KBR has agreed to pay $13.67 million to settle a breach-of-contract whistleblower lawsuit. The suit claimed the company violated the False Claims Act and the Anti-Kickback Act related to subcontracts awarded under its completed Logistics Civil Augmentation Program contract with the U.S. Army for base operations logistical support in Iraq. The 10-year contract was awarded in 2001.
The June 13 settlement does not release KBR from criminal liability or individuals from civil liability, the U.S. Justice Dept. said in the agreement.
The lawsuit concerned subcontracts that KBR awarded to two local companies to perform work on its behalf, La Nouvelle Trading & Contracting Co. and First Kuwaiti Trading & Contracting Co.
On Dec. 20, 2006, a now former KBR employee, Bud Conyers, filed the complaint in federal court in Texas. Justice later joined the complaint, which alleges that an unidentified KBR employee in 2002 solicited bids for a task order subcontract and rigged the bidding process to justify awarding it to LaNouvelle Trading. The KBR employee accepted several kickbacks from the subcontractor.
“These kickbacks were included within the prices that KBR paid to La Nouvelle and for which it charged the United States under the LOGCAP III contract,” the settlement said.
In 2003, a second unidentified KBR employee solicited bids for a task order contract and awarded it to La Nouvelle at an inflated price. That employee also received a kickback, which was included in the price KBR paid La Nouvelle and subsequently charged the amount to the U.S.
Also that year, a third KBR employee solicited a task order bid. Before doing so, the unnamed employee “entered into a kickback agreement with the managing partner of First Kuwaiti Trading Co. under which [the employee] was to receive a kickback for any subcontract that he awarded to First Kuwaiti for the lease of trucks, when other contractors could have satisfied the Army’s requirements for less money,” the settlement said.
KBR paid the inflated price and charged the U.S. for its costs under the LOGCAP III contract, the pact said. The employee then awarded a second subcontract to First Kuwaiti, which was the high bidder, for a price that also “included the price of [his] kickback arrangement,” the agreement said. KBR again paid the inflated price and charged the U.S.
The contract with First Kuwaiti was completed in January 2004, under which the firm was owed about $177,000. KBR instead paid the company more than $2.6 million.
“We are pleased with today’s settlement,” said Special Agent in Charge L. Scott Moreland of the U.S. Army Criminal Investigation Division's Major Procurement Fraud field office.
KBR remains a DOD contractor under a subsequent multi-year LOGCAP contract awarded in 2019. Company executives noted that contract in an April 28 quarterly earnings call with analysts.
The firm did not respond to ENR’s requests for comment on the settlement or its current work for DOD. It must pay the U.S. within 10 days.
The U.S. District Court in southern Texas in 2021 granted partial summary judgement to the U.S. on several of its False Claims Act and Anti-Kickback Act claims. A trial had been set for May 23, but the settlement resolves those and other claims.
The settlement also follows a previous $51-million judgment in favor of the U.S. by the Armed Services Board of Contract Appeals, concerning a larger overpayment that KBR made to First Kuwaiti under a separate subcontract in Iraq. Following a trial and an appeal to the federal appellate court in Washington, D..C, that judgment became final in 2021, the Justice Dept. said