, which was an initiative to replace all of the tents that were being used to house troops during the first phase of the Iraq War with new trailers. These new and improved trailers are known as living containers. During the Bed Down Mission, KBR was responsible for many of the services performed, as required by the LOGCAP III contract. According to the DOJ, KBR chose to subcontract much of the work to foreign and domestic subcontracting companies.
KBR awarded the initial subcontracting job to First Kuwaiti on October 16, 2003. Under the terms of the contract, First Kuwaiti was to supply, deliver and install 2,252 new living containers to Camp Anaconda in Iraq for around $80 million. According to the DOJ, First Kuwaiti was required to complete the Camp Anaconda project no later than December 15, 2003. The government further alleged that in September 2003, both KBR and First Kuwaiti were made aware they would only be able to deliver 1,645 trailers by the project deadline, as this was the maximum number of living containers the manufacturer’s production schedule would allow.
In July of 2004, First Kuwaiti submitted two claims to KBR which contained allegations that the United States government caused delays in completion of the Bed Down project. First Kuwaiti alleged that the government failed to provide military escorts for the trucking convoys that carried the trailers into Iraq, which in turn entitled them to an increase in the contract price to cover their increased costs. Both contractors allegedly violated the False Claims Act, as they knew the delays were due to the lack of completed trailers and were not the fault of the United States, the Justice Department says. KBR agreed to pay First Kuwaiti an additional $48.8 million for their expenses, bringing the project total up to $128.8 million, then passed the bill on to the United States government.
“We depend on companies like KBR to provide valuable noncombat services to our military such as housing and feeding our troops. We will ensure that contractors live up to their promises, and are not permitted to profit at the expense of the taxpayers at home who are supporting our men and women in uniform,” Stuart F. Delery, principal deputy assistant attorney general for the Justice Department’s Civil Division, said in a statement.
“When dealing with the government, just like dealing with anyone else, it’s important to give an honest account,” said Jim Lewis, U.S. Attorney for the Central District of Illinois. “The facts alleged in the complaint indicate that KBR and First Kuwaiti did not provide an honest accounting.”
The government is requesting an award of unspecified damages, interest and costs. Under the False Claims Act, the government can recover up to three times the cost of their damages, plus an additional $5,500 to $11,000 civil penalty for each false claim.