U.S. SUES KBR AND KUWAITI SUBCONTRACTOR FOR FALSE CLAIMS

(The following is a reformatted version of a press release
issued by the Justice Department and received via e-mail. The
release was confirmed by the sender.) 
NOVEMBER 19, 2012 
UNITED STATES SUES HOUSTON-BASED KBR AND KUWAITI SUBCONTRACTOR
FOR FALSE CLAIMS ON CONTRACTS TO HOUSE AMERICAN TROOPS IN IRAQ 
WASHINGTON - The United States has filed a civil complaint
against Kellogg, Brown & Root Services Inc. (KBR) and First
Kuwaiti Trading Company for submitting inflated claims for the
delivery and installation of trailers to house troops in Iraq,
the Justice Department announced today.  KBR is headquartered in
Houston.  First Kuwaiti, a KBR subcontractor, is based in
Kuwait. 
KBR is the Army’s primary contractor for logistical support in
Iraq.  On Dec. 14, 2001, the Army awarded KBR the LOGCAP III
contract, the third generation of contracts under the Army’s
Logistics Civil Augmentation Program (LOGCAP) since the
program’s inception in the 1980s.  LOGCAP III required KBR to
provide logistical support in the military theater whenever and
wherever it was needed.  Support included services such as
transportation, dining services, facilities management,
maintenance and living accommodations for United States and
coalition forces.  LOGCAP III was originally awarded to Brown
and Root Services, a division of KBR.  The United States has
paid KBR tens of billions of dollars for logistical support
services since awarding the contract. 
The government’s complaint arises from the Bed Down Mission, a
push to replace the tents used to house soldiers during the
early days of the war with trailers, also called living
containers.  KBR performed many of the services required under
LOGCAP III, including the Bed Down Mission, through foreign and
domestic subcontractors.  According to the complaint, KBR
awarded a subcontract to First Kuwaiti on Oct. 16, 2003, to
supply, transport and install 2,252 living containers at Camp
Anaconda in Iraq for about $80 million.  The government alleges
that First Kuwaiti was required to complete delivery and
installation of the trailers at Camp Anaconda by Dec. 15, 2003.
The government further alleges that in July 2004, First Kuwaiti
presented two claims to KBR contending that government-caused
delays in providing military escorts for convoys into Iraq
entitled the company to an increase in the contract price to
cover its increased costs.  According to the complaint, KBR
agreed to pay First Kuwaiti an additional $48.8 million and
passed that cost on to the United States. 
The government’s complaint alleges that First Kuwaiti knowingly
inflated its crane, truck and driver costs, among other items,
and misrepresented the cause of its delays.  The complaint
further alleges that KBR charged these costs to the United
States knowing they were improper. 
“We depend on companies like KBR to provide valuable noncombat
services to our military such as housing and feeding our
troops,” said Stuart F. Delery, Principal Deputy Assistant
Attorney General for the Civil Division of the Department of
Justice.  “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.” 
“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 United States is suing KBR and First Kuwaiti under the False
Claims Act.  The act holds persons responsible for presenting,
or causing to be presented, claims for government money or
property they know are false.  The statute entitles the
government to recover three times its damages, plus a $5,500 to
$11,000 civil penalty for each false claim. 
The United States is also suing KBR under the antifraud section
of the Contract Disputes Act and for breach of contract.  The
Contract Disputes Act establishes liability for contractors who
certify that they are entitled to money under a contract, if any
part of their claim is unsupported due to a misrepresentation of
fact or fraud.  Under the Contract Disputes Act, the government
may recover the false and unsupported part of the claim, plus
its costs of review. 
This matter was investigated by the  Commercial Litigation
Branch of the Justice Department’s Civil Division; the U.S.
Attorney’s Office for the Central District of Illinois; and the
Defense Contract Audit Agency, the Defense Criminal
Investigative Service, and the Defense Contract Management
Agency of the Department of Defense.  The claims asserted
against KBR and First Kuwaiti in the United States’ complaint
are allegations only and there has been no determination of
liability. 
The lawsuit was filed in the Central District of Illinois and is
captioned United States v. Kellogg, Brown & Root Services Inc.,
et al. 
(sgp) NY 
#<278855.14078.3.1.0.0.76>#
 
 
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