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Lawsuit: KBR transported soldiers' ice in unsanitized morgue trailers

Jan. 28, 2014 - 06:00AM   |  
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Justice Department vs. KBR

The Justice Department is suing KBR and two foreign companies for allegedly defrauding the Army.

The most shocking accusation: Workers used “refrigerated trailers to transport ice for consumption by the troops that had previously been used as temporary morgues without first sanitizing them.”

The incidents occurred in 2003 and 2004 throughout Iraq, said a source with detailed knowledge of the suit and circumstances.

One incident in the civil suit references a refrigerated trailer called R-89.

“Sometime around July 2003, while R-89 was being used as a morgue, the refrigeration motor broke down, leading KBR to send it back to Kuwait for repairs,” the suit said. “In late August 2003, after R-89 was repaired, KBR used the reefer to transport potable ice for the troops at Camp Matilda in Kuwait. KBR did not properly sanitize R-89 before loading it with potable ice for use by the troops.

“KBR also used other morgue reefers to transport ice and food for human consumption without properly sanitizing them first. KBR charged the Government for the costs of these reefers without disclosing that they had been used as morgue reefers and had not been properly sanitized.”

The heart of the Justice Department’s suit lays in the claim that Kellogg, Brown & Root Services Inc., and Kuwaiti companies La Nouvelle General Trading & Contracting Co. (La Nouvelle) and First Kuwaiti Trading Co. (First Kuwaiti) in 2003 and 2004 took kickbacks and submitted false claims in connection with KBR’s Army contract to provide logistical support in Iraq.

“We depend on companies like KBR and its subcontractors to provide valuable services to our military,” said Stuart Delery, assistant attorney general for the Justice Department’s Civil Division, in a press release. “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.”

The civil suit was filed Jan. 23 in federal court in Rock Island, Ill., where the Army’s contracting command responsible for this contract is located.

KBR was unable to comment on specific claims since it is still reviewing the recently-filed suit, said spokesman John Elolf.

The alleged activities occurred under the Logistics Civil Augmentation Program, or LOGCAP III, an umbrella contract for an indefinite delivery of an indefinite quantity of wartime logistical support services such as transportation, maintenance, food, shelter and facilities management. KBR is alleged to have claimed inflated, excessive reimbursements as well as reimbursement for goods and services that were grossly deficient or not provided. One example is a subcontract to supply fuel tankers for more than three times the tankers’ value. La Nouvelle later rewarded the KBR employee who awarded the subcontract with a $1 million bank draft, the suit claims.

“Our office investigated the actions of KBR and related companies, as well as certain KBR employees,” said Jim Lewis, U.S. attorney for the Central District of Illinois, in a release. “We were able to obtain criminal convictions against several subcontract managers whose actions were illegal and caused damage to our military, and we are now committed to pursue these civil claims against the companies themselves.”

Indeed, the bulk of the civil suit centers on the actions of three KBR subcontract managers who have admitted taking kickbacks or making false statements in connection with the allegations made in the current complaint. These include:

Anthony J. Martin, who in 2007 pleaded guilty to taking roughly $360,000 in kickbacks, the amount of which he included in the price of the subcontracts. Martin was ordered to serve 12 months and one day in prison and to pay $200,504.85 in restitution.

Stephen Lowell Seamans, who in 2006 pleaded guilty to accepting $305,000 in kickbacks from La Nouvelle and another $124,000 from Saudi Arabia-based subcontractor Tamimi Global Co. Ltd. The latter has paid $13 million for civil claims criminal fines related to its kickbacks. Seamans was sentenced to 12 months in prison and ordered to pay $380,130 in restitution and a $200 assessment.

Jeff Alex Mazon, who in March 2009 (and after two trials ended with deadlocked juries) pleaded guilty to making a false written statement in connection with a fuel tanker subcontract. He increased a subcontract price from $98,287 to $2,259,840 without a proportionate increase in the scope of work, according to the suit. He also received $1 million from La Nouvelle’s managing partner Ali Hijazi for giving La Nouvelle favored treatment in the award and pricing of subcontracts, according to the suit. Mazon ultimately awarded more than $90 million in subcontracts and change orders to La Nouvelle.

The total damage done will be determined at trial, according to the suit. Under the False Claims Act, the United States as plaintiff is entitled to three times the amount of damages plus civil penalties of $5,500 to $11,000 for each violation. The Justice Department in its “prayer for relief” asked for judgments ranging from twice the amount of the kickbacks to three times the amount of damages sustained, and the maximum $11,000 penalty for each violation.

This is not the first time the U.S. Attorney’s Office in Rock Island has tackled such issues. It has convicted 10 companies and individuals in connection with wartime contracts in Iraq.

And this is not the first time KBR has been in the Justice Department’s crosshairs.

Albert “Jack” Stanley, a former KBR chairman and chief executive officer, was sentenced in February 2012 to 30 months in prison for conspiring to violate the Foreign Corrupt Practices Act. He participated in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction contracts and conspired to commit mail and wire fraud as part of a separate kickback scheme.

The department filed a $150 million suit against KBR in November 2012 under the False Claims Act. That suit alleged inflated costs and that KBR “grossly overbilled” the government for trailers used to house soldiers in Iraq in 2003.

That same month, a dozen Oregon National Guard soldiers were awarded more than $85 million after a jury determined KBR knowingly exposed them to hexavalent chromium at the Qarmat Ali water facility in 2003.

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