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6May/100

Whistle Blown on KBR Once Again

The army just can't seem to break it off with military contractor KBR. They're like that couple everyone wants to break up, but they stay together--usually with one party taking advantage of the other. We've recently blogged about KBR's ongoing legal troubles, but here is just one more volume for a shelf sagging under the weight.

Even though the DOJ has just joined a whistleblower lawsuit against KBR, the Army has announced a $568 million no-bid contract with the company through 2011 for military support services in Iraq.

KBR allegedly accepted meals, sports tickets, and golf outings from two freight forwarding companies.

KBR denies the allegations, of course, and in a statement said that "Gifts of dinners, baseball tickets and other similar items would violate KBR policies." This is sort of like saying, "It would just be so awful if some (hypothetical, of course) company bribed officials. Nothing specific, other than dinners and baseball tickets...er..." KBR went on to say that maybe, possibly, if this hypothetical naughty company did give any gifts, they would have been less than $20,000. No big deal, right?

The problem is that this kind of behavior ends up costing taxpayers money in the end. Although the government hasn't definitively stated whether the kickbacks cost taxpayers money yet, there is a strong possibility that KBR passed up companies offering lower costs for those that bought the best dinners and seats for games. Choosing a supplier on the basis of the gifts they provide shifts a government contractor's priorities away from where they belong (providing the best value to the taxpayer) and warps the "bidding" process into one in which the contractor puts its own interests first. Fortunately, there are whistleblowers out there to help keep contractors like KBR in check.

This article was sponsored by The Qui Tam Team, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

Filed under: Current Cases, Litigation, Military/Defense, News No Comments

15Apr/100

A Curious Company Called Agility

Agility is one of those companies whose name gives you no clue as to what it actually does. It could be physical therapy or investments, but what Agility, which is actually a Kuwaiti logistics firm, seems to do very adeptly these days is getting itself in trouble with the U.S. government. On November 16, 2009, the company was indicted on multiple charges of conspiracy and fraud for allegedly overcharging the U.S. Department of Defense for food. Agility (formerly operating under the much more pedestrian and not-so-PR-friendly name Public Warehousing Corp.) is the top food supplier for U.S. troops in Iraq, and is accused milking the Army on $8.5 billion worth of contracts. A whistleblower, Kemal Mustafa, filed the initial case. Mustafa had excellent inside information--his company had originally partnered with Public Warehousing Corp. to get U.S. military contracts.

Now, the government has extended the indictment to two of Agility's subsidiaries: DGS Holdings and KSCc. The company has been doing extremely well financially up until now, so it remains to be seen how the extra indictments will affect things. On April 11th, Agility posted a 22 percent rise in fourth-quarter profit--evidence that its enormous military contracts are an extremely lucrative business, even if it involves vast overchargings for a couple of bananas or some Romaine.

Today's overpriced banana is the modern version of the $600 toilet seat--the modern military outsources even the most mundane details, not just procurement of equipment. Although the extensive use of contractors puts the military at a much higher risk of being subjected to fraud, this does not excuse any contractor who overcharges for goods and services. It's taxpayers who ultimately end up footing the bill.

UPDATE: As we were writing this post, it was announced that Agility has lost its contract to supply food to troops in Iraq! Agility stated on the Kuwaiti Stock Exchange website that another company had been appointed to take over its duties, but that Agility would continue on for six more months.

This dramatic turn of events was brought about by a whistleblower without whom Agility's fraud may never have come to light. The company could have gone on overcharging the military and taxpayers for many more years, but fortunately in sixth months we won't be buying any more overpriced Iceburg lettuce from this outfit.

Tagged as: corporate fraud, fraud, government, military, whistleblower No Comments

6Apr/100

KBR’s Permanent Rain Cloud

Military contractor KBR, Inc., seems to have one of those personal permanent rain clouds hovering over its head that follows it everywhere. You almost can't help feeling sorry for the forlorn little former subsidiary of Haliburton...or not. So far, KBR has been sued for (not an exhaustive list):

Exposing troops to unsafe food, water, and toxic fumes. KBR allegedly loaded ice for the troops onto trucks that were still contaminated with bodily fluids and other biohazards from bodies, and allegedly mismanaged the burn pits it used to dispose of medical waste and bodies so poorly that a stray dog was seen running around a base with a human arm in its mouth.
Health problems related to its massive burn pits. Plaintiffs alleged that their family members died as a result of exposure from toxic fumes emitted from KBR's flaming garbage pits in Iraq and Afghanistan. Pretty much anything not tied down was allegedly tossed into these pits, including the aforementioned arm.
Forcing Nepalese workers to work in Iraq, where they were kidnapped and killed. The workers were allegedly recruited in Nepal by KBR and its Jordanian contractor and told that they would be working in a luxury hotel in Jordan. However, they were taken instead to Iraq where, on the way, their unprotected convoy was attacked and all but one were kidnapped and murdered.
KBR is also facing a criminal investigation as a result of electrocution deaths of soldiers. 18 soldiers have been electrocuted, most while showering, as a result of improperly installed or maintained electrical equipment.

Now, in the latest legal snafu, the U.S. Department of Justice has sued KBR for allegedly knowingly including impermissible costs for private security in bills submitted to the Army between 2003 and 2006. According to the lawsuit, KBR violated a service contract by failing to obtain authorization from the government for private security subcontractors. KBR, on the other hand, claims that the government was the one in breach of contract because it failed to provide adequate protection for KBR employees, requiring KBR to hire its own guns.

With all this litigation as a result of what appears to be serious mismanagement and lack of oversight, we need to question whether military contractors are providing taxpayers the best value for their money. It's important for more whistleblowers to bring fraud by military contractors to light so we can start getting our ill-gotten tax dollars back!

Tagged as: corporate fraud, fraud, government, military, qui tam, whistleblower No Comments

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