by Ben Vernia | March 16th, 2011
On March 16, the Department of Justice announced that it was raising fraud counterclaims in a lawsuit brought by Kellogg, Brown & Root over food service subcontracts in Iraq. According to DOJ’s press release:
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.
