The United States government has opted to intervene in a controversial case involving several defense contractors. The case was originally filed under the whistleblower provisions of the False Claims Act and, after an intense review, the government has stepped in and filed its own complaint. By intervening in this case, the government is able to implement the investigative powers of the Department of Justice’s Civil Division, the Defense Contract Audit Agency, the Defense Criminal Investigative Service, and the Army Criminal Investigation Command. The decision to intervene generally indicates a strong confidence in the case and a passion for bringing the defendants to justice.
Iraq War Kickback Scheme Unveiled
The government’s complaint lists the defendants as engineering firm Kellogg, Brown & Root Services, Inc. (hereinafter, “KBR”), Kuwaiti-based La Nouvelle General Trading & Contracting Co., and First Kuwaiti Trading Company. The facts of the case evolved pursuant to a contract between the U.S. government and KBR for logistical support of military personnel and operations in Iraq. KBR is based in Houston, Texas and sub-contracted with La Nouvelle and First Kuwaiti for the necessary transportation and maintenance services needed to fulfill its requirements.
More specifically, KBR contracted with the U.S. military to provide a Logistics Civil Augmentation Program, or LOGCAP. This mega-contract allowed KBR to serve as a leader in the transport of food, shelter, facilities, and provisions management for troops stationed in Iraq during the war. Naturally, KBR needed to contract with local companies who were more familiar with the industry and logistics common to the area. According to allegations, KBR began to accept kickbacks from companies like La Nouvelle and First Kuwaiti in exchange for the former’s agreement to award the sub-contract and, ultimately, direct some of the government’s money their way. Thereafter, KBR invoiced the federal government for the amount it spent to sub-contract services and, allegedly, presented invoices for false, excessive, or inflated expenses.
The DOJ presented an example in its recent press release involving La Nouvelle’s sub-contract for the supply of fuel tankers. Allegedly, KBR awarded La Nouvelle a subcontract to supply the tankers for a price of more than three times the tankers’ actual value. La Nouvelle then, according to the government, “rewarded” KBR for securing them the sub-contract with a $1 million bank draft.
In another example, KBR allegedly continued to make monthly lease payments to First Kuwaiti for military vehicles it had already returned to the sub-contractor, and billed the federal government for each monthly payment.
The False Claims Act was originally enacted to address problems similar to those described above occurring during the Civil War. The history of the FCA reveals that Union soldiers were receiving worn, unwearable uniforms under government contracts for the provision of new uniforms. As a result, the Lincoln administration found it necessary to incentivize those willing to come forward and report fraud, enacting the qui tam provisions of the FCA. As the above case illustrates, wartime fraud continues to invade our modern military operations and our country depends on whistleblowers to come forward with an illumination of these deplorable practices.
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