United States Files Counterclaims Against KBR Alleging False Claims and Kickbacks
United States Files Counterclaims Against KBR Alleging False Claims and Kickbacks
Department of Justice
Wednesday, March 16, 2011
KBR Managers Allegedly Received Kickbacks from Dining Facility Subcontractor
WASHINGTON – In response to a pending lawsuit from Kellogg Brown & Root Services Inc. (KBR) in the U.S. Court of Federal Claims, the Department of Justice has filed counterclaims alleging that KBR managers had received kickbacks from a dining facility subcontractor in violation of the False Claims Act and the Anti-Kickback Act. The subcontractor was retained in connection with KBR’s contract with the U.S. Army to provide logistical support to the military in Iraq and elsewhere. The counterclaims also allege that the kickbacks should cause KBR to forfeit its claims against the United States and to return money paid by the United States as reimbursement to KBR upon the tainted subcontract.
The counterclaims assert that, from late 2002 through 2003, Terry Hall, who was KBR’s regional food services manager for Iraq and Kuwait, and his deputy, Luther Holmes, received more than $45,000 in kickbacks from Mohammad Shabbir Khan, vice president of Tamimi Global Company. Khan provided the kickbacks to ensure that Tamimi was treated favorably by KBR. Hall and Holmes used their positions to advocate on behalf of Tamimi, and, during the time that they received the kickbacks, KBR awarded Tamimi subcontracts worth more than $400 million. Other KBR managers knew of apparent irregularities involving the Tamimi subcontracts, but approved them anyway.
The subcontracts were awarded under the Logistics Civil Augmentation Program (LOGCAP) III contract, which was awarded to KBR by the Army in 2001 to provide logistical support for U.S. military operations abroad. One of the tasks directed by the Army under the LOGCAP III contract was for KBR to provide dining facilities at its bases in Iraq and Kuwait. The Army reimbursed KBR for its costs in doing so plus a fee, based upon the amount of costs incurred. Thus, all of the allegedly improperly awarded subcontracts and KBR’s profit on these subcontracts were paid for by U.S. taxpayers.
“Kickbacks in military subcontracts open the door to wartime profiteering and corrupt the integrity of our government contracting process,” said Assistant Attorney General for the Civil Division Tony West. “When we learn of such illegal conduct at the expense of taxpayers, we will pursue it.”
KBR’s original lawsuit seeks approximately $41 million that the United States required KBR to return after a Defense Contract Audit Agency (DCAA) audit. The DCAA found that KBR overpaid Tamimi $41 million for dining facility costs from July 2004 to December 2004, compared to what it was paying other contractors during that time period.
The assertion of these counterclaims demonstrates the Department of Justice’s commitment to ensuring the integrity of the government procurement process.
Other DOJ/KBR News:
JGC Corporation Resolves Foreign Corrupt Practices Act Investigation and Agrees to Pay a $218.8 Million Criminal Penalty
Department of Justice
Wednesday, April 6, 2011
$1.5 Billion in Total Penalties Obtained to Date for Scheme to Bribe Nigerian Government Officials to Obtain Contracts
[…]
JGC, Kellogg Brown & Root Inc. (KBR), Technip S.A. and Snamprogetti Netherlands B.V. comprised the four-company TSKJ joint venture that was awarded four EPC contracts by Nigeria LNG Ltd. (NLNG) between 1995 and 2004 to build LNG facilities on Bonny Island. The government-owned Nigerian National Petroleum Corporation (NNPC) was the largest shareholder of NLNG, owning 49 percent of the company. The EPC contracts to build liquefied natural gas (LNG) facilities on Bonny Island, Nigeria, were valued at more than $6 billion.
[…]
In a related criminal case, KBR’s successor company, Kellogg Brown & Root LLC, pleaded guilty in February 2009 to charges related to the FCPA for its participation in the scheme to bribe Nigerian government officials. Kellogg Brown & Root LLC was ordered to pay a $402 million fine and to retain an independent compliance monitor for a three-year period to review the design and implementation of its compliance program. In another related criminal case, the department filed a deferred prosecution agreement and criminal information against Technip in June 2010. According to that agreement, Technip agreed to pay a $240 million criminal penalty and to retain an independent compliance monitor for two years. In July 2010, the department filed a deferred prosecution agreement and criminal information against Snamprogetti, which also agreed to pay a $240 million criminal penalty.
Albert “Jack” Stanley, Former CEO, KBR
In other related criminal cases, KBR’s former CEO, Albert “Jack” Stanley, pleaded guilty in September 2008 to conspiring to violate the FCPA for his participation in the bribery scheme. Tesler and Wojciech J. Chodan, a former salesperson and consultant of a United Kingdom subsidiary of KBR, were indicted in February 2009 on FCPA-related charges for their participation in the bribery scheme. In March 2011, Tesler was extradited from the United Kingdom and subsequently pleaded guilty to conspiring to violate and violating the FCPA and agreed to forfeit $148,964,568. In December 2010, Chodan was extradited from the United Kingdom and subsequently pleaded guilty to conspiring to violate the FCPA and agreed to forfeit $726,885.
The criminal case is being prosecuted by Assistant Chief William J. Stuckwisch and Deputy Chief Patrick F. Stokes of the Criminal Division’s Fraud Section, with investigative assistance from the FBI-Houston Division. The Criminal Division’s Office of International Affairs provided substantial assistance. Significant assistance was provided by the SEC’s Division of Enforcement and by authorities in France, Italy, Switzerland and the United Kingdom.
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