U.S. files civil suit against defense contractor KBR

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By Walter Pincus
Washington Post Staff Writer
Friday, April 2, 2010

The Justice Department on Thursday filed a civil suit against defense contractor Kellogg Brown & Root Inc., alleging that the firm provided false statements in charging the government for the unauthorized use of private security guards in Iraq.

In the suit, Justice said KBR, a former subsidiary of Halliburton Co., was not permitted to charge the Army for security services under the terms of its contract but repeatedly did so anyway.

From 2003 to 2006, the firm awarded subcontracts to three private companies -- to provide armed security details for KBR executives -- and awarded additional subcontracts to more than 30 other companies that employed their own private security, the suit alleges. It also states that one subcontractor "routinely" hired armed guards "to shuttle managers, personnel and payroll around Iraq" rather than traveling in military convoys.

The suit did not indicate how much money KBR charged the Army for private security services or the damages being sought.

In a statement, KBR said the Army was aware of the private security costs. "Nothing in KBR's contract with the Army prohibits KBR or its subcontractors from using private security to fulfill its mission to support America's troops," the company said.

The company added that the Army breached its contract responsibilities "by repeatedly failing to provide the necessary force protection and, in fact, frequently left KBR, its employees and its subcontractors unprotected." KBR said it had had taken that issue to the Armed Services Board of Contract Appeals in 2008.

The government signed its contract with KBR in December 2001. The contract, known as LOGCAP III, required KBR to perform non-combat services, including construction, maintenance and management of dining and other facilities in support of military operations anywhere in the world.

The suit makes clear that the Army began questioning some of the charges as far back as 2004. It refers to a KBR senior contract manager in 2004 acknowledging in an e-mail that if subcontractors had personal security details their cost "could be considered unallowable" by the Army and the Defense Contract Audit Agency. In a 2007 exchange, the suit claims the same KBR contract manager, when asked by the Army about unauthorized use of security guards, "admitted" approval had not been sought from U.S. Central Command.

It was unclear why the government filed a civil suit rather than seeking a criminal indictment against KBR. Last November, Public Warehousing Co. of Kuwait was indicted for overcharging the Army for food and other materials supplied to U.S. and allied forces in Iraq and Kuwait. At that time, the government also joined in a civil lawsuit against the company.

As a result of the indictment, Public Warehousing and its related companies were prohibited from bidding on any new government contracts. No such step has been taken against KBR.


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